A large part of users tend to believe that by obtaining a credit card , they will be able to buy things and hire services at will without having to pay anything in return. This is a very serious mistake, like everything else, if you do not have a good use of your credit card , you are, you could generate a debt that will ruin your life and that is why here we will explain some of the bad habits of using credit cards credit cards .
Credit cards should be viewed as a means of payment , never as extra money. Creating a large debt without knowing later if you will have the means to pay it is a bad idea, says spokesman Wolfgang Erhardt of the Credit Bureau , the company that is dedicated to electronically recording your credit history and behavior .
At the beginning, because you are a student, you will be able to access various types of products: university or department store cards issued by banks. Now, if instead you have just started a working life and have a payroll account , the most likely thing is that the bank will offer you a credit card . There are basic concepts that you have to know to take into account to properly use credit cards and thus get the most out of it, so that they do not later become debts, which you could have avoided if you had more awareness.
Things you should know before applying for a credit card
Something basic in personal finance, it goes like this: if you don't work, what will you pay with? If you don't have income, don't even think about taking out a credit card , warns the director Ángel González, of the National Organization for the Defense of the Debtor , a company that is dedicated to providing legal defense to debtors . The most convenient thing before applying for your first credit card is to have a relatively stable source of income. If your income varies, you must be careful in the loans requested, in case of having a significant variation, you would present problems when paying it.
Many people look at the interest rate , but it is also important to see the “CAT” Total Annual Cost , which shows how much the credit card will cost you considering the commissions and the interest rate, says the spokesperson Kathy Quintero, from Resuelve your Debt , adviser of people in debt . Example, There are cards with a lower interest rate compared to others in its category, but they have so many commissions that they make them more expensive than the competition.
Tips to avoid bad habits when using credit cards
Ask how much the financial institution charges you, simply to keep your card active. The more benefits credit cards offer, the higher the fee can be. It is advisable to use only one credit card , if they offer you another with a lower interest rate and lower commissions than the previous one, replace it, but do not keep the first one. When you have more than one card, it is easy to lose control of the debts and the payment dates of each one.
Cancel the cards you don't use, most people see the credit card to use it for unexpected expenses , but having unused cards stored "just in case" is a very bad investment. If you have a credit card that you haven't used for 10 months, cancel it. Despite not using it, the bank will charge you the annuity and on some occasions, commissions for lack of use . The most recommended, in emergencies in which you have unexpected expenses , is to have savings in the bank immediately without requesting a loan .
What things should you buy and what things should you not buy with credit cards ?
Use your credit cards only to buy goods that are at least three years old, such as tablets, computers, or specific materials for your career. You could also use it as a method of payment for some services such as Uber or Netflix , but try to pay monthly, if you don't you will have a fine. Do not go partying with the card since if you pay for the party in installments, the next time you go out to farra you will continue to pay with interest what you drank three months ago. With a credit card, we could practically buy whatever we want, but yes, we must always be careful with bad habits of using credit cards , since if we do not, they may end up with unpayable debt.
Identify how far you can borrow
If you still live with your parents and your expenses are low, do not trust yourself, better try to suggest that the payment of your debts do not exceed 30% of your monthly income . If your income changes and you would like to know what your ability to pay is , consider a moderate amount as fixed income , and do the same operation, meaning with the lowest range of income you have. If you obtain a line of credit , this does not mean that it is your real debt capacity.
You obtain the real debt capacity by subtracting all your expenses from your fixed monthly income , including a fixed monthly amount for savings. The remaining money is your ability to pay . If you have bad habits in the use of your credit cards , with your first credit card that you acquire, it is most likely that your relationship with credit will be negative in the future .