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A credit limit on a bank card can create a false sense of financial capability and push a person to spend more. If borrowed funds are not repaid within the grace period, costs grow further due to interest.
Key point: The credit limit can create the illusion of having extra money. Going beyond the grace period makes the loan more expensive. Regular use of credit funds can reduce the financial cushion. Before a major purchase, it is useful to give yourself time to think through the decision. It is better to keep financial reserves so that they cannot be spent instantly. The credit limit creates the illusion of extra money. According to Kozak, paying by card and the available credit limit can indeed affect a buyer’s behavior. “The grace period on a card creates the false impression that I have more money than I can manage,” the expert noted. At the same time, credit funds can be a convenient tool if a person controls their spending and repays borrowed money on time. Problems begin when the cardholder does not manage to settle within the grace period. “If a person does not control and already cannot settle during the grace period, then these interest charges begin to torment the person,” Kozak explained. The expert also pointed out another problem: if a person constantly uses the credit limit, in case of unforeseen circumstances they may have no available reserve. “When a person regularly uses bank credit and suddenly a crisis or trouble occurs and they need money, there is already no figurative cushion in the form of the credit limit,” he said. In such a situation, one has to take out a new loan already with interest, which increases costs. Read also: A damaged credit history: how to restore financial reputation and how long it will take. Money can disappear quickly after payday. Separately, Kozak explained why a person might spend a substantial portion of their salary right after receiving it. According to him, part of the income may immediately go to repaying debts on credit limits. After this, a person sees that real money left is much less. “When you repay these debts, it suddenly turns out that real money, not limits, is much less than the salary. And then these swings begin,” the expert said. Another reason he cites is the psychological perception that money must be spent after getting paid. “If there is money, you have to spend it, because everything is tempting. I saved up, I worked hard and finally got paid, finally I can make these delayed purchases,” Kozak explained. 24 hours can help delay an impulsive purchase For large purchases, the expert recommends using a rule of 24 hours — give yourself time before the final decision. “Literally set an alarm on your phone so you don’t buy or reach for it until 24 hours have passed,” Kozak noted. In this time, attitudes toward the purchase may change, and the person may decide that the money would be better used differently. Taras Kozak advises always keeping a financial cushion for unforeseen expenses. In his view, the reserve should be stored not directly on the card from which it can be spent immediately. “Either a deposit or some government bonds, because from the moment you want to buy something until the money becomes available here, a certain amount of time passes,” Kozak explained. According to him, such a pause can help reduce the impulse for an unnecessary purchase.
Read also: New rules for obtaining bank cards became effective in Ukraine: what has changed
Document: PDF proof of the original version of the news item "Кредитна картка може збільшувати витрати: експерт пояснив, як не потрапити у фінансову пастку". It records the publication content at the moment of the first scan, the preservation date and the source: RBC-Ukraine.
