Surely you have heard all kinds of comments about credit cards, that they are an excellent financial tool or quite the opposite, that don’t even think about having one; but since we are business (and science) people we will show you what they are, what they are for, and how to use them correctly.
What is a credit card?
A credit card is a plastic or metal document, issued by a bank or financial institution, in the name of a person who meets the requirements to make purchases in future periods; That is to say, it is as if it were your payroll card, only it is not necessary to deposit cash into it; Since at the time of issuance it has a certain approved amount, this amount depends on the bank or financial institution that grants it. With this card, you can make the purchases you want, but on a certain date, you will have to make the corresponding payment.
To make it clear, the credit you use from the card must be returned to the bank within a period of generally 30 days depending on the cut-off dates of the account statement.
A credit card can be very useful and even bring you great benefits, as long as you use it intelligently and responsibly. Sometimes poor management can have serious consequences that can compromise your finances. A common case is spending more than we can pay since the cards charge a certain percentage of interest for late payments and this situation can make you fall into the famous Credit Bureau.
Be aware of our financial situation
We have to ask ourselves: Do I really need to have a credit card? You have to evaluate whether it is convenient to have it at this time. Next, I invite you to answer the following questions to determine whether it is best for you to request one.
- I find it difficult to control my expenses.
- When I have money in my hand, I spend it without considering whether I have savings.
- I don’t resist offers, I take advantage of the moment without measuring the consequences.
If you answered yes to each one, the first thing you should work on is your financial education, this will allow you to learn to make better decisions and benefit from the financial system.
If you are building your financial future and need to create your own credit history, you can look for alternatives to avoid the temptation of uncontrolled spending, that is, you can leave the card at home when you consider that if you go out with it you may overspend. And the ideal is to obtain benefits and not problems.
Choose the credit card correctly
Ok, let’s say that you have already prepared to request one, now what you need to know to choose between all the options is: the annuity, interest rates, CAT, if you have to pay insurance, if they charge you the cost for account management; We recommend you take the time to review all the options on the market.
The power of “Cash Back” and the Offers newsletter
If you already have a credit card, you can focus on making smart purchases, and that is, buying things that can generate some type of cash return, things that we really use or need, these are generally linked promotions with the bank or financial institution to which we are affiliated where we may receive a newsletter from time to time with offers with products below their price or, as we mentioned, that they return some percentage of the money we allocated for the purchase, this type of offers can be seen in “Black Friday” or “Buen fin” type weeks, where in addition to taking advantage of discounts, we can also obtain a percentage of cash back.
Months without interest
This concept is what has made most people want to request one since it allows you to gradually dose the payments for a product that you cannot purchase at once due to the high cost. Without a doubt, it is highly recommended to take advantage of this purchase model, since it allows you to maintain cash liquidity and helps you discipline yourself with payment dates. In this case, it may happen that you commit to different purchases over months, where the accumulated payment is too high to cover it and you fall into late fees that can damage your finances.
Keep our expenses under control
Preferably, and a generally important rule to generate an optimal credit history, is not to spend more than 30% of the credit limit granted by the card, we must make planned purchases or include them within our budget, otherwise, we less have the plan to cover the debt.
Pay on the established date
Paying on the payment date is essential to keep our history intact, since this way we will only pay what is due, if we are late or for some reason we miss it, it will generate interest. If you are one of those people who do not remember the dates, don’t worry, many banks send notifications or you can request direct debit of your payments so that they automatically charge your debit card on the payment dates.
No small payments
If we are going to make the payments on the corresponding dates, we must make them in such a way that we cover the total debt to be paid, since if we pay the minimum we can begin to generate interest, this will cause us the same issue as if we do not pay on the established date, then, to avoid all this, it would be best to pay on time and settle without mediation to have financial peace of mind.
Review your account statements frequently.
Reviewing account statements is essential to have control over our expenses and even realize if something is not right about the expenses generated. In any case, if you detect a purchase that you do not remember having made, it is best to contact your bank to make the clarification.
Having said that, I give you the best advice: if you have a debt with the bank, pay it off as soon as possible, so that this does not take away your financial peace of mind. I wish you much success!