07 Feb The Best Way to Use Your Credit Card
Credit cards can be a great financial tool, but they can also lead to debt if not used responsibly. In South Africa, where credit card debt is a common issue, it’s important to know the best way to use your credit card. By following some basic guidelines, such as keeping your spending under control and paying your balance on time, you can avoid high interest rates and fees. In this blog post, we’ll explore the best way to use your credit card and how to make the most of this valuable financial tool.
Spend Only What You Can Afford
Using a credit card can be a helpful way to manage your finances, but it’s essential to avoid overspending. Spending more than you can afford quickly leads to debt, high interest rates, and a damaged credit score. Therefore, the best way to use your credit card is only to spend what you can afford.
When you use your credit card, remember that you must pay back everything you spend, plus interest or fees, if you miss a payment. It’s easy to fall into the trap of thinking of a credit card as an unlimited supply of money, but this can quickly lead to trouble. To avoid this, limit your spending to what you can comfortably pay back each month.
In South Africa, high interest rates and fees can make managing credit card debt particularly challenging. To stay on top of your finances, keeping your credit utilisation rate below 30% is important. By spending only what you can afford to pay back, you can avoid the pitfalls of credit card debt and make the most out of your credit card benefits.
Always Make Payments on Time
If you’re a credit card user, it’s important to know that making payments on time is another great way to use your credit card. By doing so, you can avoid high interest charges and late payment fees that can quickly add up. Not only that but consistently making payments on time can also help improve your credit score, making it easier for you to obtain credit in the future.
Credit card debt is a major concern for many people in South Africa, and that’s why making timely payments is even more important. With high interest rates and fees, missed payments can quickly lead to overwhelming debt that can be difficult to manage.
To ensure that you’re always making payments on time, it’s a good idea to set up automatic payments or reminders. This way, you can avoid forgetting to make a payment and ensure that you stay on top of your finances. Remember, making timely payments is a great way to use your credit card and can ultimately help you achieve your financial goals.
Keep Your Oldest Account Open
Keeping your oldest credit account open could be one of the best ways to use your credit card. The length of your credit history accounts for up to 15% of your credit score, making it the third most important factor. In South Africa, credit scores are important when applying for loans, credit cards, and even rental agreements. Therefore, keeping your credit score healthy is crucial to maintaining a good credit history.
One way to do this is by keeping your oldest credit account open, even if you no longer use it. For students, it’s recommended to open a student credit card with lower requirements to qualify. This will help kick off your credit history and grow your credit score. However, if you no longer find a card useful, consider doing a product change instead of closing the account. Doing so lets you keep your credit history intact and maintain a good credit score.
Need Relief from Credit Card Debt?
In conclusion, using your credit card responsibly is key to avoiding debt and maintaining a healthy financial standing. Remember to spend only what you can afford, make payments on time, and keep your oldest credit account open to improve your credit score.
If you’re struggling with credit card debt, we’re here to help. At Debtco Group, we specialise in debt review and can assist you in managing your finances effectively. Contact us today for a free consultation and take the first step towards financial freedom.