Breaking News: Over 1.1 Million Active Credit Cards in Paraguay – Expert Warns of Over-Indebtedness Risks
In a recent revelation, the Central Bank of Paraguay (BCP) reported that there are currently more than 1.1 million active credit cards in the country. While more people are turning to credit cards as a strategic means of payment, a significant 42% of users are paying only the monthly minimum, putting them at risk of over-indebtedness and cumulative interests.
Expert Advice: Pay More Than the Minimum to Avoid Debt
“Paying the minimum leads you to a vicious circle of debt. If you cannot pay everything, try to cover more than the minimum to reduce the pending capital,” warns economist Mario Giménez. He emphasizes that one of the most frequent mistakes is considering the credit card as a source of “extra money.”
Understanding Credit Card Terms Before Use
Before using a credit card, it is crucial to understand its terms and conditions, including the interest rate and the total annual cost (CAT), which encompasses all applicable fees and commissions. Giménez advises, “A card with a low rate can have a very high CAT due to other positions. Comparing the CAT between different options is key to choosing the most convenient card.”
Common Mistakes to Avoid
- Paying Only the Minimum Amount: Although tempting, this only covers a small part of the capital, leaving the rest to generate high interest.
- Using a Card to Pay Another: This postpones the problem and increases the total cost of indebtedness.
- Exceeding Your Payment Ability: Experts recommend that total debts should not exceed 30% of your monthly income.
Maximizing Interest-Free Days
One of the lesser-known benefits of credit cards is the ability to get up to 50 days of interest-free use. The key is knowing your cutting date and payment deadline. For example, if your cutting date is the 10th of each month and you make a purchase on the 11th, you can have up to 50 days to pay without interest.
Strategies to Get Out of Debt
If debt has already exceeded payment ability, the first step is to stop card expenses and prepare a realistic budget. Two classic strategies include:
- Snowball Method: Pay off the smallest debts first to generate a sense of achievement and free up funds for other debts.
- Avalanche Method: Prioritize debts with higher interest rates to save more in the long term.
Financial Education as the Best Defense
Giménez points out that the lack of financial education is a significant issue. “Many use the card without understanding how credit, interest, and penalties work. It is essential to know your rights and obligations before accepting a card.” Additionally, he recommends always having an emergency fund equivalent to at least three months of basic expenses.
Key Recommendations
- Do not use the card as extra money; it is a loan, not an income.
- Do not spend more than 30% of your income on debts.
- Always pay the total balance or more than the minimum.
- Take advantage of interest-free days with a good financial calendar.
- If indebted, use the snowball method or avalanche, but never ask for a loan to pay another.
A recent report by the Secretariat of Consumer Defense (SEDECO) indicates that consultations with credit card problems are among the main financial claims in Paraguay, especially for improper charges, unaffected charges, and hidden commissions.
For more expert tips and financial advice, stay tuned to archyde.com, your go-to source for breaking news and evergreen financial insights.
