Credit Card Use: Avoiding Mass Indebtedness

What’s happening with credit card use?

According to G1, the president of the Central Bank, Gabriel Galípolo, revealed that 101 million people in Brazil use credit cards, an alarming figure representing nearly half the population. The excessive use of this resource is linked to a significant rise in indebtedness, which, according to Galípolo, needs serious discussion.

The credit card, especially in its revolving credit form, carries exorbitant interest rates that can reach 425% per year. This means that anyone who does not pay their bill in full by the due date quickly falls into a vicious cycle of accumulating debt.

The economic landscape and its impact

The rising inflation, driven by various economic shocks such as the Covid-19 pandemic and conflicts abroad, has resulted in high prices that are putting pressure on family budgets. Many people, unable to balance their finances, resort to credit as a resource to meet their daily needs.

For example, if you have a monthly income of R$ 3,000.00 (about $600) and end up using your credit card to cover expenses like food and transportation, it's easy to get lost in the numbers. If your credit card bill reaches R$ 1,000.00 (about $200) and you cannot pay it in full, the debt just grows due to high interest.

What does this mean for your wallet?

If you are among the 101 million who use credit cards, it is crucial to understand that this payment method can turn into a villain if not used carefully. What seems practical and convenient can quickly become a financial trap.

Thus, adopting the 50/30/20 method to organize your finances is essential: 50% of your income should go to needs, 30% to wants, and 20% to investments or debt repayment. If you have credit card debts, prioritize this 20% to pay them off as quickly as possible, avoiding high interest.

Concrete actions you can take

• Review your bills: Make a list of all your expenses and see where you can cut back. It could be a streaming service subscription you don’t use or dining out less frequently.
• Use the credit card wisely: Avoid impulse purchases. Always ask yourself if the purchase is truly necessary.
• Set a monthly limit: Determine a maximum amount you can spend on the card and do not exceed this limit.
• Consider alternatives: If you need credit, look for options with lower interest rates, like personal loans or financing.
• Build an emergency fund: Having a savings buffer can prevent you from needing to resort to credit in unexpected situations.

Connecting with ADXIS

Organizing your finances is not just a task; it's an essential skill for ensuring your financial future. At ADXIS, you can find tools to manage your expenses and plan your investments more effectively. Remember, the key to avoiding indebtedness is not letting the credit card become a supplement to your income but rather a tool that you control.