About 37 million. That is the number of credit cards in circulation in our country, according to the Bank of Spain. There are almost as many elderly residents as there are credit cards in circulation. They seem like a lot, but they only represent 43% of the total; the rest are debit.
Despite its wide acceptance, for many consumers its use ends up becoming a headache. Its advantages are clear: they allow you to dispense with cash and pay for purchases in installments, that is, they are a means of instant financing. But getting into debt (every time a credit card is used, a debt is assumed) has its risks if it is not done responsibly.
The financial product comparator HelpMyCash.com has compiled a list of seven typical mistakes to avoid when signing up for a credit card.
Splitting the payment of the supermarket purchase, paying the gas bill in installments or transferring the credit from the card to the checking account to pay the mortgage bill is a mistake.
Experts recommend not financing recurring day-to-day expenses and not abusing card credit, since their cost is high (the average interest they charge is 17.91%) and because if they are used to finance day-to-day expenses, the chances of ending up over-indebted are many, explain HelpMyCash sources.
If, for example, a customer uses the card's credit to pay the monthly installment of his mortgage, the following month he will not only have to face a new installment of the loan, but will also have to return part of the disposed balance of the card with the corresponding interest. An unsustainable situation in the long term.
A separate case is if the credit card is usually used to pay for day-to-day purchases with the method of payment at the end of the month. With this system, all the money used during the settlement period is paid at the end of the month or at the beginning of the next one at once and without interest.
Credit cards allow, for example, to finance the purchase of a computer or bedroom furniture and pay a very small fee each month. With this system, the client can obtain liquidity to finance their needs and return the money little by little.
It is tempting, but the reality is that if you pay a very low monthly payment, the debt could become too long and the interest could skyrocket. Also, if the fee is too low, the debt could become indefinite. The Bank of Spain warns that "when the amount of the installment is equal to the interest for the period, the outstanding debt will remain constant and if it is less than the interest, the debt will increase".
Thus, those who decide to finance a purchase with a credit card must choose a monthly installment that they can assume and that allows them to pay off the debt in a short time so that the interest generated is not too high.
Some cards include very attractive bonuses and discounts on purchases, which are applied even if you pay at the end of the month without interest.
For example, the WiZink Plus credit card returns 3% of the amount spent each month on food, leisure, fashion or travel (two categories of the four above to be chosen by the customer) with a maximum of six euros per month, although the purchases are paid at the end of the month without interest. The card is free and can be requested without changing banks.
If the condition to receive the reward is to pay in installments, it is not advisable to make purchases only to obtain bonuses, since in that case you will end up paying more money in interest than what you obtain with the rewards.
Before starting to use a credit card, it is important to check which payment method is activated by default.
Some banks and finance companies issue their cards with deferred payment activated and a very low monthly reimbursement fee, HelpMyCash warns, which implies that all purchases that are paid with the plastic will be paid in installments. When contracting a card, the customer must select the payment method that suits their needs, something that can be done easily online, through the entity's app or by phone.
If the cardholder is late with the payment of the monthly fee, the entity will charge a commission for the unpaid receipt, so it is not advisable to pay late. It is important to know on what date the card issuer collects the receipt and to have enough money in the account to pay it.
Many credit cards carry accident insurance and, sometimes, also travel assistance insurance and even protected purchase insurance. If their coverage is good, they can be very useful, for example, if a flight is cancelled, if the airline loses the customer's luggage...
The problem is that many customers are unaware of its existence. From HelpMyCash they recommend reviewing the insurance coverage associated with the cards, as well as the conditions to be able to benefit from them. To do this, information on the policies can be requested from the card issuer.
Credit cards can also be used to withdraw money from an ATM. Of course, in this case the money extracted will come from the line of credit and not from the checking account, so a debt will be assumed. In addition, withdrawing money on credit always entails the payment of a commission, even if the bank's own ATMs are used. On the other hand, transferring money from the line of credit to the current account to, for example, attend a bill also usually involves the payment of a commission.
Resorting to the credit of the card to obtain cash can be useful in specific cases in which liquidity is urgently needed, but never on a recurring basis and always knowing what the cost of the operation will be and how much money will have to be repaid. In addition, other options to receive money in the account can be cheaper, such as pre-approved loans.
Credit withdrawals should not be confused with debit withdrawals made with a debit card, which are free of charge. In recent years, dual credit cards have become fashionable, which allow you to pay in installments, but withdraw money from your current account at the bank's own ATMs without paying interest or commissions.
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