Whether it's credit cards or loans, learn the difference and discover some tips in this article to help you manage your resources properly.
Mistakes are often made when starting to use credit cards, the most critical of which is ignoring the very nature of the cards and the financial cost involved in using them. Almost immediately, the monthly payment commitment becomes unfulfilled and the debt spirals into a vicious cycle of making only the minimum payments, perpetuating the debt.
It's important to address some issues regarding the debts incurred when acquiring a credit card and to warn about the commitment to making regular payments. It's very easy to acquire larger debts without the necessary knowledge.
Avoid considering the card as an extension of your salary; you certainly shouldn't view it as a free way to obtain funds. In fact, it's a financial product that you have to pay to use. If you stop making payments, it can cause major problems.
What is the common interest?
When you pay with your card, the issuing financial institution charges standard interest. Febraban defines these charges as the normal payment for regular card use. Partial payment must be made if the total debt is not covered.
What are the standard interest rates?
When you are late on your monthly payments, a situation known as late payment interest occurs, which is the amount that the financial institution charges when you are late on your payments.
If you fail to make the minimum payment to continue using the credit line authorized by the bank, you will have to pay the normal interest and late payment interest, which you authorized under the terms and conditions. This is why it is so important to be well informed before contracting any service.
If you don't cover your card payments month to month, it can be an easy problem to solve if you're late for a month or two, but over time the situation becomes quite complicated.
What to do when late payment interest increases?
The most important thing is to commit to paying off your debts. You should consider that your allotment for this payment should not exceed 30% of your income. Avoid defaulting on or late paying monthly installments. It's also advisable to try to cover more than the minimum and, if possible, pay the full amount due in a single payment.
Avoid accumulating payments. If you have problems, don't compromise your money. One option is to seek guidance from a credit repair company to find out what steps to take to get out of debt faster. They can advise you and create a plan tailored to your needs.