1. Interest free periods
An interest-free period is offered by most credit providers. What this means is that you can spend on your credit card, and repay what you owe within the interest-free period, without incurring interest. Some consumers are scared of using credit cards, but a credit card provides you with protection and rewards unlike any other card, so it’s a good idea to use it to shop. You don’t ever have to incur interest on your card and many consumers actually pay funds into their credit card, use these funds to shop and benefit from the credit provider’s rewards programme and protection benefits.
One of the protection benefits your credit card provides you with is the ability to dispute the non-delivery of goods or services. For example, if you buy a pair of shoes online using your credit card and they aren’t delivered to you, and you aren’t able to resolve the matter with the online retailer, you can contact your credit provider and lodge a dispute with them to help you get your money back.
2. Set up a monthly debit order
Life is busy, and there’s so much to remember to do in a day. Why worry about repaying your credit card instalment too? You should set up a debit order on your credit card to ensure that the amount you owe monthly is deducted from your account without you needing to remember to do it. Paying your credit card late can result in penalty interest being charged, and your credit record being negatively impacted, impacting your ability to apply successfully for credit in the future. Many credit providers provide their customers with different debit order options to repay in the way that suits them.
3. Straight and budget payments
When you make a purchase using your credit card at a point of sale device and dip or insert your card, you will be prompted to select “straight” or “budget” as your repayment option. These two options refer to how you choose to repay the amount you have spent on your credit card. Straight transactions are included in the amount you need to pay back when your interest free period ends. Budget transactions are repaid over an extended amount of time (which you can select as six or 12 months, for example) in instalments that incur interest at the interest rate that you’ve agreed with your credit provider. Buying on budget is similar to taking out a loan and paying it off in monthly instalments, but the interest-free period your bank offers you (usually between 55 – 60 days) doesn’t apply in this case.
Here’s an example of how this works: Let’s say you need to buy a large appliance such as a washing machine for R8 000. You may not want to owe the bank the R8 000 in one go, and so you select a 12-month repayment period. What happens in this case is that the R8 000 purchase, including the interest you owe on the item is divided over 12 months, and this extra portion is added to the instalment you owe the bank on your credit card every month. Many consumers use the budget facility as a loan they can use without applying for a separate personal loan, which works well for them.
4. Use your credit card as your shopping buddy and save on transaction fees
A credit card is designed to be used as a transaction tool to use when you shop. Most financial institutions provide their customers with an interest-free period, which means that you can shop using your credit card without ever needing to incur interest on the transactions, if the credit is repaid within the interest-free period. However, most credit providers charge you for doing things that are outside of the credit card’s primary purpose. When you swipe your card, or transact via Contactless, you are usually not charged a transaction fee to encourage you to use it in this fashion.
However, if you withdraw funds from your credit card at an ATM or transfer funds out of your credit card to pay an account, you will be charged a transaction fee. What’s more, when you withdraw cash or make a fund transfer, the interest-free period does not apply and you are charged interest from the day in which you have withdrawn or transferred funds.
Keep safe and limit carrying excess cash with you — it increases the risk of theft and costs you money.