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How credit cards should be used

Posted: 06 Jun 2018

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Credit cards can be very useful, but if they are used incorrectly, they can cause you severe financial strain. Consumers often struggle with controlling their credit card debt. Compuscan would like to offer you five things you should and shouldn’t do for safely using your credit card.

✔️ 5 things you should do:

1. Know your credit history In order to know how much credit you qualify for and whether lenders/banks see you as a low risk borrower, you will need to find out what your credit history looks like. Compuscan offers one free credit report per year. This will tell you what type of borrower lenders will see you as, and also what type of credit you will qualify for. Visit www.mycreditcheck.co.za today to get your credit report. 2. Never skip a payment Pay your bill every month! If you can’t settle the entire amount, make sure that you can make the minimum payment. Missing payments on your credit card reflect poorly on your credit history and negatively impacts your credit score. This will then negatively impact how much credit you qualify for. It also takes some time for your score to go back up after you miss payments. 3. Use your card sparingly Avoid using your credit card for irresponsible spending and only make use of the card for needs and not wants. If you plan your credit budget properly, you should always be able to pay your bills and maintain a healthy credit score. 4. Pick a payment date that works for you Most credit card companies will allow you to stipulate your preferred debit order or payment date. Make sure you pick a date that you can remember and that works for you. If you know you always receive your pay check on the 25th, make sure your credit card payment date falls after this date. If you do not set up a debit order, pick a date that you will easily remember. 5. Control your outstanding balance It is good practice to make sure you don’t spend more than 30% of your credit limit. For example, if you have a credit card limit of R10 000, try and keep the spending on your card below R 3000. If you have two credit cards each with a limit of R10 000, that means your total available credit is R20 000, and you should keep your total limit below R6000. This way you will always be able to make your payments and maintain your credit score.

❌ 5 things you shouldn’t do:

1. Don’t lend your credit card Avoid lending your credit card to someone else, even a friend or close relative. You will have no control over how much they spend on the card, and you could end up with debt you can’t afford. They may also lose the card and not tell you about it, which could lead to your card falling in the wrong hands. 2. Don’t give out your credit card details Never, under any circumstances, give your credit card details to strangers in person, over the phone, through the internet or via email. Reputable institutions and lenders will never phone or email you and ask for your credit card details. If you receive communications like this, ignore them! Only make transactions over the internet on secure websites you can trust – don’t type in your details on any old site! 3. Don’t withdraw cash on your credit card Cash withdrawals with your credit card may carry unseen costs – it is almost always a more expensive way to access cash. Only use your credit card to access cash in the case of an emergency, otherwise you may sit with balances you can’t afford. 4. Don’t own multiple cards Unless you need to, try and avoid owning and using multiple credit cards. This is dangerous because it makes keeping tabs on the amount outstanding more difficult. It can also lead you to make more debt than you can afford. NEVER pay off one credit card with another! 5. Avoid paying foreign transaction fees If you are traveling overseas, make sure you know what fees your credit card provider charges when you use it outside of South Africa. Some credit cards carry additional transaction fees for all transactions occurring outside the borders of the country. It is best to find out before you leave what the best way to pay for your daily expenses would be. Tip: Another way of protecting yourself, is to make sure the information on your credit report is accurate. If it isn’t, you need to dispute it – find out how to dispute information on your credit report here. To get your credit report, visit www.mycreditcheck.co.za today!
Remember: An informed individual is a protected individual!

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