Bank credit limit, good or bad? When a customer goes to the bank with the intention of opening a checking account, the facilities and possibilities of credit that are opened are innumerable. The account holder can go to the bank with the simple desire to open an account and leave the financial institution with a credit card in hand and a good amount in the credit limit in your account.
The jargon used by financial institutions that defines this practice is that of “pre-approved credit”. With a name that sounds so good in this ear, it’s kind of hard not to want to, is not it? Even more so if “pre-approved credit” is a generous amount. What many do not think is the “other side,” the dark side of the credit limit.
In most cases, this “pre-approved credit limit” is calculated based on an analysis of the client’s financial profile. Even so, the accountant has to be attentive to a detail that in some cases ends up going unnoticed: interest.
In the case of the credit card, the trap is due to that old story: the payment of the minimum amount. Paying only a portion of the credit card fee does not void the debt. On the contrary, it only makes it increase even more. The worst is when the customer begins to make the habit of paying the minimum and continues to make other purchases before removing the previous account. It turns a snowball of debt and accrued interest.
It’s good to be careful about spending on your credit card. According to data from the Calculating Debts Website, the average interest rate charged by the banks for the credit card is 13% per month and 330% per year.
Another credit service offered by banks is the overdraft. It is the provisioning of an amount in the customer’s current account in addition to what he actually has. Example: if the account holder has $ 200 reais in the account and his limit on the check is $ 500, appears in the balance of the current account $ 700. It is necessary to pay attention when you have this type of service not to end up thinking that you have more money than you actually have. It is that some banks add up the total amount between limit and actual balance. Usually the free limit value appears first.
It is obvious that this “automatic loan” does not go free. The amount that the customer withdraws from the limit will be charged along with the interest of the service. Also according to the Calculating Debts website, the interest amount for the overdraft is on average 9% per month and approximately 200% per year.
At the time of tightening, looking for the bank credit limit can be a way out. But it is important to analyze the ease in recovering this credit and the amount of interest that should be paid later.