A credit card is a quick and practical solution for those who have money and want to buy, or even if you have money but want to pay at a later date. It became popular and occupied a fixed space in the financial market.
But do you understand how interest on a credit card works? Better understand the interest rate that can be added to your purchase and weigh it to see if it is worth paying a little extra for your purchase.
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But how does interest work?
Financial institutions that provide credit cards make money in many ways, not just when you buy something. Many of them even make a profit when you apply for your credit card, meaning maintaining your card generates fees, which are what keep these institutions active and making a profit.
Understand better how credit card interest works and carry out a financial analysis, considering whether or not it is worth it for you to keep a credit card for everyday use. See the considerations below and be sure to do an in-depth analysis!
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1. There is a monthly billing cycle
Interest is accrued on your card within one billing cycle. From closing an invoice and paying it to opening another, the purchases you make through this method will generate additional fees. If you don't pay by the due date, the interest starts to rise, as it is counted as a delay.
2. Annual fee
Most branded credit cards have an annual fee, that is, their users pay an extra monthly fee during the 12 months of the year even without consuming anything on the card. With this, financial institutions ensure that you keep your card and somehow encourage you to use it.
3. Minimum payment
The cards provide a minimum payment option to users, but it can only be a good option in emergencies, as it is one of the ways to exponentially increase your debt with the finance company. Only use the minimum payment as the last option because it can double the value of your debt to the financial institution.
4. Running and revolving interest
If for some reason you are unable to pay off your debt on the scheduled date, the credit card ends up charging you interest, which in some cases can be extremely abusive and exceed your budget dedicated to paying the card. Pay attention to the expiration dates of your financial products and ensure that you will not pay excessive interest.
5.Daily interest
Interest on a credit card is calculated day after day, on a daily basis, as a percentage of the total amount. So if there is a significant delay in your payment, the amount could potentially increase, causing you to pay an amount that could exceed the amount of the original debt.
Be aware of abusive charges!
Not all additional interest on a financial product can be considered normal. It is important that you be aware of possible abusive charges, and notify the supervisory bodies if you feel harmed in any way by any financial institution that is charging double or triple for a product consumed.
Credit card interest rates have changed recently, and you can appeal if you notice that you are being charged interest above double the original amount of the debt. Abusive charges can end up affecting financial companies that tend to maintain abusive practices and charge their customers high fees on a monthly basis.
Common questions:
Abusive charges on credit cards may include excessive fees, abusive interest, undue charges, charges for services not contracted, among other abuses by financial institutions.
Yes, several countries have specific laws and regulations to protect consumers against abusive credit card charges. In Brazil, for example, the Consumer Protection Code and Central Bank regulations establish guidelines and limits for charges made by financial institutions.
The consumer can start by contacting the financial institution to dispute the undue charges and seek a solution. In addition, you can file a complaint with consumer protection bodies or seek legal advice to resolve the problem.
The rates and interest charged on credit cards may vary according to the legislation of each country. In Brazil, the Central Bank establishes limits on interest rates, fees and financial charges that can be applied by financial institutions to consumers.
Regulatory bodies, such as the Central Bank, are responsible for monitoring and regulating the financial sector to ensure that institutions respect established standards. They can impose penalties on companies that charge abusively and create rules to protect consumer rights.
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