Credit card – flexible friend or foe?
27 November 2012
The credit card has become an instrument of choice for South African consumers. However, for some, the costs associated with using a credit card can lead them into financial trouble. Understanding the fine print in the cardholder agreement can save you money now and avoid future difficulties.
The first rule of credit card use is to check your cardholder agreement and go through every single detail.
Tip #1 – No grace period
If you don’t pay your balance in full each month by the due date there is no grace period. You will pay interest retroactively on previous purchases.
Tip # 2 – Interest rate changes
Some credit cards offer a lower interest period for a limited time. Be careful to remind yourself of the change in interest rate so you don’t get hit with a big interest charge. Check your statements carefully each month.
Tip # 3 – Other Charges
Under the National Credit Act, in your credit agreement all fees and interest need to be carefully laid out in a simplified format. Check these fees, such as insurance costs and administration fees, as well as late payment charges.
Tip # 4 – Payment due date
Did you know… if you make your payment on the due date, the credit card company may charge you interest as if you paid late? In some cases, processing can take several days. Make a habit of paying your credit cards 5-7 days prior to the actual payment due date to be sure. If any errors occur, contact your credit card company and ask them to reverse any charges and get it in writing.
The bottom line
Your credit card will be your friend if you know what you can afford to charge and pay off each month because you have a budget. Using your credit card as an extension of your pay cheque means that you could be adding at least 50% to the cost of whatever you are buying. If the sticker price looks like a good deal, decide if it’s still a good deal with interest and fees added on. If it’s not, don’t buy it unless you have the extra cash to pay for it.
Should you require the assistance of a debt counsellor please contact DebtBusters on 0861 663 328 or have a look at our website www.debtbusters.co.za.