Your credit card has the potential to be a cool companion if you maximise its effectiveness and make it work for you.
In an online survey conducted by FNB, 39% of respondents said they only use their credit cards in emergencies, 36% said they swipe for everything, big and small, 17% use it solely for online shopping and only 8% said they use it to buy big purchases.
“Credit card users that swipe for all their purchases have the right idea,” says Chris Labuschagne, CEO of FNB Credit Card. “Using your credit card daily can be beneficial, but you need to exercise financial discipline. ”
Using your credit card to transact doesn’t mean that you should dispose of your cheque account – you need to keep it to receive you salary and have your debit orders running from it. It just means that you capitalise on the added perks that your credit card offers.
Free up your personal cash flow
If you pay-off the full credit card balance every month, you won’t pay interest. This means you can use your credit card to fund your monthly expenses.
“Your credit card gives you up to 55 days interest free and paying it off monthly will ensure you don’t incur interest,” says Labuschagne.
This leaves your monthly salary to be used more effectively, such as boosting your savings or putting more money into your home loan. Your money will then work for you, instead of the other way around.
“The trick here is to use your card for purchases you normally wouldn’t consider, such as your children’s school fees, as most schools have a point of sale, or your electricity bill.” suggests Labuschagne.
Keep a track record
Credit cards are widely accepted, this means that you can swipe for even the smallest item. All these transactions will then be recorded on one statement, which, from a budgeting point of view is one of the best ways to manage your finances
Use the budgeting facility
“The budget facility on your credit card is also a great tool that can be used when you need extra funds to buy an item, you can view this as a short term loan and once you pay it off – the facility remains so you can use it again,” adds Labuschagne.
Set your limit to your lifestyle
Using your credit card irresponsibly can be detrimental to your financial position. So you have to control how much you spend and how you pay back your credit card debt.
“I suggest setting aside a fixed amount of your monthly salary to pay-back your day-to-day expenses incurred on your credit card. Take some time every month to budget and try to keep the spend and payment in balance,” says Labuschagne
“Life happens,” Labuschagne continues, “which means from time to time everyone will spend more than what they can afford. Unplanned medical expenses, broken fridges and school trips are just a couple of examples of events that can stretch your credit card facility to the limit.”
If you are fortunate enough to receive a bonus or maybe a 13th salary payment, use some of the funds to pull your credit card back into line, alternatively you would have to cut back on your lifestyle for a while. Try to never pay back your credit card with other forms of debt – this can quickly become a vicious cycle.
“Your credit card if used properly can be a great financial aid, helping you to spend and manage your finances easily; which is ultimately all we want from our financial products,” concludes Labuschagne.
Alan Straton
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