Christmas is a period in which expenses skyrocket and the monthly budget suffers. Credit cards can help us defer payments. But is it worth it?
The main feature of credit cards is that allow us to have a formula to pay in installments in our pocket and they are ready to use at any time. It is common that they are used for times of greater spending such as Christmas, they explain from the financial comparator HelpMyCash.com. However, it is not advisable to use them for all purchases related to these dates, as there is a risk of over-indebtedness.
We must know that paying a purchase in installments with a card will have an additional cost, since interest will have to be paid. The average cost of financing purchases with credit cards is 18.34%, according to the latest report published by the Bank of Spain. For this reason, It is important to know three simple tricks that will allow us to decide quicklyif it is worth financing Christmas shopping with a credit card and how much it will cost to do so.
1- Create a budget
Developing a budget is the first step in ordering expenses. It does not have to be too detailed or exact, but it does have to collect a small list of the money that we want to spend on each expense (gifts, trips, meals …). This will give us a general idea of how much we will spend and will help us decide which expenses we will pay out of pocket and which ones with credit cards. Remember that these types of products are used to pay for specific purchases and not as a usual way of financing, so making this separation will be essential to clarify whether it is worth financing an expense or not.
2- Choose the payment method
Credit cards have different formulas to pay in installments (fixed, percentage, in a series of specific months …) so the second step, once we know which items we will finance, is choose the deferred payment method that best suits our Christmas purchases. It is important that we pay a fee low enough so that it does not unbalance our economy, but high enough so that it does not last too long. This point is especially important, since many cards allow you to return fees from 10 or 12 euros, but this system is not beneficial for us, since purchases will end up being very expensive.
It is advisable not to extend the refund period for purchases for more than 12 months. For example, a purchase of 1,000 euros with the average interest of the cards (18.34%), it would generate 30 euros in interest if we pay it in three months. Instead, it would generate 102 euros in 12-month interest. The shorter the term, the less interest we will pay.
In addition, it is also advisable to avoid that the reimbursement of Christmas purchases overlaps with other times of more spending (Easter, long weekends, summer holidays …).
Currently, many cards offer a method to finance one-off purchases called easy payment. It is a way to pay a purchase in installments without changing the payment method at the end of the month. Generally, it tends to have more advantageous conditions, so it is worth checking if our entity includes it. For example, the WiZink Plus Credit Card, without annual fees and without changing banks, offers three-month financing without interest with a commission of between 2.5 and 25 euros, depending on the amount financed.
3- Know the total cost of financing us
Finally, the third step to know if it is worth financing Christmas shopping is calculate how much we will pay in total for paying in installments with our card. Only then can we value if the cost of financing us is worth it in exchange for not paying at once. Thus, if financing a purchase of 300 euros costs us 30 euros, it could be interesting. On the other hand, if that same purchase implied 150 euros in interest, the operation would no longer be so attractive. The HelpMyCash comparator has a credit card fee calculator that can be used free of charge to make this calculation easily and know in just a minute if we are interested or not.
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