Belinda Beresford
Careless use of your credit card could mean you are making your bank an interest-free loan. If you fail to pay your total credit card debt each month, your bank may charge you for the full outstanding amount – even if you have made a partial payment.
Say your statement says you have to pay R2 000 by the 25th of the month, but you only pay off R1 500. You could still be charged interest on the R2 000. The interest could be about R53, given current interest rates on plastic of about 32%.
Credit cards can be a cheaper (and safer) way to make payments and you can get an effective interest-free loan for up to 55 days. But you have to remember this period includes the time it takes your payment to reach the bank.
The crucial factor is to time your spending. The best option is to make big purchases immediately after your statement date. They will then only be reflected on the next statement, and your due payment date will be the following month.
For example, if your statements are dated on the 29th, and you buy a computer on August 30, the cost will be reflected on your statement on September 29, and you’ll have to pay by about October 24. If you bought the same stereo on August 28, it would be reflected on August’s statement, and you’d have to pay it in September. This doesn’t apply if you use your credit card to get cash or buy petrol. In both these cases you’ll be charged interest from the transaction date.
Keep in mind that your credit card can be an effective savings tool. The interest rate on positive balances is almost always higher than on a cheque account or even a savings account.