Understanding Interest-Free Months (MSI) and Their Risks
Interest-free months, or Meses Sin Intereses (MSI), are a popular offer during El Buen Fin and often attract credit card users. However, 42.1% of these cardholders end up with prolonged debt as they fail to pay off their monthly purchases in full and resort to minimum payments.
Buen Fin 2024 Sales Figures and Their Impact
The previous edition of El Buen Fin saw sales amounting to 173 million pesos, marking a 15.5% increase from 2023, according to the Mexican Secretariat of Economy. While these purchases contribute significantly to economic growth, a considerable portion of them can lead to extended financial commitments.
The Dangers of Minimum Payments on Credit Cards
A common practice following Buen Fin purchases is relying on the minimum monthly payment. This strategy proves costly, as interest accumulates over time, potentially doubling the initial purchase amount. The situation worsens if holiday spending is added to regular end-of-year expenses, causing more than 30% of family income to go towards debt repayment.
Strategies to Prevent MSI from Turning into Debt
David García, CEO of fintech Digitt, warns that many customers utilize MSI without accurately calculating their repayment capacity. “In January, they realize that interest-free months combined with other obligations leave them only able to cover the minimum payment. From there, credit turns into a growing debt rather than a financial tool,” he explains.
Five Steps to Manage Debt After Buen Fin
- Financial Diagnosis: Sum up all your monthly obligations (credit cards, loans, deferred payments) and ensure they don’t exceed 30% of your monthly income. If they do, it’s time to make adjustments.
- Pay More Than the Minimum: Always pay more than the minimum to reduce interest and shorten your debt term. Make advance payments before your cutoff date to affect the average daily balance.
- Avoid Adding New Debts: While stabilizing your finances, steer clear of new credits or installment purchases.
- Plan and Organize: Utilize financial organization tools to have a clear view of income, expenses, and debts; identify potential “leaks,” and strengthen your control.
- Consolidate if Necessary: If minimum payments keep you trapped, evaluate consolidation or refinancing options for better terms and reduced financial pressure.
Key Questions and Answers
- What are Meses Sin Intereses (MSI)? MSI, or interest-free months, are promotional offers during El Buen Fin that allow customers to purchase goods without interest for a limited time.
- Why do MSI lead to prolonged debt? Many customers fail to pay off their purchases within the interest-free period, resorting to minimum payments that accumulate interest over time.
- What is the recommended strategy to avoid prolonged debt? Regularly assess your financial situation, prioritize paying more than the minimum, avoid new debts, plan and organize your finances, and consider consolidation if necessary.
