The credit card is a means of payment that allows people to have in advance the money that they do not yet have in their bank account, and with these resources they can make payments, purchases and have cash.
As a result of their falling income, many Peruvians were forced to use a credit card to cover their expenses throughout the covid-19 pandemic.
While useful in emergencies or large investments, the high interest rates for using it mean that users must be responsible when making purchases and payments with it.
ESAN Graduate School of Business Finance Professor Mario Miguel Vergara provides five tips for efficient credit card use:
1. In what situations to use the credit card?
The credit card will allow you to buy in installments, pay for university or college, buy devices such as a computer or refrigerator, and, in case of health emergencies, it is useful to have the line you have assigned.
It should be used periodically and show that you are a good payer.
2. So in what situations is it better not to use it?
The credit card is not for making unnecessary purchases, such as going to the supermarket for weekly purchases, or small expenses that could be paid in cash.
You have to avoid falling into minimum payments, since interest rates can be very high.
3. Is it advisable to have more than one credit card?
It is recommended to handle a maximum of three cards, since this way we can demonstrate a good credit history. One of them can be used for Internet purchases, since it is easier to detect fraud with it, if necessary.
The second, you can keep it at home and use it only for regular purchases. Finally, you can have a card from a commercial store.
4. Should one resort to paying the debt of a credit card with the cash disposition of another card?
Definitely not a good idea. Cash disposition rates are very high, so withdrawing money from one card to pay off the debt of another is like entering a debt carousel that is difficult to get out of. If a person is in this situation, one option is to sell the debts to a single financial institution, in order to centralize them.
5. What considerations to have before accepting a credit card?
You have to evaluate terms and rates. It is recommended to make a comparison of the interest rates of each financial institution, in order to calculate how much you will have to pay monthly for the loan you are accepting.
This payment must be included in the monthly budget, such as housing, food and education. It is advisable to allocate between 35% and 40% of income to financial debt.
More in Andina:
There are four million people without retirement savings due to withdrawals in a pandemic, reveals the @SBSPERU https://t.co/2W3tPndJ8A pic.twitter.com/sKnjc6T8ml
– Andean Agency (@Agencia_Andina) March 22, 2021
(FIN) NDP / MDV
Published: 3/22/2021
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