The revolving cardshave made headlines in the past year. Once the Supreme Court ruled that the interest on these means of payment could be considered usurious, many provincial courts have ruled against the entities that market them in legal proceedings brought by dissatisfied customers, attracting media attention. Even on January 2, a new ministerial regulation related to revolving credit will come into force.
For you to understand what are the cards revolving, what implications they have acquired according to the Supreme Court ruling and the Ministry’s regulations on their use and whether there are cheaper options to this type of financing products.
What is a revolving card?.
A revolving card is a consumer or expense credit that allows access to defer payments for purchases made using this card. With this type of créditos revolving, consumers have a fixed credit limit that is periodically repaid and automatically renewed at monthly maturity.
Banks offer this type of credit that gets smaller as the monthly payments are made but increases as you use the card, since interest is generated and financed simultaneously with the debt, which means that this amount does not decrease but increases month by month.
It is important to emphasize that, as with other financing products, these cardshave both strengths and weaknesses, which is essential to know and make good use of them.
How do revolving cards work??
This type of card allows purchases to be made regardless of the level of liquidity, corresponding to the availability of a credit balance on a revolving credit card.
There are two ways to renew the balance drawn on a Revolving Credit:
Pay a percentage of your card: customers who have established this form of payment will have to pay a fixed percentage of the balance due each month. A minimum and maximum percentage is usually applied, which tend to fluctuate between 5% and 25%. If the percentage applied is 5%, this means that the user will have to repay 5% of the debt accumulated in that period each month.
Paying a fixed amount on your card: those customers who have established this form of payment will pay a fixed monthly fee until they pay off their debt in full. A range of minimum and maximum payments is also established.
Revolving cards also allow you to repay the entire credit in arrears and in this case they would work as a normal credit card. The issue is that this form of payment does not accrue interest, so banks do not usually promote it and try more or less transparently that the payment is postponed in order to charge interest.
To conclude categorically:.
A revolving card certainly works like a consumer credit.
Credit limits and return terms are agreed in the card contract. According to this will depend on the interest to be applied, which may be reduced (or even non-existent) when opting for full payments, or very high if you opt for deferred payments.
The revolving cardperforms as a fund of extra money, for which you can dispose and which you then have to pay back step by step, paying interests.
In banks, this type of card is presented as an easy and convenient payment instrument, offering great simplicity and allowing additional funds to be made available and replenished little by little. In addition, each payment is converted back into available capital.