What is the credit card ?
It is an instrument through which you can make purchases and pay them later. Materially, it is a plastic card, whose shape and dimensions have acquired some uniformity, although already some brands, looking for differentiating elements, have begun to vary sizes and formats.
This instrument has embossed an account number and the name of the person authorized to use it, which may be the account holder or an additional, the date on which it will lose validity (expiration) and a card number related to an account.
In legal terms, the credit card is not a credit instrument in itself, but it must be accompanied by the prior signature of a contract and the document (s) supporting purchases made with it. Therefore, the card alone would not serve to claim rights or fulfil obligations.
Usually, credit card stations in addition to the contract require the signature of a blank voucher, which operates as a guarantee in the event of non-payment. The user of the card authorizes in the contract that this voucher is completed by the station to make cash the collection of what it owes.
Credit cards versus debit cards
The debit card is linked to your checking account or savings box. When you use the debit card the money is deducted from your funds in those accounts.
With the debit card you can buy in commercial establishments without having to carry the cash or your checkbook. Simply file your debit card anywhere you see your card logo and the amount will be deducted directly from your account.
By contrast, the credit card constitutes an unguaranteed loan that extends a financial institution as a convenience. When you use the credit card to buy something, it means that, in case of not paying before the expiration date, you must also pay interest.
Deciding when to use your debit card and when to use your credit card is not a decision to take lightly. The credit card is a tool to buy now and pay later. The debit card is to buy and pay at the same instant, as if it were cash. Both cards can play an important role in their financial management plan.
Two card operation systems:
Open system: To go a case study, will explain the case of the Visa card suddenly!. In that case, soon! It is the one who issues and therefore takes care of the relationship with the cardholder (determines the annual cost and establishes the terms of payment and credit). The issuer (in this case soon!) must pay Visa, as a paying entity, who is responsible for the relationship with the adhered merchant (the amount of the transaction is paid minus a commercial discount corresponding to the service). That is to say that the client pays the issuer (soon!), the issuer to the paying entity (Visa) and this to the merchant.
Closed system: It is the case of the cards that take care of the whole process (emission, adhesion of trades, processing of charges of the trades, billing of all the clients, service of authorizations, publicity, etc.).
Using the card, is it beneficial?
Credit cards as well as credit in general can be beneficial or detrimental in accordance with their use. Responsible use maximizes benefits and considerably decreases disadvantages.
The worst thing you can do is take the credit card as an extension of the income. Not planning the expenses to be carried out with a card can lead to exceeding your ability to pay and generate unwanted situations.
The purchase by card requires the same care as the purchase with cash. Precisely, the absence of cash during the card purchase makes it often associated with the false feeling that you do not pay what you buy, causing you to lose the notion of accumulated expenses and the income that should be compromised for the payment of fees.
Summary: that the “credit card” tool will become beneficial depends mainly on your responsible use.
What is the credit card ?
Anticipate purchases by differing payment. Buy today and pay tomorrow.
Finance your purchases. He pays in instalments what he might not be able to pay in cash.
Security for not having to carry cash or checkbooks.
It makes it easier to manage accounts if you consolidate expenses on a card.
Possibility to withdraw cash advances.
It may include additional costs.
It can generate monetary hardship if you lose the account of how much you have spent.
Makes compulsive purchases easier. As has been said, card shopping is often associated with the false feeling that it is not paid.
How to pay your card
You must receive a statement that contains key data such as: all the information of the consumptions carried out (dates, places, etc.), outstanding balances, financing and arrears, date of closing and maturity, limit of purchase, limit of financing, limit of extraction, account number, current minimum payment and current maturity, among others. It is important to clarify that failure to receive the statement does not justify default.
In case of not having received the statement, the client has a certain period (in the case of Pronto!, for example, is 5 days, after closing) to make the corresponding claim. The non-claim will be understood as the user has received the information correctly.
In many cases, when there is a delay in the payment of your statement, the corresponding notice is made to notify the situation, and if the situation persists, the card will be blocked. In these cases, to reactivate the card, in addition to making the respective payment, with their corresponding interest in arrears, must pay the fees of arrears and administrative blockade.
Summary: Always check your statement, but has received it at closing date, has a specific period to make your claim. The non-receipt of the statement does not exempt you from your payment obligations.
Limit of purchase or limit of credit: it is the maximum granted to the line of credit to make purchases and/or to acquire services in the adhered stores. (maximum credit per purchase)
Funding limit: The maximum amount of credit granted to the account to finance the consumptions made. (Maximum credit in total)
Extraction limit: This is the maximum amount given to make cash advances.
Credit available: It is the updated credit you have to make purchases and/or purchase services at a certain time, discounting your original purchase limit the momenet of transactions already made in the period that competes.
Account number: is a unique number assigned to the account and to which a card (holder) or several cards (holder + additional) will be associated.
Closings and maturities: the closing dates and previous, current and next maturities are detailed in the statement.
Closing dates: It is the day of the month to which all purchases made are counted. Any purchases made after that date will enter the account statement for the following month.
Expiration Date: This is the one that indicates how long the account summary can be paid. Some cards offer an additional grace period.
Current minimum Payment: is the minimum amount of money to be paid from the current statement of account in order not to incur arrears. It is important to mention that on the difference between the balance to be paid and the minimum payment, they govern the corresponding interests. If you pay only the minimum every month, you not only pay interest for the balance, but you will not be releasing available to make new purchases, among other negative effects. The minimum payment must be taken as a tool of exceptional use that can be used in case of great need. Current expiration: Indicates to what date you have time to pay without extra charge the current statement.
