A shopaholic’s favourite piece of plastic: the credit card. A credit card is issued to an individual by a bank or a registered credit provider. It extends a line of credit to the cardholder who will have to pay the amount borrowed back later with interest.
There are many smart ways to use a credit card so it can be beneficial to your financial situation. Credit cards can be used to finance larger purchases, build your credit score to qualify for larger loans, or make your travel easier.
Here at BudgetGist, we understand that picking out the right credit card can be overwhelming. There are heaps of information available online, and it can be difficult to make a confident, informed decision.
That’s why we pride ourselves on being South Africa’s information hub for all things related to finance and money. We’ve compiled guides on everything you need to know about different types of credit cards and how to use them to get the most out of your money.
One of the more popular reasons to get a credit card is for the rewards and cash back perks. You could receive cash back for making purchases at certain stores or making purchases over a certain amount.
Some credit cards may even offer reduced fees for making online purchases, or discounts at restaurants. In some cases, you may be offered percentage cash back on any positive balance on your credit card.
When signed up for rewards and cash back credit cards, it's best to find a rewards programme that you can utilize regularly. This will offset any additional fees you may have to pay to access these programmes.
With the rising cost of living, it can be difficult to justify paying high-interest rates on your monthly purchases. This is why interest-free credit cards are so appealing!
Some credit cards are interest-free as long as you repay your debt within a stipulated period. An example of this kind of credit card is the Standard Bank credit card which has a 0% interest rate as long as your debt is settled within 55 days.
Be warned that there may not be many interest-free credits on the South African market. It may be easier to find a low-interest credit card that suits your needs, especially if you want to take advantage of rewards programmes.
Standard Bank and Diners Club International offer the Diners Club Shari-ah Charge card, for those that need an interest-free credit card for religious reasons.
Exploring new countries, getting a taste of the local cuisines, and discovering the culture can all be extremely expensive. Travel credit cards can help you save money when planning your next trip.
Travel credit cards can offer you discounts on car rentals, accommodation, flights, and free travel insurance. Some travel credit cards may even allow you to upgrade your flight or accommodation.
When travelling abroad, having access to an airport lounge can be extremely beneficial. Many travel credit cards come with access to airport lounges across the world. You could also receive priority boarding and free bag check-ins when flying. Some travel credit cards will even grant you access to amenities such as golf courses or spas when in a foreign land.
When signing a credit card agreement, take note of the interest rate, whether it is due to increase, and any other penalties you may face for late payment. Additionally, check for any clauses regarding the rewards programme or travel plans. It can be worth comparing interest rates and terms and conditions between credit cards to find the one that suits you best.
One of the most important things to note is your repayment schedule. Regardless of the type of credit card you own, it is always advisable to make the minimum required payment within the stipulated repayment period. This is why borrowing an affordable amount is so important. You do not want to be stuck with a mountain of debt that just keeps growing!
South African banks generally offer a repayment period of between 50 and 60 days. This can vary between credit providers, and you may be incentivised to pay earlier rather than later. Making earlier repayments can boost your credit score and reduce interest payments.
Here are a few ways you can use credit cards to your advantage:
Your credit history can prove to be instrumental in whether you qualify for a credit card. If you have a bad credit score and do qualify for a credit card, be warned that you may face higher interest rates and stricter terms and conditions.
You will likely be subject to income tests; you will need to earn a minimum amount of money every month. This is dependent on the type of credit card so be sure to take this into account before beginning the formal application process.
The amount of money that you borrow monthly is known as your credit limit. Your credit limit is usually set by your credit provider and stipulated in your contract or official communication to you.
If you are unsure about your credit limit or any penalties, do not hesitate to contact your credit provider and have these terms explained to you in a manner that you can understand. It is very important to always be aware of your credit limit and to borrow well below your limit if you can.
In some cases, your interest rate and additional fees may be personalised to your application based on your credit score. In general, you can expect an interest rate of between 7%-28%. This is subject to change based on the National Credit Regulator guidelines.
You may also find that you have to pay an initiation fee, monthly fees, credit card facility fees, rewards programme fees, and international transaction fees. These fees will vary between credit cards and providers so be sure to shop around for the best deal.
Overall, there are many reasons why you should consider getting a credit card. Building credit, impressive rewards programmes, and travelling perks are all popular reasons to get a credit card. Whatever your reason for getting a credit card, take some time to ensure that your credit card truly suits your needs.
Don’t be afraid to ask your credit provider any questions you may have about their financial product. Remember, you should not feel pressured to commit to a credit card without first having all your concerns addressed. This includes shopping around for quotes and negotiating interest rates where possible.
With so many credit cards on the South African market, you're spoilt for choice; there’s no reason to pay more than necessary. No matter the financial conundrum, BudgetGist is here to help! We are South Africa’s information hub for all things related to finance and money.
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