A credit card is a financial instrument offered by both financial institutions (banks) and department stores. These are used to make purchases, and pay later. The optimal use of credit cards is to be able to pay for products, services or trips in monthly installments. For example: if a plane ticket costs 10,000 pesos, with a credit card you could pay it at 12 months without interest, making monthly payments of 833.3 pesos, in this way, you would not need to make a large payment. However, it is important to pay on time, since otherwise, the institution that grants the card would start charging late interest.
Generally, the grantor of the credit card will charge an annuity for the use of the same, and will depend on the type of card, the amount of the annual payment.
There are two types of major credit card grantors:
- 1. Banks: With these cards it is possible to pay in any merchant that accepts card. Monthly interest-free promotions will depend on the store where you buy. It is possible that, in case the trade does not offer monthly payments, the bank does, however, sometimes, these monthly payments are with a small interest.
- 2. Department stores: With these cards, you can buy inside the department store that granted the card. Generally, by having a departmental card, the store offers special promotions, both interest-free monthly payments, such as discounts, accumulation of points, or other benefits.
Cutoff Date and Payment Date
On many occasions, people are confused with the terms “Cut-off date” and “Payment date” of credit cards, and this may lead to unnecessary interest payments, or the obligation to pay something, at a time when The one who doesn’t have the capital. Therefore, we explain what each of the terms refers to:
Cut-off date: it is a fixed date of each month, and it is the day on which a period ends. The purchases you make before the cut-off date, you will have to pay on the next payment date.
Payment date: it is a fixed date of each month, and it is the day on which you will have to pay for purchases made in the previous period. Generally, this date is 20 days after the cutoff date, however it may vary depending on the grantor
Types of credit card
In Colombia, banks and department stores offer various types of credit cards, and these offer different benefits to cardholders. The differences between the cards are generally the amount of the annual payment, related to the amount of credit available. The higher the credit, the greater the annuity. The most common classification is as follows:
- Basic Cards
- Classic Cards
- Gold Cards
- Platinum or Platinum Cards
It is important to mention that some banks and financial institutions divide their cards in other ways.
Basic Credit Cards
They have a low credit limit compared to other cards, and usually have few benefits. However they serve to start creating a credit history, and to learn how credit cards work. If you pay them on time for an approximate period of 6 months, it is very likely that the same institution will offer you a new card with greater advantages, or increase your credit line.
Approximate average credit: $ 17,600
Annuity: Between $ 0 and $ 400
Classic Credit Cards
They offer some benefits, such as point programs, in exchange for commissions or an annuity. Generally, banks offer them to those who have paid a basic card on time. When paying on time, it is very likely to access a major credit in a short term, or even a Gold card.
Approximate average credit: $ 33,000
Average annuity: $ 495
Average interest rate: 28.8%
Gold credit cards
These cards are granted to people who have a higher credit history, and with a higher payment capacity. The annuity tends to grow compared to classic cards, however, sometimes banks offer promotions not to pay for the first year. In the same way, it is very likely that, when you buy your card, the bank offers you discounts of 10% or 15% on your first purchases, or paying them to months without interest, regardless of whether the store where you make the purchase has these promotions .
Approximate average credit: $ 137,000
Average annuity: $ 2,380
Average interest rate: 18.6%
Recommendations when requesting a credit card
- Be sure to request a card that is appropriate for your profile. For example, if it is your first credit card, it will be impossible for you to obtain a Gold card, much less Platinum. It would be advisable to apply for a basic or classic card.
- If you have a debit account (savings or payroll), we advise you never to leave the account empty, this will increase your monthly average, and it is very likely that the bank offers you a credit card.
- Remember that credit cards are an instrument to acquire products, services or trips and not have to disburse a large amount of money. It is VERY IMPORTANT that you pay your card on time, otherwise it will be very complicated for you to obtain greater benefits, or another card.
- If you already have a credit card and would like to increase your credit line, we recommend using your card constantly for at least 3 months, and paying it on time. In this way, when you request a larger line of credit, the bank will see that you are responsible for your payments, and will be much more likely to receive it.