Let talk about credit cards. Convenient and accepted almost anywhere. And yep… probably in your wallet or purse right now. But here’s the scary thing, that little piece of plastic can cause havoc in your life if you don’t know how to use it right. Here are our 5 top tips for managing your credit card and doing it like a pro.
Credit cards have got a lot of South Africans into a frightening amount of unmanageable debt. If fact, a shocking 58% of us struggle to pay our credit card debt each month. And you will soon see why this isn’t hard to believe.
When you are out and about and you decide to treat yourself to an extra-large latte, which card do you use?
Is the first piece of plastic you pull out to pay with your credit card?
If you answered yes, just know you are not alone.
Over 14 million South Africans were reported as credit active in 2018. But with an average of 50 million credit card transactions happening a month, it’s clear we are using credit cards to pay for day to day living expenses. It’s a difficult habit to break.
Unnecessary spending can cause unnecessary debt. We all know how easy that is. That can be a hard hole to climb out of. But if you want to take control and you want to manage your credit card better, then stay tuned.
Poor credit card management can cost you a lot of money in the long run. So how do you get out of the hidden credit card traps?
You learn to manage your card like a pro.
1. Understand Your Billing Cycle
Your billing cycle will usually end on the 1st or 2nd of every month. This is when your credit provider will add interest to your account based on the balance ending on the last day of your billing cycle.
Always make sure that your balance is the lowest you can possibly make it by the end of your billing cycle.
2. Don’t Use More than 30% of Your Credit Card Balance
This little trick is called your “credit utilisation percentage” and it’s kind of a big deal. FICO, the standard credit score model used to work out your credit score, shows that those who have a score above 750 usually have a credit utilisation percentage of an average of 7%.
Want to work out your credit utilisation percentage?
Total Balance ÷ Total Credit Limit = Credit Utilization x 100 = %
Not only do you pay less interest, but you may also be eligible for a credit card with a lower interest rate. Savings all round.
3. Pay More Than the Minimum
The less you pay now, the more you pay later. Depending on the credit card, you could save an average of 20% per year on interest.
4. Make multiple payments
We all fall into the trap of only paying one payment off your card at the end of the month. But it’s a little-known fact that making multiple payments can improve your credit limit and make it easier to manage your balance.
5. Never take cash out
Credit card companies like to add on fees and interest wherever they can. Taking cash out, also known as a cash advance, is an expensive way to use your card. Every time you use your credit card at the item, you will immediately be charged interest and you will also have to pay a fee.
How do you know you’re in trouble?
Your balance never seems to go down. Your minimum repayments are reaching limits that you’re not totally comfortable with. You’re struggling to live without your credit card every month. You may even be getting to a point where you don’t want to open your credit card statement anymore.
If you play dangerous with your credit card it will play dangerous with you. But don’t worry, the best way to make sure you don’t fall into the credit card debt spiral trap is to get help before it’s too late.
We deal with clients everyday who have decided that they no longer want to suffer from debt.
If you would like to know more about how Debt Rescue could help you get in touch today!