Do you always hold your breath, close your eyes, and pray whenever a new credit card bill arrives? This text is to help you avoid that ordeal and understand all the charges involved

What do that blouse bought at the beginning of the month, the installment payment for the furniture, and the gift from your nephew have in common?

These are all the things we pay for on our credit cards, forget about, and then reappear on our bill at the end of the month to haunt us. That's why it's so important to understand exactly how credit card payments work, what's being charged, and what fees and taxes are involved.

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Understanding your credit card bill

The invoice is the document that compiles all the purchases you made using your credit card during a 1-month period. More precisely, from the closing date of your previous invoice until the card's billing cycle begins.

To understand it more simply, let's think of an open invoice as something you fill out until the closing date.

Whether you receive your bill by email, through your bank's app, or physically at home, it will always contain a great deal of information.

Here's an example:

What information can I find on my bill?

→ Location where the purchase was made (whether it's a physical store or a website);

→ Date of purchase;

→ Number of installments (and the respective installment number being charged on this invoice);

→ Total purchase value;

→ Invoice due date: this is the deadline for payment. If the invoice is not paid by this date, the financial institution that issued the card may begin charging late payment interest on the outstanding amount, with a gradual increase based on the number of days of delay;

→ Total invoice amount: sum of purchases made during that specific period;

→ Minimum payment: the minimum amount that must be paid if full payment is not possible. But remember, by choosing this minimum payment, you will enter into those unfriendly revolving interest charges (link);

→ Installments due: this is an option offered to allow you to pay the total amount of your bill in installments. But it's the same thing here: interest will also be charged with this option.

What charges, fees, and interest might I have to pay on my bill?

Revolving credit: this is perhaps the best-known (and most dangerous) payment method. This type of credit is charged when the total amount of the bill is not paid (i.e., the minimum payment mentioned above is made) and can exceed 300% per year. To avoid this trap, read our full article on the subject.

Annual fee: This is the fee paid for using the card. It is usually charged automatically. Payment can be monthly, divided into installments, or annually, in full. It's worth remembering that you can contact your bank or card issuer to try and negotiate the amount you currently pay in annual fees.

IOF: If you have made purchases outside of Brazil, or on international websites, you will pay, in addition to the value of your purchases, the Tax on Financial Transactions (IOF). This tax also applies to transactions related to currency exchange and insurance.

Emergency credit assessment: we've already talked about the importance of knowing your credit card limit and, more importantly, ensuring it's an amount that doesn't compromise other items in your budget. But, in emergency situations, when your limit is exceeded, you can get an extra balance from your bank or card issuer. Caution: this request involves the payment of fees that vary depending on the card network, annual fees, and other factors, charged on your statement.

Fees for cash withdrawals with a credit card: making withdrawals using a credit card can be tempting if you need money urgently. Be aware that this will also incur fees and interest that can make your bill even higher.

Does paying household bills with a credit card increase my bill?

Few people know this, but it's possible to pay household bills, such as electricity and water, using a credit card! These bills cannot be addressed to a legal entity (company) or a third party.

But it's good to know: banks charge varying fees for this type of payment, ranging from R$7 to over R$20. Calculate all these costs carefully to determine if it's financially worthwhile.

What can I do to avoid getting into trouble with my credit card bill?

Knowing your budget will always be the best advice we can give you! Doing so will help you avoid being caught off guard and ending up in debt.

If things get out of control in a given month, try to pay off any outstanding amounts as soon as possible (consider, for example, using your emergency fund for this), so you also avoid the accumulation of higher market interest rates on the amount to be paid.