Does the interest depend on the credit card line?

One of the easiest ways to start a credit history is with credit cards. And when talking about cards many doubts arise, such as the interest that will be charged for them.

Well, there are people who think that the more credit line they get, the more interest they will pay. This is not entirely true. In this note I want to talk more about it.

Credit line

Credit line

Before delving into the subject, I explain a little about what a line of credit consists of. This is the amount the bank gives you so you can use it through credit cards.

The amount of credit line they give you will depend on your profile. So it is not strange that there are people who take cards for the first time for amounts of S /. 500 while others of the same age already have cards for up to ten times the value.

The interest of the cards

The interest of the cards

The interest on the cards does not depend on your profile, but on the bank’s offer and that each entity has a fixed interest rate. This fixed interest rate can mean more or less interest according to the line of credit that each person has.

I explain with an example

You and your friend each have a credit card in the same bank. The annual interest rate of this bank is 36% (and a monthly interest rate of 3%). But you have a credit line of 1,000 soles while your friend of 1,200 soles. Suppose that both deplete the line of credit and will pay in a single installment. The interest you would pay would be 1,000 x 0.03, that is S / 30.00 while your friend would have to pay 36 soles. Of course, if both use the credit limit and want to pay it in one payment.

As seen in the example, at some point the amount of credit line will have to do with the amount of interest we will pay for what we buy with the card. That is why we should not fear having credit cards with wider lines. It is more to more credit give you better health will have your finances and you will be a candidate for larger loans. While having a good payment behavior having more credit line is not a problem for your economy.

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