Be careful if you pay the minimum on your credit card! Here’s how rising interest rates affect you

The Bank of Mexico announced an increase in the interbank interest rate one day at a level of 11.00%, because in January, the headline inflation has increased to settle at 7.91%. The underlying component, which better reflects the evolution of inflation, stands at 8.45%, surprisingly on the rise. This before a slower than expected decline inflation in food commodities and the rebound in that of services. For 2023 and 2024, inflation expectations have risen again, while longer-term ones have fallen slightly, although they remain above target.

All this means that the credit card users should moderate their use because “borrowed money” will be more expensive To put it colloquially, and if you are a person who only pays the minimum amounts, this news does not benefit you at all, because you will pay more interest for the money you use with banks.

This is the fourteenth consecutive increase in the reference rate, aimed at containing inflation which stood at 7.91% last January.” Most central banks, including the United States Federal Reserve, have continued to raise their benchmark rates, announcing that these rates will remain high for an extended period,” Banxico argued.

How does the interest rate affect credit cards?

All banks charge you an interest rate for the money they lend you, so if you take out a loan, you will pay more, because money has become “more expensive”. Now this applies equally to credit cards, if the one you are handling is from floating rate, You will be among those affected by this increase, since it will increase each time Banxico increases its reference rate, so it is recommended that you review the conditions with which you acquired this banking service.

This is directly related to the payment of interest, so it is recommended to pay the total balance month by month, this way you will prevent them from growing and then having an impossible debt to pay. Although it is not advisable to make minimum payments, the National Commission for the Protection and Defense of Financial Services Users (Condusef) It has a calculator that will help you see the status of your debt.

With this calculator you will be able to know the amount of the minimum payment, the balance remaining to be paid, and the time it will take you to pay your debt if you only minimum monthly payment, Well, by covering this payment, you are practically only paying interest and not paying off your debt, even if you make more purchases, this balance logically increases.

You will pay more for your credits

This increase in interest rates affects not only credit card users, but also those who have a mortgage loan, for a car or a variable interest rate bank loan, because they will adjust to the increase in 11% announced by Banxico, so you will pay more for the requested balance.

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Author: Diana Zaragoza
Source: El Heraldo De Mexico