A Credit Card is convenient

Credit cards offer convenience as one can purchase goods immediately and only pay for it later.

This can assist a person that needs to pay off an essential item as he/she do not have the full funds available upfront to pay for the item or perhaps do not have enough cash in the wallet to pay.

 A Credit Card is safer than carrying cash

Carrying a Credit Card in your wallet can be perceived safer than carrying a large amount of cash.  If your wallet is stolen, the cash is gone and cannot be recovered, however a Credit Card can be stopped at the bank and hopefully no cost is incurred by the owner.

Precautions to take

Considering the convenience and safety aspects of a Credit Card, one can fall into a trap of no self-control and impulsive spending with a Credit Card.

• Bear in mind that using a Credit Card is similar to taking out a loan. One will be required to pay back the money spent in full at the end of the month, or as a last resort pay it back in instalments over a period of time – with interest which increases the pay-back amount to be more than the purchase price of the item/s bought.
• Accumulated transactions of a Credit Cards that are not paid monthly and in full, turn into debt.
• Control one’s impulses to use a Credit Card for essential items only that cannot be bought in cash.
• Don’t charge purchases that you can’t afford to pay for.

Choose the right Credit Card that suits your needs

Shop around and compare the terms, conditions and interest rates of different credit cards.

Ensure you understand the following:

• Annual Percentage Rates (APR) and whether rates are fixed or variable – The APR on your credit card is based on the bank’s opinion of your creditworthiness, which is in large part derived from your credit score.
• Annual, late and overdraft-limit fees
• Credit limit on account
• Grace periods before interest begins accruing
• Rewards programme e.g.discounts, miles etc.

Know your rights

Credit Card holders have certain rights, like no liability in case of fraudulent charges made to one’s Credit Card if it was reported stolen to the bank.  Each bank do have several terms and conditions to fraudulent transactions on Credit Cards and it would be wise to familiarise oneself with it.

In some cases, one has the right to dispute purchases with merchants for unsatisfactory products or services.

The true cost of credit

If you don’t pay off your credit card balance every month, the interest that adds up could mean you’ll be paying more than you planned.

See how much extra you might pay on a R1,000 credit card purchase with different interest rates:

How to lower a credit card’s interest rate?

One has control over some of the factors that determine your credit card’s interest rate. A better credit score leads to better credit card interest rates.  Other options to consider are:

• Pay one’s credit in full every month, if possible, to avoid interest.
• Make more than the minimum payment, if you can’t pay your bill in full.
• Make payments more than once a month to shrink the balance interest is calculated on.