APR Credit Cards Are No Problem
We have all heard that credit cards charge high interest rates and we are worried and even reticent about the advantages of having a credit card.
In fact, credit card interest rates are very high and when analyzed in terms of the actual cost to the customer, by analyzing the APR, any doubts that exist are completely clarified.
In order to reinforce this clarification, if we take into account the maximum interest rates for the second quarter announced by the Bank of Portugal for credit cards, then we conclude that, 34.30% is definitely a considerable overall effective interest rate.
But Should It Be A Problem?
It is true that a credit card has high interest rates, but it also allows the user to have a period of 20 to 50 days of free credit, that is, without any interest cost.
Also, credit cards, as a financial product that is also attractive for banks and card issuers in terms of profitability, have associated benefits to attract more users that are beyond reproach.
They are annuity offers for ever, cash-back programs, discounts with established partnerships, point programs, savings options, use and management software, free insurance, among others, that attract new users with the aim of enticing them to use of the credit card waiting for the banks for the potential payment of interest that some less attentive clients provide.
Therefore, the credit card is much more effective than an interest rate and it should not be the only point of evaluation and decision on whether or not to have a credit card. Moreover, only users who do not know the benefits of credit card are subject to bear interest rates.
Otherwise, let’s see
We can clearly identify four variables that may influence our decision-making in relation to owning or having a credit card, namely;
- Existence of annuity;
- Interest rate
- associated committees;
- programs, benefits and offers
Existence of Annuity
The competitive market for credit cards plays in the customer’s favor, as it is very easy to find a credit card that simply does not have an annuity, however, in the same market, there are also many credit cards that have annuity or have annuity with potential provided certain requirements are met.
Do not withdraw the value to the credit card with annuity, as there may be a benefit that justifies the support of this charge, such as a cash-back program that definitely repays on the moderate scale the existence of annuity, or a program of points This means that it is not necessary to have a minimum of one year’s membership in the course of the year. discouraging inefficient use of the credit card.
Generally, non-annuity credit cards have high associated interest rates, the banks and credit card issuers seek to monetize the annuity offer by charging interest. Likewise, interest will only be paid if you do not settle the entire debt in the free credit period.
This period exists in most, if not all credit cards, so it is the biggest benefit of credit cards since being used rationally.
Therefore, the interest rate variable is perfectly viable with the option to pay 100% of the principal amount in debt, and the new user of the credit card or the current user must request or change the monthly payment percentage.
Users who match our credit card rules know the existence of a high interest rate or APR is not a problem due to the possibility of paying 100% of the debt. They also know that the annulment of the interest rate is an act of individual responsibility because it is up to each user to exempt this type of financial burden.
For the responsible user of the credit card the existence of commissions is his only concern, since these are due some certain services or some non-compliances occur, and not even the users that obey all our tips for the credit cards are free of this type of charge.
An example is the use of credit card to raise money in ATM machines. This movement is called cash-advance, usually has fixed and variable charges.
Likewise, there are users who prefer to make payment of the credit card debt manually and not by debit to a bank account. For these, the risk of forgetting to pay the debt at 100% is higher, and may incur commissions for late payment.
The most distracted users can easily damage or lose their credit card, so they need to request a duplicate credit card. Not all credit card providers charge for this type of procedure, but many, especially those who do not charge annuity, who have significant charges for requesting a duplicate credit card.
The combination of all elements is fundamental to eliminate the concern of high interest rates, because credit cards, due to competition, have numerous benefits for their users.
A credit card with a high APR should only be a problem if there is an inefficient use of it, or if there are benefits that require the payment of part of the capital in debt and not the whole.
Banks recently sought to condition offers to this type of payment by the credit card making little advantageous Compared to other options.
So, when you choose a credit card, you should look at all the following questions:
- Does the credit card have an annuity? If yes, is there any way to exempt it?
- What is the APR?
- Are there associated benefits, such as offers and discount programs?
- What are the commissions associated with the credit card (included in the general conditions)?
- Can I request a 100% credit card payment? If so, is there any impact on the associated offers?
- Can I request a cancellation of my credit card at any time? If so, what are the implications?