According to the SA National Credit Regulator (NCR), South Africans are edging close to R18-billion in credit and store card debt in serious arrears (120+ days). Add to this that 40% of our 27.5-million credit-active consumers have bad debt. I believe there is a space for a credit card, as long as it is used responsibly.
And it’s possible if you use these guidelines.
When it is okay to swipe:
With a credit card you can spread the cost of a large purchase – this can be useful for emergency situations where you might struggle to pay for something you need immediately i.e. new tyres for your car
Some credit cards offer rewards such as cash back every time you swipe – so with the right type of credit card you can save as you spend. As long as you use your credit card responsibly.
If used correctly, credit cards can be very useful in helping consumers develop a positive credit profile
When it is not okay to swipe:
Credit cards carry a high interest rate in certain instances, and personal loans even higher interest rates. The basic principle is to always cover the most expensive debt first. Therefore paying off one debt, can add to your credit card debt and can easily get you into a negative debt spiral.
It’s irresponsible when you have no budget, but use your credit card anyway for a night out or to impress others. If you don’t have the cash, and can do without the purchase, don’t take out your card. Never ever shop for luxury goods using your credit card as the financing tool.
This will enable the credit facilitator to obtain the maximum amount of interest from you and will result in your purchases being more expensive. Credit is expensive, always pay the maximum amount you can afford.
Do you feel like you don’t have a handle on your debt? Meeting with a financial planner can help you manage your spending choices and build a healthy relationship with money.