Practical and comfortable, credit cards continue to grow in Spain. The first quarter of 2016 has closed with 44.88 million of this type of plastics compared to 25.23 million debit cards. The reasons and advantages are obvious. Carrying this type of card is to have a credit in your pocket that we can use when it suits us and with it obtain much needed financing in periods of great expenses such as holidays, Christmas or back to school.
But this freedom also entails a responsibility. This goes, from not accumulating an excess in cards as mainly the use we make of them. We must perform intelligent debt management, trying not to accumulate high amounts but especially complying with the stipulated payments. These two concepts are often faced.
On the one hand, to try not to accumulate interest expenses it is convenient to pay as much as possible and pay off the debt as quickly as possible. But on the other, many times this is not possible and small amounts tend to be paid, an option often necessary to avoid a worse one, the non-payment of the debt that leads to adding other costs. All this is possible because the majority of credit cards offer three possibilities to finance a purchase with advantages and disadvantages that we must analyze in search of the best management of our personal finances.
The three ways to finance
The three ways to finance with a card that customers find are the following:
Fraction for a given number of months
The amount corresponding to the debt and the interest generated at this time are distributed. With this modality we know the end of the operation, what we pay month by month and of course, we control the cost much better. If for example we have a purchase of 850 dollars that we finance in 3 installments of 300 dollars, 900 dollars in total, we know that the cost for this financing is 50 dollars.
Pay a fixed amount per month
With this modality we know what amount we are going to pay, but only approximately, when we are going to finish financing. The time will depend if we are adding new purchases to our card. The biggest risk is that the amount is very small and with that what we pay mainly are interest. If we choose small amounts, even if something we pay in capital goes up month by month and interest decreases, the payment can be excessively expensive.
Pay a percentage on the debt per month
It looks like the previous option but we do not know what we are going to pay month by month or when the payment is going to end. In fact, until it reaches the minimum amount required by financial institutions (for example, 5% of the debt with a minimum of 30 dollars), it would not end. In addition, if new purchases are added there will always be a pending amount that generates interest.
The differences in cost between the 3 ways to finance a card purchase can be important. In most cards we can alternate different forms of fractionation, and if one month we can not pay much, lower the fee in another to pay more. But always, let’s try to pay as much as we can month by month, so that the total cost of financing is as low as possible.