Domestic debts, should they be financed with a credit card or personal loans?

El analista Christian Buteler in dialogue with Ambit highlighted that historically “Domestic debts should be financed with personal loans that tend to have better rates than a checking account or a credit card”. However, the current situation contradicts this premise.

“At this time and due to a disposition of the Central Bank there is an anomaly in the market since a ceiling was put on the rates with which the banks can charge you with the credit card“clarified Buteler so that currently “It is better for you to finance yourself with a bank credit card than with a personal loan.”

The Central Bank in January resolved that The Annual Nominal Rate (TNA) will maintain a maximum of 43% for financing unpaid credit card balances of up to $ 200,000. It should be noted that 95.5% of users use this financing mechanism.

The nominal interest rate (TNA) is not the only cost that banks apply to debts, which is why if the surcharges for commissions and taxes are added, the Total Financial Cost (CFT) remains, which is the amount that is finally paid the client. At this time the client pays a debt with a credit card, depending on the entity, with a CFT of 53% without VAT, and close to 67% with VAT.

This is not the case with personal loans. “As they have no ceiling, in personal loans you can find rates from 70% to well above 100%” Christian Buteler clarified that, at the moment, “it is cheaper for you to finance yourself with a credit card.”

The market analyst also explained that there is little availability of personal loans: “Banks are not very focused on giving loans because there is a problem with people’s income. Banks have to be very safe to give credit and know that you can pay it; more at those rates. “

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Buteler also stressed that although credit card rates accompany the evolution of inflation, the same does not happen with salaries.

“Any of the rates you take to finance yourself with those percentages is difficult. Although when you take it in real terms, the credit card rate is not much higher than inflation; if it is much higher than how income is growing“, closed the market analyst.

Recommendations for taking out a personal loan

  • The interest rate is only one of the components that make up the cost of a loan. The correct cost comparison should be used the Total Financial Cost (CFT) It includes the annual effective interest rate (TEA) and all those costs associated with the operation (such as insurance, taxes, among others).
  • You can choose between an interest rate that is maintained stable throughout the loan (fixed rate) or that varies periodically (variable rate).
  • If the loan includes the contracting of insurance, it must be taken into account that according to the law, the client has the right to choose between three different insurers.
  • Take into account that if the borrower is final consumer must pay VAT on the interest paid each month, which will impact the fee.
  • If the loan contemplates the possibility of a Anticipated cancelation, partial or total, it is convenient to know what its cost is.
  • All the conditions informed by the financial institution at the time of offering the loan they must be in the contract.

Recommendations for the use of credit cards

  • Within the costs related to the use of the product, includes life insurance on financed balances, administrative expenses, card renewal expenses and commissions that are charged for the withdrawal of cash, in addition to VAT on compensatory interest.
  • We have to consider the compensatory interest rate for financing your purchases, the punitive interest rateia for not making the minimum payment indicated in the monthly summary, the amount of that minimum payment Y the commissions charged for exceeding the purchase limit.
  • When buying with the card, it is recommended take into account the ability to pay that is had in the successive installments.
  • When making a purchase, the transaction must be made where you can see it, to avoid any use with which we do not agree. It is also advisable to save the purchase tickets to compare them with the account status.
  • It’s advisable avoid paying only the minimum payment of the card balance. The accumulation of balance generates higher interest in the future.
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