The also known “plastic money” is a useful tool to manage the payment for purchases throughout the month. But it is not always used wisely. With exorbitant interest when the invoice is not paid or partially paid, it is no wonder that the doubt always remains in the air if it is really worth using a credit card.
Despite the recent reduction in interest rates, they are still extremely high: above 300% per year. Is it a high fee? Yes, no doubt. But the debt risk cannot be attributed to it. The main cause of this is to use the card without any control.
Financial planning: the best debt vaccine
To be worth using a credit card, you cannot give up controlling how much you earn and how much you spend per month. And, more than that, knowing how much of your revenue will already be committed to installment purchases in the following months.
The installments accumulated on the credit card cast finances and are a critical point in the uncontrolled budget. A small purchase here, another median there and a large one with installments in almost a year will compromise any other expenses that need to be made on an emergency basis, for example.
Write down your expenses and, if necessary, consult a personal financial planner. The purpose of this control is to make it clear that the credit card is not a supplementary income to what you earn. On the contrary: it can even become a risky form of payment.
Credit cards without any control and accumulating debts
As important as registering the movement of money is having discipline to respect spending limits. Resistance to impulse purchases is not really easy, but do you think it is worth using credit cards without any control and accumulating debts?
In order not to take this risk, set a spending cap for this type of purchase per month (always counting the accumulated installments from previous months!).
The less you use the card for that purpose, the better. But if you need to use plastic money, don’t spend more than 30% of your revenue, okay? If you already know that you have crossed the limit, leave home without the card to avoid falling into the temptation of shopping. Also, do not be enchanted by the letters that your limit has increased!
If the invoice is much higher than what you earn per month, the debt is guaranteed. Avoid paying the minimum amount or resorting to overdraft to pay. This way, you will cover one hole by opening another.
If you generate debts with the card, you have 6 steps to get out of them. One of these steps is to use a loan to pay it back and thus pay the loan installments, which usually have lower rates.
And when is it worth it to use a credit card, anyway?
This payment option is very useful when you prefer to concentrate paying your bills on a date when you will already have revenue available. However, this does not justify paying lower bills on the card. Depending on what is paid, the operator may charge an extra fee.
It is also worth using a credit card to earn miles and take advantage of loyalty programs. If you are traveling, some operators offer insurance, but as long as you buy the airline tickets on the card. Only flags of higher categories offer the service without imposing conditions. But it is the same case from above: be sure to pay everything on the card just to earn more points.
Compare prices and note that there are cases where spending more to get more points – and “winning” something – doesn’t always pay off. It is also worth using a credit card when an establishment does not offer any discount for cash or installment purchases.
Less is more
It is worth using a credit card if you are also aware of unnecessary costs, such as:
- annuity: it is mandatory, but you can always negotiate, especially when you use the card frequently and pay on time (your bargaining power increases);
- protection coverage: the credit card operator is obliged to reimburse undue expenses on the card by third parties in cases of theft or theft. Some companies state in the contract that the responsibility for the expenses is yours until you block the card and register a police report, but the consumer protection agencies say that, whether or not you pay this insurance, they are responsible for not checking the buyer’s document;
- scope: has no prediction of when to travel abroad? Then, switch to using the card only in the national territory and reduce your annual fee.
It is worth using a credit card to make purchases over the internet. After all, you never know if your order will arrive, do you? The card ends up serving as a guarantee for the purchase to arrive and helps with the cancellation, if necessary.
Another point is that card operators often offer car rental insurance. In the debit, a more expensive security deposit would have to be made in order to withdraw the car. This would be another expense that there is no need to bear and, in this case, it would be worthwhile to use a credit card.