Users use credit card as salary extension
To pay all bills at the end of the month when money is missing, 20% of credit card users use it as a salary extension. What seems like a solution can become a trap: Lack of financial planning and high interest rates on the card can start the snowball of debt.
The chances of you having a credit card and using it in your daily life are very good. If not, surely you know someone who has and uses.
Research has shown that one in five users use the card as a salary extension – that is, they end up with this type of credit when their monthly salary ends. The study was conducted by the Customer Protection Service (SPC) and the National Confederation of Shopkeepers (CNDL).
One of the main problems that arise with this extension of salary through this form of payment is precisely the chances of debt. This is one of the reasons why credit cards are one of the main sources of Brazilian debt.
Even with the change in interest rate rules for the revolving card, which was intended to reduce default, some care must be taken not to fall into the credit card pitfalls.
There are at least three main reasons why users stretch salaries with credit card debt. Learn what they are and how to avoid the situation:
Lack of planning
The first step recommended by a good financial education is budget planning. Without it, there is no control over how much money will be required to pay all bills. The result is clear: money may be missing and then the credit card is seen as a solution. So organizing personal finances is critical to knowing how much money goes in, what the month’s bills are and how much will be left over – or missing.
To make this task so important to your financial planning, Pcredi has prepared a personal budget spreadsheet so you can better control your finances.
More practical option
Applying for a credit card is not difficult. Therefore, the number of users lives a constant increasing. Even if people don’t remember, the credit card is in fact a credit line – one of the most used by Brazilians, by the way.
Because the bank or financial institution has no real guarantee that the account will be paid at the end of the month, interest rates are very high. This further aggravates the debt situation: credit card average interest rates are around 17% per month. That is, delaying the payment of the invoice will throw the bill amount upwards.
Ignorance of alternatives
Have you heard of debt consolidation? It is the term used when a credit is contracted by those who have multiple debts, and paying dearly for them. This operation is recommended for those who want to pay less when selecting lines of credit that have lower interest rates than the revolving credit card and overdraft, for example.
Home Secured Credit, for example, has interest rates starting at 0.99% per month – very low values close to credit card interest and even other more traditional lines. Compare payment terms and interest rates in this infographic prepared by Pcredi.