In Colombia, credit cards offer three alternatives to pay the consumptions and advances in cash that you make with the credit card. You can choose the one that suits you best.
Every time you carry out an operation with the credit card you must make a decision: how much time you are going to pay, that is, how many installments you will finish paying.
It is a very important financial decision.
However, sometimes we don’t take it very seriously. It seems that we do not care to say 10 installments, than six.
As if 10 installments or six were the same. And it is not.
The three quota schemes
The financial or commercial entity that grants you the credit card can have these schemes so that you pay the consumptions and cash withdrawals:
- Revolving: This system divides the total value of consumption into 36 equal parts. Each month you will pay a share.
- In installments: You can choose to pay in two installments, in three, four, six, twelve and up to 48 installments.
- At a fee: You can make the decision to pay everything in cash, that is, the next time you have to pay the credit card.
These schemes look simple if we assume that each month we make a consumption and pay it all the following month. In that case, we would always see that the Minimum Payment is equal to the Total Payment.
But it’s not always like this.
- We defer purchases and advances we make each month.
- We buy in dollars and the card automatically assumes twelve installments.
When you receive the account statement, you have a long list.
For example, you owe eleven installments (or parts) of buying shoes; ten of the flowers, three of the dress, 16 of the engagement dinner, 22 of the specialization, and two of the concert.
It all adds up. And also add interest. Each month you pay interest on each of those consumptions.
So, the decision you make when delivering the credit card to pay has a profound impact on your finances.
It’s not just about dividing the total value, but about paying interest for a while.
- Will a purchase of $ 2,000,000.00 be justified in 36 parts with interest?
- Can I buy a $ 100,000.00 purchase in six months, or will I be safer if I say 12?
- Will I have the quota or credit line available to pay for the semester of the university, earn the points offered by the credit card, and pay everything in one month?
- I already have other previous consumptions, which I have made for months … if I buy this, can I pay it? Will the minimum payment go up a lot?
This is the kind of question you could ask yourself each time you use the card.
The answers will tell you which is the best option.
- You can pay everything you want with the credit card and earn points or miles with even the smallest consumptions. This custom is very healthy and very good business if you also get used to paying a fee, without interest.
- Making accounts to determine what term you need to pay for consumption or advance is the most appropriate strategy. You can include the fee in your budget and you will be sure to meet the payments. It is a clear way to grow and acquire, renew and change.
- Thinking about points and miles is important. Not definitive, but important. It is like receiving a small discount for the use of the card. Someday, in effect, you can pay for an appliance with points, have a new bike or buy air tickets
- Considering the debt you already have is key. You have to anticipate that everything you buy with the card you must pay and that a purchase last month adds to that of six months ago, which adds to which you still owe four installments or parts.
In short, do not save the card. Use it, but decide before how you can pay and what good business you want to do.
Do you owe a lot of money on your credit card? There are a couple of options to improve that situation:
- A new credit card with better interest rates
- A personal credit, to pay less interest
- A loan with mortgage guarantee, to recover liquidity