South Africa consumers utilise the services provided through credit cards to maintain their lifestyle, manage finances/cash flow and as a financial ‘security blanket’ when in need of extra cash. We are often warned about using credit cards wisely as overspending can increase the chances of spiralling into uncontrollable debt. If you are planning on taking out a credit card for the first time or want to improve your spending habits, here are some tips to help.
There are several credit card issuers that offer reward programmes with the credit card. The reward program will offer you points every time you spend money on the card. For example, if you spend R10 on a card, you could earn 10 points. These points can be redeemed for rewards like air miles, discounted products or even cash back. Therefore, you can make your money work for you by putting your regular purchases such groceries and fuel on your credit card rather than your debit card.
When you go away on holiday, you are always advised to take out travel insurance. The insurance will cover you if your luggage gets lost/stolen or your flight is cancelled. Travel insurance is an added expense to factor to your travel budget unless you purchase your holiday using a credit card. Most cards offer free travel insurance meaning you will not need to spend additional money on taking out cover.
Many credit card issuers partner with retail providers to offer discounts on e-commerce and in-store purchases. This means that making a purchase with your credit card instead of your debit card will save you money. To make the most of retail discounts, check with your credit card provider to see where they are offered.
Most banks will charge a small fee for making a point of sale purchase on your debit card. To encourage spending on credit cards, some credit card providers will not charge you this fee for the point of sale purchase. This is another way in which using your credit card for everyday purchases could save you money.
Many people do not realise that your credit card can have a positive balance. You will see a positive balance on your credit card if you repay more than the amount of your balance due. Some providers allow you to earn interest up to 5% on a positive balance on your credit card – an interest rate you are not likely to receive keeping money in a traditional personal bank account. If you have some extra money, it may be beneficial to keep it on your credit card rather than in your bank account.
Whilst we’ve highlighted some positives to using your credit card, it is important to not overspend and use your credit card for items you cannot afford. Making purchases on your credit card when you are not confident of being able to repay the debt will likely lead to incurring additional fees and further debt. Here are a few things that you shouldn’t use your credit card for:
Finding a credit card can be a confusing process when trying to understand the fees, interest rates and benefits accompanying them. Friendly Finance helps to remove the cloud of confusion through a simple to use and understand comparison tool. You can compare credit cards now, by visiting our compare cards page.
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