Credit cards are incredibly convenient not only for their role in making online purchases, booking events, accommodation, and flights easier, but also because they speed up purchases and make cash-free shopping and travelling safer.
Although they come with their perks, credit cards need to be managed properly to prevent a downward debt spiral, and in order to manage them properly, you need to know as much about credit cards as possible, starting at the very beginning:
Obtaining a Credit Card
All financial institutions require credit card applicants to be over the age of 18 and a valid South African ID book holder. You need to have an active current or savings account (not necessarily with the same bank from which you are applying for the card).
The type of credit card and credit limit that you will qualify for depends on your monthly income and, in some instances, your monthly expenses.
Things to Consider:
- Purchase interest rate: Purchase interest on differing credit card products varies, which is why you need to do research and comparisons to find the card with the best interest rate available to you. There are some financial institutions that work out a personalised interest rate based on individual criteria.
- Positive interest earned: In most instances, you need to have a positive balance on your credit card before you can earn interest. Also, bear in mind that your purchase interest rate and positive interest rate are vastly different, so be sure to find out what the actual positive interest rates are of each credit card you are considering before making a decision. Some financial institutions will have varying positive interest rates that depend on the positive balance in the card.
- Card fees: It is important to consider all the monthly fees when you are choosing a credit card. These fees will include costs for transactions, the monthly account fee and any additional linked cards or services.
- Benefits: Shop around, because some credit cards offer more value-added benefits than others. A linked petrol card, roadside assist, lost card services, travel insurance and rewards earned on a loyalty program are just some of the benefits available to credit card holders. It all depends on the financial institution, which is why research is important.
Due to all of these considerations, it can be somewhat daunting to get credit. Fortunately, your financial advisor can also assist you with choosing a credit card product that complements your income and spending habits. By doing some leg work and research, it won’t be long before you find the perfect one for your lifestyle and transactional needs.