“It is better to have and not need, than to need and not have.” This was the phrase with which the executive who offered me my first credit card, used to close the operation. And in part he was right. Credit cards are loans that banks give you in case you don’t have enough solvency at the moment you need to make a payment, so, the easiest thing is to access your credit line, of course, with a cost.
This cost is represented by the interest rate charged by each credit card for the use of the line you have open with them. The interest rate varies from bank to bank, so it is not advisable to be convinced by the images embodied in their ads “selling the promised land” without knowing how much it will cost to use.
This is just an example of all the elements that you have to evaluate before applying for a credit card with a banking institution. There are tools, such as credit card comparators, that provide you with the necessary information regarding the elements of each credit card, so you can make the best decision according to your needs.
Elements recommended comparing before purchasing a card or another:
This is the abbreviation for Total Annual Cost, which is an indicator that represents in a single number the cost of a financing. Thanks to a provision by the authorities regarding credits and financing, as of the mid-1990s, now all banks and credit institutions have an obligation to inform you about the CAT. The Total Annual Cost presents you with all interest, fines and penalties for arrears and commissions, among other costs.
If you look only at the interest charged by the card and not at the CAT, you could be paying much more for charges and commissions that are only reflected in the CAT data, for example, a basic card has announced an interest of 16% , which is very low compared to other cards, but its CAT is 65%, so you would be paying a lot more for commissions and late fees in paying your balance. That is why CAT is so relevant and beneficial for those interested in a card.
There are still many banks that charge you for the administration of your account in the form of an annuity, which is charged directly to your card balance, year after year. This annuity can vary from $ 500 dollars, up to $ 4,000, depending on the bank.
- The benefits
What are the benefits of your card? Some return a percentage of the purchases and consumptions you make with them. Others reward you with miles for flights and others with points. Check what are the real benefits of your card and how to make them valid.
Beware of deceptive benefits
There are cards that are advertised with benefits that are misleading, apparently giving you a great advantage that they end up compensating with another commission that is higher than usual. For example, there are cards that announce that they do not charge an annuity, but the requirements they impose on you not to charge you the annuity are such that it would be better to pay a card that charges you an annuity, instead of having the commitment to spend with it every month just to avoid that charge.
Other cards have benefits such as being able to defer the costs of flights to months or allow you to carry additional weight to what is regularly allowed, and other benefits that, when you think about it, really seem very attractive, but everything is conditioned on consumption. The more you consume with your card, the more benefits you will have or will be charged less. So I recommend you not only read the section of the benefits that appear in the information of the comparators: read everything, since not complying with some requirements could make you pay even more than what you already pay on a common card.
If you really want a contingency card, select those that probably do not offer you benefits, but at the same time they do not have consumption requirements, that is, they do not force you in some way or another to use them month by month.
My only warning against any card is that you have a good administration of your expenses and limit deferred purchases.
The bureau of financial institutions
Did you know that in addition to the credit bureau where we are the majority of people who have some credit or financing with a bank or other financial institution, there is a bureau of financial institutions?
This site contains all the information of the banks and institutions with more claims and the type of inconveniences that many of their clients have encountered. It is convenient for you to visit it so that you know which banks are better positioned in customer service.
Applying for a card also has its requirements, in many cases your credit history can affect the granting of your credit line and the specific conditions they give you for your new card. Additionally, these main requirements must be met.
- Minimum income
The minimum income varies from card to card, there are those who ask from 8,000 to 30,000 verifiable dollars.
- Seniority in the financial system
Other banks request that you already have another credit card and that you carry with it at least 1 year.
What are comparators good for?
The sites to make comparisons between cards allow you to know in a single sheet what are the cards that offer you the lowest CAT, in addition to their benefits and the annuity, if they have.
What comparators exist?
The Bank of Mexico has an informative site that presents the information of the CAT and the annuity of the credit cards with information sent by the banks, the advantage of the site is that it is a public and independent institution, so there should not be a trend To favor the information of one card over another, the disadvantage is that the information does not show the benefits that each card offers you.
Verify the information. All these sites have the information loaded from several banks, but the data shown is the responsibility of each site, so I suggest you give a second revised paper information before signing with your new credit card.
What other credit cards are there, in addition to traditional banks?
Apple has just taken out its credit card backed by MasterCard, this card promises some advantages over traditional cards that will change in the following years the charges, interest rates and commissions currently charged by banks.
With an interest rate that will go from 13% to 24%, with no fees for late payments and with a refund of 1% to 3% that you can charge daily if you wish.
Apparently there are many advantages that this card will have, in addition to carrying a system of reports that will help you maintain the administration of your accounts.
One last recommendation
You can decide how much to have available on the credit line of your card, at some point I had a line that was 4 times greater than what I perceived at that time and I found that taking it to the top is very easy if you do not have a good administration of your resources, so I suggest you have a line that is only one third of the income you currently have. If not, a simple call to your bank can help you adjust your line of credit to what you require.