Credit card is a “hand in the wheel” at various times. Practical to use, many even offer bonus programs in which we can accumulate points and redeem prizes afterwards.
However, when it comes to using the card you need to be careful: the so-called rotary credit card is a form of loan that can end up weighing heavily in your pocket.
And to help you, in today’s post we will explain how this credit service works and what new rules have been set by the Central Bank! Keep reading and know how not to fall into a trap with your credit card!
What is revolving credit?
If you ever had to partially pay your credit card bill, either because you wanted to save the money for another purpose or because you simply did not have the money, you already used the revolving credit.
It is a kind of short term personal loan that the card issuers offer to their clients. When you pay less than the total amount of your invoice, the remaining amount automatically goes to the next month’s invoice. That is why there is the so-called “minimum payment”, which is the smallest amount you can pay from the card bill.
Obviously, as with any other loan, there is the interest rate on the card rotary. And they are not cheap at all! The revolving credit may bear interest of up to 363% per year. Higher than the overdraft or even than some other personal loan options.
As a service without bureaucracy – you do not have to make any requests to the bank, just do not pay the bill in your total that is already using the service – the revolving credit is also very dangerous.
This is because it is very easy to accumulate amounts over the months, paying only the minimum of the invoice. And it was thinking of protecting the consumer from this “snowball” that the Central Bank determined the new rules of the credit card rotary.
What are the new rules of revolving credit?
If before the consumer could go paying the minimum of the card and adding new interest indefinitely, today they are faced with some restrictions. That is, those who choose to pay the minimum can not do this for several consecutive months.
The idea is to protect the consumer from messing with this service, since the more you use it, the more interest you’ll accrue on your account.
Since the beginning of 2017, however, this is no longer possible. The consumer can now only use the credit card rotary for one month. If in the next it still is not able to pay the full amount, the bank is obliged to offer a line of credit for payment. That is, the amount due will be paid in installments with lower interest rates and a fixed term.
Does this mean that I can now use revolving credit with no worries?
The interest rates offered by credit card issuers are still very high, and you may end up having a debt with higher installments than you can afford. So it is important to use credit card responsibly and do your financial planning to keep your finances up to date.
If you need to, often a good way out is to make a personal loan online to pay off debts and improve financial health.