The end of year holidays are over and some people have gone into debt to buy gifts, pay for dinners or the New Year’s party, using credit cards, which they will have to pay during the following months. One of the strategies In order not to end up in default or reported to a risk center, it is the payment of the minimum fee. However, this option may bring some problems in the future.
Find out in this note The Republic What are the risks of this financial practice, according to Jorge Carrillo, professor at the Pacífico Business School.
What are the risks of paying only the minimum credit card fee?
According to Jorge Carrillo, one of the main risks Paying the minimum payment on the credit card means that you will have to pay more towards your debt. This modality would have to be exclusive of an emergency case because additional charges can accumulate at the close of billing for the following month. “You will pay too high interest, considering that the average credit card interest rate in Peru is 60%”added the specialist.
As indicated by Carrillo Acosta, this modality only covers a part of the capital that has been divided into 36 parts, to which are added interest components, credit insurance, commission for sending a physical account statement, among other additional expenses.
Although this is regulated by the Superintendency of Banking, Insurance and AFP (SBS), the entity only states that the minimum payment should not be less than S/30 or US$10. However, a few years ago, banks were free to set the minimum payment without a common criterion, generating what Carrillo points out as “eternal debt.”
Finally, Jorge Carrillo Acosta recommends that a person manage a maximum of two credit cards, because some unnecessary expenses can be generated such as the annual membership cost. In addition, financial institutions may consider you as a potential debtor. Finally, it is recommended that you not be allowed the “card cash withdrawal” option, due to the high interest it may cause.
Source: Larepublica
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