When used wisely and responsibly, credit cards can be useful in many situations. Allows you to make payments for goods and services (online or otherwise) and withdraw cash with credit (cash in advance), which should be returned on the date and under the conditions agreed with the card issuer.
Also read: 5 expenses you should not pay with your credit card
To take advantage of the benefits of having a credit card, one of the main precautions you should take is to pay off the monthly amount you owe in full. Thus, you can enjoy the credit you have contracted for a short period of time, without paying interest.
If you don’t have this discipline, you can end up piling up debt – the so-called ‘avalanche effect’.
There are two ways to pay by credit card: full payment and partial payment.
If you pay in full, the amount you spend will be charged within 20 to 50 days – according to the terms agreed with the bank – without interest. In a partial payment, the bank allows you to pay only part of what you spent and leave the rest to be paid later (with interest). In a partial payment, keep in mind that the longer it takes to pay off the entire debt, the more interest you will accrue.
Discover the difference between all bank cards on the Banco de Portugal website.
Hence, it is best to settle these debts as soon as possible. In this article we leave you some tips.
Reduce the number of credit cards
If you have more than one credit card, it’s best to focus on one debt at a time. Start by analyzing which card has the highest interest rates and the lowest amount owed and pay that amount. Then use the amount you paid monthly on that card to pay off another’s debt, and so on.
And don’t forget, if your goal is to get rid of card debt, you can’t add to it with other card spending. So stop using your credit card. This rule is essential: do not increase the debt.
Save what you can
Another effort you should make is to save as much as you can. Even for expenses that you might consider light on your budget, like coffee outside your home, for example. Every cent counts towards getting out of debt. Buy only what is necessary and avoid unnecessary expenses. If you can, even take advantage of extra income such as holiday and Christmas allowances.
To fulfill your goal, you can also find ways to earn some extra money. You can, for example, sell clothes or other items that you no longer use. Use used product sites to do this. It will be another value that will accumulate.
Use the money you’ve saved during the month and add it to your regular payments. So, in addition to paying off part of the final amount, interest will also accumulate more slowly (they are calculated according to the total debt, which is lower).
Rethink your credit card usage
As we said before, paying off your credit card won’t be that difficult if you use it responsibly and thoughtfully. So, use it only for urgent and unavoidable expenses and once you use it, do everything possible to pay off the debt as soon as possible. As the saying goes: time is money. For each month that passes, interest will accrue.
Analyze the feasibility of credit consolidation
In case you have many credits (credit cards, personal loans, car, housing, among others) you can evaluate the consolidation, that is to say, join all the credits in a single contract, paying only one monthly fee, with better conditions.
After Debt Settlement Keep ‘Good Habits’
All that effort certainly paid off. So after going through this process, you will be able to understand that with some organization and discipline, it is possible to have a more relaxed financial life. So maintain good financial habits. Apply the amount to settle other debts and live without the pressure of financial debt.