The main advantage that credit cards have is that they allow us to have a loan in our pocket ready to use at any time and pay for any purchase in monthly installments, as explained by the financial comparator HelpMyCash.com, and it is common for them to be used for times of greater spending such as Christmas.
Although more atypical and probably with less expenses due to the restrictions of the pandemic, the budget that we dedicate to these parties is high. In fact, last year in Spain we spent an average of 554 euros at Christmas, according to a Deloitte study. Whatever the budget, it is important to take into account certain criteria before deciding whether it is worth financing a purchase with a credit card.
The first thing to keep in mind before financing purchases with a credit card is that the operation will have an additional cost, since interest will have to be paid. According to the latest report published by the Bank of Spain, the average cost of financing a purchase with a credit card is 18.34%.
For this reason, HelpMyCash.com gives some easy-to-apply tips to use cards responsibly and avoid over-indebtedness.
The first is to create a budget . It does not have to be exact, but making a small list of the amount of money we want to dedicate to each game (gifts, transportation, meals?) And what expenses we want to finance will help us not to spend uncontrollably and pay everything with the credit card. credit.
Let’s not forget that the main purpose of the cards is to pay for specific purchases later, not to use them as a regular form of financing, so choosing which purchases to pay with our money and which ones in installments is the beginning to finance ourselves responsibly.
Second, choose how we want to pay. The cards have a large number of deferred payment formulas to choose from (fixed, percentage, by installments ??).
We can easily change this mode from online banking or by calling our bank. To choose the installment well for us, it is advisable to take into account that it must be a monthly payment that is low enough not to unbalance our economy, but high enough so that it does not last too long and does not generate an excessive amount of interest .
Many cards allow you to return the money with very low monthly installments, but this system is not beneficial for the client, since the repayment of the debt is very long and the operation ends up being very expensive.
As for the term, it is advisable not to extend it more than 12 months. For example, a purchase of 300 euros with the average interest of the cards (18.34%), would generate 9.2 euros in interest if we financed it for three months. Instead, it would generate 30.6 euros in 12-month interest. The shorter the term, the less interest we will pay.
In addition, preventing the reimbursement of Christmas purchases from joining other times of more spending (Easter, long weekends, summer holidays ??) will be vital so as not to end up suffocated by debt.
Many entities offer those who have the default payment at the end of the month to finance specific purchases without changing the method of reimbursement.
This modality is commonly called easy payment and usually has more advantageous conditions than the generic deferred payment. An alternative to consider if we use the card in a timely manner.
Third, calculate how much we will pay in total . One of the most important points to know if a purchase is worth financing or not is to know how much we will pay in total to pay it in installments. Thus, if we decide to finance a purchase of 300 euros, but we will pay 100 euros in interest, it may not interest us.
On the other hand, if a purchase of 300 euros generates 30 euros in interest, the operation could be acceptable. Deciding if the cost of financing a purchase is worth it or not will depend on what we are willing to pay in interest for the ease of paying it monthly.