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Double-edged sword: what are the risks of the credit card minimum payment?

Double-edged sword: what are the risks of the credit card minimum payment?

When used responsibly, a credit card can save you from a lot of trouble. On this long holiday, from April 6 to 9, due to the celebration of Holy Week, thousands of people take the opportunity to carry out more bills than usual. During this time, money plastics are an attractive option to pay some journeyconsumption in restaurants or the stay in Hotels. However, if not managed correctly, the financial problems They will start to reflect.

In this scenario, when a person receives their account status To cancel the debt of everything consumed, there are various payment options. One of them is the minimum payment, whose use can be a double-edged sword that can put the user at risk. According to Jorge Carrillo, a professor at the PacĂ­fico Business School, the minimum payment is the smallest amount required by banks. to avoid falling into arrears or being reported in risk centers. But he warns of the first consequence: you will pay more.

The minimum payment can keep you from defaulting, but the interest can hurt your financial score.  Photo: Andean

The minimum payment can keep you from defaulting, but the interest can hurt your financial score. Photo: Andean

“What I recommend is to avoid the minimum payment because you will pay too high interest considering that the average interest rate of the credit card in Peru is 60%“, indicates Carrillo Acosta. He adds that this amount should be executed only in cases of emergency as additional charges may accumulate by the billing close of the following month. “If I have to split the payment, the ideal is to do it in installments,” she advises.

Minimum payment: what expenses are included?

According to the specialist, this modality only covers a fraction of the capital divided into 36 parts or amortizations. Added to this are interest components, tax credit insurance, commission for sending the physical account statement, among other additional expenses. As an example, to determine the minimum payment, if you owe S/1,800 for a product you purchased, divided by 36 is S/50. The aforementioned interest is added to this amount.

Currently, according to the regulation of the Superintendence of Banking, Insurance and AFP (SBS), the amount of the capital to be paid in the Minimum payment must not be less than S/30 or US$10. A few years ago, banks were free to set the minimum payment without common criteria. “There the debt was eternal,” says Carrillo.

If necessary, the payment of the credit card must be under the modality of<strong>direct credit or full payment</strong>, according to Jorge Carrillo.  Photo: composition LR/IStock/BBVA   ” title=”If necessary, the payment of the credit card must be under the modality of<strong>direct credit or full payment</strong>, according to Jorge Carrillo.  Photo: composition LR/IStock/BBVA   ” width=”100%” height=”100%” loading=”lazy”></div>
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If necessary, the payment of the credit card must be under the modality of direct credit or full payment, according to Jorge Carrillo. Photo: composition LR/IStock/BBVA

financial recommendations

The finance expert also recommends that a person manage a maximum of two Credit cardssince having several lines can generate unnecessary expenses, since most banks charge an annual membership fee. In addition, if you have more than three or more cards, for the financial institution you are a potential debtor. Another piece of advice to take care of your financial health is that, preferably, if you take out a credit card, ask not to have the option of “cash withdrawal from the card”, whose interests are very high.

Source: Larepublica

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