Receiving a salary credit card statement at the end of the month and being able to pay a minimum amount, with no deadline to pay off the total debt, has a high price tag. Anyone who has used the revolving credit card knows very well how much it costs.
With the high interest that was charged to those who chose to pay the minimum, debt only grew and often became priceless. To remedy the situation, the National Monetary Council (CMN) resolved to interfere by imposing a 30-day limit on rotative use.
The new regulation has already completed one month, and if you used the rotary at this time, it is time to adapt. That is, it is time to decide between the full invoice payment or the installment payment. This change lowers the cost of debt, but it is still very expensive to curl up on the credit card. Read on and learn more!
The credit card snowball
Under the old credit card rules, the administrators only allowed a small part of the debt to be paid. The rest could go into revolving credit and be rolled indefinitely.
Hoping to find a future situation that would allow her to pay off, those who resorted to this option ended up wrapping themselves in a snowball. After all, the interest rate surpasses 500% per year on a revolving basis, which further complicates the situation.
The new rules for credit card revolving
Under the new rules, the consumer can only pay the minimum bill once. If in 30 days he does not pay off the total debt, then he should opt for the installment. In installments the interest rates are softer than the revolving ones, and they are turning between 1% per month and 10% per month, depending on the bank.
Still, you need to be very careful, after all, in addition to the interest, there are other charges, which can incur debt 300% per year or more, depending on the institution. Since up to 24 installments can be paid, long-term installments continue to set a trap.
A practical option for shopping
Those who see the credit card as a form of payment can enjoy the best of this feature. With it, carrying little money, it is possible to make payments in a very practical way, including travel.
It is also easy to have complete control over spending since the invoice records when and where an expense was made and how much it represented. In addition, when there is no interest charge or when interest is reasonable, you can also make very smooth install purchases, even over the internet.
However, those who need to resort to money from a financial institution should look for alternatives outside the credit card.
The Alternatives to Paying Credit Card Debts
If you are in doubt, the first thing to do should be to avoid using it at all, even if your limit still allows. The best option is always if possible to pay the full amount in arrears as soon as possible.
But if your debt is beyond your means of payment, it is also worth pursuing a negotiation with the manager, trying a less costly exit.
If the only alternative is the installment, try to find out about the interest charged. To these should be added the other fees and tax, composing the Total Effective Cost of the debt. Total Effective Cost will represent how much you will actually pay for what you owe.
Then compare the Total Effective Cost with the rates charged on loans or outside the bank to which your card is linked. Chances are you will find credit lines with lower interest rates than those charged by the card.
Personal credit, for example, is often an option with lower interest rates. Or try researching payroll, with direct payroll discount, and more competitive interest rates.
There are also credit unions, which charge little more than 2% per month for loans. It may be more interesting for you to take out such a loan to pay off the credit card.
Now that you know how to handle the end of revolving credit card, subscribe to our newsletter for new tips on financial organization.