There are three options to pay your credit card that do not come in your statement and that is directly related to another credit, did you know? We explain them to you, but before …
Has this happened to you?
Either because you are interested in “entering” the world of credit cards or because some executive seduced you with the famous phrase “you have a pre-approved card”, the joke is that you left the branch with the plastic in hand.
You activated it, you started doing some shopping and, until then, everything was a “fairy tale”. The thing gets serious when, a few weeks later, you open the door of your house and the state is waiting for you.
And we say it not because you do not have money to pay but because between numbers, percentages, and concepts such as: “weighted average rate” and “CAT”, you can get confused and make incorrect decisions.
Add to this that credit cards are not accompanied by a user manual and financial institutions do not care (or do not care) that you know how to use them.
So, from what your friends tell you and from what you see, you learn that you have three options to pay:
Payment not to generate interest: that is, the amount to settle so that the bank does not have the opportunity to charge interest. To those who make them, they are commonly called “totaleros.”
Minimum payment: that is, the minimum amount to cover so that your card is considered current; unfortunately, many take it as the amount to pay each month, which makes their debts grow and get out of control (for the interests).
Higher payment to the minimum: in which although you will not be paying the total and the ordinary interest rate will be applied to you, you will not pay the minimum and you will be able to control your debts.
But, did you know that there are other alternatives to pay your credit cards, which have to do with another financing?
Well, just for that we made this article, in which you will learn in detail how to pay a credit card with another credit, as well as to identify if these options are for you or better you should continue with the three that we explain here.
1.- With another credit card
Wait, do not get too excited, we do not mean you can go to the bank to pay your HSBC card with an American Express. If you thought that was a probability, we clarified it at once, it is impossible.
Doing this is like going to Cinépolis and wanting to pay your tickets with Cinemex Points.
We refer to a balance transfer.
What is a balance transfer?
A transfer of balances is, in simple words, to pass the debt you have on your credit card to another bank that offers you a lower interest rate, thus you reduce the amount you are paying by interest.
Do all apply for a balance transfer?
No, banks reserve the authorization of this operation to users with good credit history and who are not over-indebted, because they must ensure that the person has the resources to continue paying.
Unfortunately, this can mean a limitation, let’s be honest: many times, people who want to transfer their balance are those who, for one reason or another, let the “snowball” grow and can no longer pay the minimum your credit cards.
How do you get a balance transfer?
By invitation: some banks send their users, through account statements, emails or account statements, invitations to obtain a transfer of balances.
Processing a card with balance transfers: in the market, there are different plastics that offer the main benefit balance transfers, which simplify things for users who want to reduce the interest they are paying.
Steps to request a transfer of balances:
Request your new card (to which you will transfer the balance): take into account that you must comply with each requirement of the new plastic.
Check your new line of credit: if this is less than your debt to the other bank, request a reconsideration mentioning that you wish to make a transfer of balances.
Ask the institution for the transfer: call the bank to request the movement to pay for your “old card”.
Continue paying the debt on your “old card”: after requesting the transfer, ask how long your balance will be reflected in zeros, as each bank contemplates different periods.
Concentrate on paying: the transferred debt will be divided into fixed payments, if you fail in any, your monthly payment will be part of the revolving balance and the regular rate of the card will apply. Avoid it at all costs.
2.- With a cash disposition
A disposition of cash is one of the benefits that credit cards have and consists of withdrawing a certain percentage of the line of credit in cash. This operation can be done at ATMs or at the teller window.
As you are already imagining, with a disposition of cash you could withdraw money from your credit card at an ATM to pay for another plastic.
Can you withdraw cash with all the cards?
Virtually all credit cards can make cash arrangements, in fact, the only ones that do not allow it are the basic cards, which “sacrifice” the benefits by not charging an annual fee.
Although there are plastics that allow immediate dispositions if yours does not have this benefit, you must show at least 6 months of good credit behavior in order to get cash.
Is there a cost to take money out of a credit card?
Unlike a plastic debit card, withdrawing money from a credit card is “borrowing from the bank”, and for that, you will be charged a commission only for withdrawing the cash, which on average is 5% of what you took out.
This means that if you withdraw 1,000 pesos, the bank will charge you 50 pesos just to give you the money.
What practically nobody knows is that, in addition, the bank charges daily interest for the use of money, from the day you receive it, until the day you pay it.
If we assume that interest rates in Mexico are on average 50%, this would imply that the applicable daily interest rate would be 0.14%.
Using the previous example, you would pay 1.37 pesos per day for interest until you pay the 1,000 pesos, so if you take a month to pay, the cost of money would be equivalent to 9.1% of what you withdrew. A lot, do not you think?
So you can compare, a personal bank loan, with not so good rates, you would have charged 2.24% for the same amount and for the same period.
Although the decision is in your hands, as you could well realize, make a provision of cash with your credit card is not a good idea, because you will be paying much more.
So if you had an emergency and the only thing that could rescue you was your credit card, settle the balance as soon as possible so that your debt does not get out of control.
Keep in mind that there are other options if you require a credit to pay a credit card, such as payroll or personal loans https://research.northumbria.ac.uk/support/2015/06/22/budget-tips-from-the-leverhulme-trust/.
3.- With a personal or payroll credit
Has it happened to you that you are withdrawing money from your payroll card and a message appears on the screen of the ATM telling you that you have an approved credit?
Well, as you’re already assuming, that’s a payroll credit.
A payroll loan is a loan whose biweekly or monthly payment is obtained by the grantor from your payroll account. This means that if the monthly payment is 3,000 pesos, this amount will be deducted automatically from what you receive in your payroll account.
On the other hand, a personal credit is practically the same, with the difference that the payment is not linked to a payroll account, so you will not automatically be deducted from what you receive from salary.
Why are they a good option to pay for your credit cards?
These credits do not have a specific purpose, so you can use them for whatever you want without having to be alerting the grantor, something that does not happen, for example, with an auto loan.
If you use them to pay the debts of your credit cards, you will almost be making a transfer of balances, because in the end what you will do is consolidate your debt and pay it at a lower interest rate.
The process to obtain them is really agile, because the bank has sufficient elements to verify your data and carry out a credit analysis.
What do I need to request one of these credits?
Although the requirements of each grantor may have some variants, you will usually need to comply with this:
- Receive your payroll or have a savings account at the bank where you plan to apply for your credit.
- Be of legal age and have valid official identification.
- Have an active account, either payroll or debit, with six months old.
- Proof of address and proof of income over 2,000 pesos per month.
Think carefully before choosing an option
Although you are entitled to use any of these three options, the ideal is to spend responsibly so you do not have problems every month and thus do not request a credit to pay your credit cards.
To achieve this, we recommend:
Pay the total of your purchases at the end of the month (becoming full), so you will not let the interest rate of your plastic “come into play”.
Take advantage of the months without interest, this way you will divide the payments and you will not have to worry about paying the total price of the product on the next payment date.
Use your card wisely and get used to buying in the first days after the cut-off date, so you’ll have up to 50 days to pay, a good time to raise the money necessary to cover the total and not generate interest.
Do not commit to purchases that will put your economy at risk or that you know will require maximum efforts to be paid.
If you have no alternatives other than applying for a loan, your first option should be a transfer of balances, because “the deal” is good: pay the same as you should but with less interest.
If you go for a personal or payroll loan, although they are also good alternatives, be careful not to accept more money than you need to pay your credit cards.
Finally, try never to make a cash disposition of your credit card, because if you do not liquidate that money quickly, you will end up paying much more.