In this section, Mr. B helps you deal with the complex world of credit cards, and their relationship with credit ratings.

How to choose a credit card?

In very simple terms we can tackle the problem of choosing a credit card by asking a simple question: if I cannot pay off the debt generated, will I be able to pay interest on my debts?

This is one of the fundamental questions we must ask ourselves when choosing a credit card .

But let’s proceed with order …

If you have chosen a credit card for the balance , you will pay the charges made at the end of each month and there will be no calculated interest on the debt. In that case, it is worth having a credit card with a bonus points and rewards system. These cards give the buyer every time you use reward points, cash or air miles. However, these types of cards have higher interest rates, high enough to take away the value of the prizes they earn.

If you have chosen an installment credit card , and you are unable to pay the debt every month, then Mr B advises you to observe the contract well and to minimize interest payments: in this case you should choose an installment credit card which has a low interest rate.

Let us always remember that a credit card is issued by a bank. The bank determines the interest rate, commissions and benefits, so it is important to find a bank that offers a card that satisfies you based on all the parameters.

The credit card is then distributed over two networks , such as Visa or MasterCard. The distribution network does not actually affect the card, with the exception of minor advantages such as travel accident insurance, etc. In general, credit card distribution networks are not as important as the institution (bank or financial institution) that issues them.

Interests and Commissions

Credit card companies make money in three ways:

• interchange fees, or fees charged to the merchant each time the credit card is used;
• interest payments , which begin to run from the moment when the debt is not paid;
• fees , such as late payments or annual fees.

First of all, you don’t have to worry about the first point because interchange fees are a problem for merchants . Instead, the credit card holder should be very concerned about the interests and commissions.

If you have a credit card with points and rewards, remember well that nobody gives you anything … and those points are not given generously. Most people think a credit card will get you more into rewards than paid interest, but this is a rare case.

But how do credit card fees work?

Credit card commissions and benefits are always defined with what is known as a Schumer box ( Schumer box ): a black and white box that gives you the most important information on the card.

Here is a logical outline of how to read the Schumer box (Schumer box).

• APR for purchases: this is the interest rate that will be charged on the amounts you did not pay the month before. The APR is the monthly interest multiplied by 12, so every month, you will be charged 1% of the amount due. There are some credit cards in which interest will not be charged for the first six months;
• Variable APR: this means that the interest rate can vary based on a base rate set at the national level called the prime rate . In this case, the interest rate may not always be constant and equal to X. If the prime rate rises 1%, the interest rate rises similarly;
• APR for transfers: If you have a debt on a credit card, you can move it to a new card. Some credit cards allow you to shift your debt and not pay interest from 6 to 12 months, but other institutions will apply the same rate;
• APR for cash advances: If you take a cash advance (such as withdrawing cash from an ATM), you will be charged the interest rate on the amount you borrowed. Unlike purchases made with a credit card, in which you have a period of about a month to pay the debt, interest on a cash withdrawal starts to pay interest from the day of the withdrawal itself.

Keep reading our guide, Mr B will explain to you the advantages and disadvantages of credit cards on the market and how to choose a credit card.