Detail: Here are available the consumptions made, the payments made and other concepts such as financial interests or summary shipping costs, with their value and corresponding date. The previous and current balances for each currency (pesos or dollars) are also reported.
It is very important to verify, month after month, that the payments you have made are registered in the statement (of the month that corresponds). It is also very useful to keep track of your expenses (keeping the vouchers) to analyze whether they match your statement and to figure out how many new credit purchases you can afford.
Check the interest rate and how it was calculated, and do the same with the date the payment should be made to be able to do so in time and form.
Choosing a credit card
In the market there is a very wide offer of credit cards. Today it is very common to offer a credit card even if you have not requested. This generates that sometimes you have an endless number of cards, on the one hand, because they deliver them free of charge and without further formalities and on the other, because, in general, they are low-credit cards which implies that if you want a higher limit of credit, you will find it easier to accept others.
Which reject and which do I accept?
If you do not pay the total account statement (which is not recommended), a factor of interest is the financing rate. However, if you use the credit card basically as a cash-like payment medium, and you cancel 100% each month, the interest rate (funding) is no longer significant.
Another factor to consider are the benefits associated with the use of the card, whether in services, special discounts, financing plans without surcharge, points, miles, etc.
A crucial element that must enter into the analysis is the number of stores attached to the card, that is to say how many places it is accepted. A card is useless if it is not possible to use it in any trade or in very few.
Finally, items such as the annual cost of the card, monthly costs (shipping cost of the statement, etc.) or coverage (national, regional or international), can be important when choosing the ideal credit card for your reality.
Items to consider:
Access to credit on a permanent and rotating basis
possibility to advance consumption
Price equal to counted
Extensive collection network
Access to Promotions
Possibility of financing and refinancing
Fuels without surcharge
ATM Network Nationwide
Presence across the country
Possibility of cuotificación of balances
When you are in a trade (attached to your card), willing to purchase a good or service, you can choose between the payment options offered. If you choose a single payment, you will have a certain time to make the amount effective, in this operation the institution does not charge you interest (if paid in date).
Cash advances with your card
A cash advance is an “instant loan” that can be obtained in some cases from an ATM or directly in the card issuing authority and is billed to your credit card.
In general, in addition to the financial interests, a charge or commission that can be fixed or a percentage of the advance amount is charged.
Cash advances are tempting, just a simple procedure and ready, already counted on the cash, but should not be used as part of your income. Instead try to make the purchase with your card and the cash advance use it only for emergencies.
On the other hand, cash advances in some cases are computed in full for the minimum payment, so you have to check the conditions of the card well not to be surprised at the time of receiving the statement.
The most expensive way to pay
It is very important to understand that the money spent when using a credit card is being borrowed from the issuing authority of the card. Therefore, what is spent with the credit card is a loan and as such has its costs.
In fact, most credit cards allow you to pay for purchases bonificándole interest for a period of time, since the purchase is made until the expiration date of the statement, in this period no financial expenses are incurred, provided that the total expenses are paid and before the due date.
If you do not pay the entire statement you will be charged interest:
They shall apply on the amount of each purchase and from the date of each of them up to the closing date (interest/bonus product).
On the balance resulting from discounting the partial payment, from that closing date to the next closing (financial interests).
In the event that you do not make the payment out of date or the payment is less than the minimum you will be added to the moratorium interests, which are generally greater than those of financing.
So if you are not sure that when you make a purchase you can pay the whole the following month consult in the respective trade if you have the possibility to do so in payments without surcharge. In this case the amount of each fee will be charged to your statement.
Therefore, paying only the minimum required is the most expensive way to repay the debt. In case of not being able to pay the total payment counted, what is recommended is to make the highest possible payment in date (above the minimum payment), since that way you can catch up in less time and will generate lower interest.
Terms and Conditions
The advantages offered by credit cards are sometimes so attractive that you overlook those not so obvious conditions that you might be accepting when signing the agreement. In this respect, not all cards are the same.
Before you sign, don’t forget to take the following concepts:
Interest rates for financing and arrears.
Minimum payment and how it is made up.
Card costs: Social fee (if any), sending of statement, issuance, renewal, additional card, etc.
Surcharges for purchase of specific items (eg: fuel, supermarkets).
Management fees: (for example: operating cashiers, foreign operations, card replacement in case of theft or loss).
Charge for having a cash advance, for exceeding your credit limit, or for keeping a balance at zero, if they exist.
Beware of theft or fraud
Credit card fraud is done in many ways. The most common is that thieves steal your card and try to use it, but there are also other possibilities like making false impressions, which is commonly called clone cards, and many other modes that are less publicly known.
The most advisable in the face of these situations is to denounce the fact before the financial institution issuing the card.
How to protect yourself from these situations?
Protect the credit card as it would protect the cash.
If you have multiple cards, carry only one or two. In the event that they are lost or stolen they will have to make less efforts to denounce or notify their disappearance and lower risks.
Have the numbers on hand to communicate in case of theft or loss so that the cards are blocked immediately.
Always check that your card is returned to you after you make a purchase.
Save all receipts from the purchases made and compare them with the account statement records to verify that there is no expense that has not been made by you.
Never give strangers your credit card number.