Student in Economics
Few days ago, while I was traveling on bus, an aged woman sited next to me. I glimpsed at her and noticed that she was carrying her humble shopping in plastic bags. A moment later, the woman took out what turned to be a brand new Black Berry. I was like: “Oh, my God. What the heck!? I only got a Chinese telephone!”
So, I told her: “M’am, I’am an economist and I'm very interested in the decision making process.”. Thankfully, the old lady didn’t get freaked out by my disrespectful intromission. I asked her if she knew how credit markets work and if she had heard about what was CAT –CAT stands is the total annual debt amount or “Costo Anual Total”. She told me that she had no idea, but that she had bought cloths with a credit card and that the final amount she had paid had nearly doubled.
The lack of information at the moment of acquiring goods can turn into the loss of the money already paid and of the consumable good that we were trying to buy. Moreover, our credit qualification in the national credit will take a hit, which implies that we will later have problems getting fresh loans.
Credit for consumption -money borrowed to acquire goods that later won’t be used in a production process- must be analyzed with special attention because it can severely disrupt our purchasing power. We must take note of several factors outside our control: for example if our economy enters in recession or we lose our jobs the financial institutions will borrow us less money and at higher rates. If we miss a payment it is almost certain that we will end paying a higher amount, too.
Credit granted by financial institutions must not be seen as a “gift”, but instead as a service for which we must pay, lake hiring a professor or a doctor. In México you can estimate the total annual amount -CAT- with the next financial formula:
J=1MAj(1+i)tj=k=1NBk(1+i)Sk
Ok, maybe that’s not useful so here’s a link were you can estimate your CAT -http://www.banxico.org.mx/CAT/index.html- Don't hesitate to leave a comment, correction or questions about the article. And remember; buy using your head, not your heart.
Deseo leer este artículo en español.
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