The credit card made life much easier for everyone. With it, we stop walking around with large amounts of money in our pockets as we can buy without making disbursements at the time of purchase. Another facility is the possibility of parceling purchases, which has even brought more people to credit purchases, because the bureaucracy is very small in purchases made with plastic money.
This ability to split purchases, along with not spending money at the time of purchase, leads many people to buy more than they should, incurring debt to card operators. They end up living leveraged, which is above the limit of consumption they should be.
Debt can turn into a snowball
Over time, this process of debt can get worse if you have many cards, the fact that it is not difficult to happen, since the offer of this financial product is large. And it is always a case like this that comes out of the infamous phrase that “everything has become a snowball.” With each new debt, the harder it gets to get out of the process. So the snowball gets bigger and bigger.
But for those not yet over-leveraged with credit cards, the door to financial health may be where they least expect it: personal loans.
Credit Card and Personal Loan Interest Rates
I was reading the June Interest Survey report prepared by the National Association of Finance, Administration and Accounting Executives (Anefac) and noticed that credit card interest rates remained stable from May. The average fee charged by card companies was 10.69% per month, the highest percentage since June 2010, totaling 238.30% per year. On the other hand, the survey reveals that, despite having an increase of 1.11% in relation to May, the annual interest rates of personal loans, in June, presented a difference of 184.9 percentage points in relation to the rate charged by credit institutions. Cards
In June, interest rates on personal loans from commercial banks stood at 3.63% per month (or 53.40% per year). In the case of personal loans with financial companies, the interest rate increased by 0.75%, jumping to 8.04% (or 152.94% per year).
Why is it worth switching?
This shows that changing lenders from credit card debt to bank debt can be very advantageous as the indebted person will no longer pay almost 185 percentage points of interest per year. By getting a personal loan from a bank, you can pay off your debt to the credit card company, going from a very high rate of 10.69% per month to a much lower rate of about 3.63%. per month.
This change is reflected in the personal budget, as the debt will settle better, leaving room for more money at the end of the month, which can be used to prepay loan installments or in cash purchases, so not to incur more card debt, makes the dreaded “snowball” much further.