Many people are seduced by the offer of credit cards. Although they do not understand why the bank pays for each of their purchases (The account-keeping bank receives 0.6% after a credit card purchase, this represents a 0.2% reduction in the transaction tax. card holder. That is, each transaction is a net charge to the bank.), why give them a free loan for 45-51 days, which also has a significant cost to the bank.
Obviously because the bank is really worth the credit card and not stupid, but I don’t want to write about it right now. It’s about the pitfalls of using a credit card because you can easily pay any kind of penalty for your ignorance.
Credit Line Overrun: If you spend more than the credit limit you are allowed to pay, you will be charged a penalty of about $ 3,500 per month. Most banks allow you to exceed your limit by a certain amount. Even if you make sure you don’t exceed the limit, you’ll often be penalized for the costs billed at the end of the month (monthly fee, monthly SMS fee, annual card fee, or even last month’s penalty and interest.). Therefore, never overemphasize your credit line, rather stop in front of it.
Don’t wait until the last day, because every bank has a so-called cut-off time when they close their accounts that day. If you do this at your bank at 5pm and you transfer the monthly payout from your account to internet bank at 5:02 pm on the last payday, you will be charged a penalty of $ 5,000 each and $ 4,000 each time, that is, you have to pay an additional interest of 10-15 thousand HUF. Therefore, you should pay as soon as possible.
You always have to pay after your account is closed! If you realize that you are paying only $ 5,000 in interest on a 500,000 credit card debt, it seems a good idea to prepay as much as possible as soon as possible. So let’s say you prepay $ 100 for a month and then pay nothing after you close your account, because you’ve already made a bunch of money that month. Well, you went wrong too, because you always have to pay after closing your account, at least 3-5% of your debt plus interest and costs. In this case, you have 200,000 in debt, five percent of which is 10,000, interest is almost 10,000, and other expenses. You will have to pay this money even if you have already redeemed that amount many times that month! Therefore, you should always schedule a repayment after you close your account or leave enough money to pay the minimum fee. Otherwise, you will be charged a penalty and interest again for that month.
Set up account closure after payday!
You’re really bad at having to pay your credit card in the second half of the month when you’ve already spent most of your payment. Therefore, if your bank allows it, choose a closing date after your payday, if you can’t choose, open your credit card in advance (if you need it anyway) by the end of the cycle.
Even if you miss $ 50, you pay full interest on the whole amount! Many people misunderstand the condition of interest-free. You will only be eligible for the interest-free period if you pay all your debts up to the last penny by the due date. If you pay less than $ 1.00, the entire amount , not just the $ 1.00, will be charged at an annual cost of around 40%. Therefore, never leave a penny owed.
Up to 45 days is not 45 days! There are no refunds for 45 days from the date of purchase, but there are monthly cycles that are completed at the end of the cycle, and then you have 15 days to settle the entire bill. That is, if you bought something on the last day of the cycle, you will have to pay it off in full within the next 15 days. Therefore, if interest-free is important, you should wait until the first day of the next cycle to make a purchase.
Taking out money at a gold price:
It is a gentleman’s pleasure to withdraw money from your credit card. The fee is 2.5-2.8%, minimum HUF 1000, and as a bonus this amount is non-interest-bearing, that is, it will definitely interest at the rate of 40% per annum from the date of enrollment. Therefore, we should avoid this and be aware that, for example, postal payment is a money withdrawal.
Don’t get into the destructive spiral! Although many people do not believe it, credit card is a very dangerous thing, which is extremely difficult to get out of and is extremely expensive to capture. For example, if you are unable to pay your full bill in one month, and you just scroll through these few thousand forints every month, you lose interest-free every month and pay $ 200 in interest only with 500,000 card transactions, as your total debt.
Or, for example, you lose your job and want to live off your credit card for a month or two. What will happen? You cannot repay it, so you pay a late fee ($ 10,000) each month plus interest of $ 10-20,000. Because of the interest, you shortly break your credit line, so you pay another $ 3,500- $ 4,000. That is, you pay a $ 7,000-7,500 monthly penalty and a 40% annual interest. And of course other fees like account management, card fees and more.
By the time you get out of this situation, you will be losing hundreds of thousands and you will find out why banks are forcing credit cards and baiting for free loans and refunds.