South Africa has 6.6 million credit card accounts which is a 2,3% year-on-year increase on 2021 according to TransUnion. The reason for this growth is that that little piece of plastic in your wallet is one of the most powerful financial management tools available to the man or woman in the street. But, like any powerful tool, used incorrectly it can cause damage.
That’s particularly germane now as we put Black Friday behind us and face up to the Christmas season followed by all the expenses of the back-to-school rush. Used responsibly, a credit card can be a very helpful financial tool, but if your credit spending gets out of control, monthly payments and accumulated interest can become a nightmare.
Privesan Naidoo, Executive: Trading Products at Nedbank shares six ways you can use your credit card to manage your money better, especially during this time of the year where many South Africans are having to reach for it more frequently.
1. Manage your spend
This is probably the most valuable benefit of a credit card. Most people get into financial trouble because they don’t really know how they spend their money—and what you can’t measure, you can’t manage. People who use a credit card for all their purchases, online and in the real world, can manage their expenses via their banking apps and the dashboards available in these platforms that track their spend.
2. Use your card to achieve your goals
Credit cards are astonishingly flexible. Once you understand how you spend your money, make the changes needed to match your stage of life. For example, a student would find a card to be a convenient, secure way of receiving an allowance and making payments, while building up a credit history. As they climb the ladder of success, cardholders can use their increased purchasing power to access a greater quantum of rewards that can be used to travel, upgrade or purchase. Seniors would focus more on using their cards to keep their money secure and to make payments easily and securely.
3. Make your money go further
A credit card is essentially a way to get free credit for a limited period. Your cash can safely earn interest during that period, or it could provide the leeway you need before the next salary cheque comes in. If you pay off the full amount each time it becomes due, you will not incur finance charges and thus your credit will effectively be free.
4. Get the rewards
All credit cards have reward programmes, some better than others. Look out for a rewards programme that is simple to understand and use and offers genuine benefits. Just taking a little bit of extra trouble to understand all the rewards on offer can unlock significant extra amounts of cash, as well as access to special offers and discounts. For example, credit card purchases can generate points that can be used to buy or upgrade air tickets, and certain purchases made on a credit card attract discounts and/ or bonus rewards points. With the Nedbank American Express credit card for example you can earn double rewards when making purchases.
5. Benefit from secure, convenient digital payment
Digital payments using a credit card have a number of benefits relating to convenience and security and have been a lever for innovation. Payment can be made instantly, through options such as Tap and go or Scan to Pay, without the need to carry or draw cash—a major advantage in a country with such a high crime rate. There is a lot of publicity about card fraud, but following a few security precautions, one can continue to transact safely.
6. Look out for purchase protection
This is something that only some cards offer and is a form of insurance that allows cardholder to make a claim for reimbursement of eligible spend on items that are damaged, broken or stolen a specified time after they were bought on the card.
If you use it correctly, your credit card is an incredibly powerful tool for acquiring goods and services you want.