Use your credit card for the right reasons

With barely a month to go before the year-end holiday most people are dreaming of that well deserved December holidays.

However, one thing’s for sure though, most of us haven’t started planning for them, says Hendrik du Plessis, head of cards at Standard Bank Namibia.

“People want to reward themselves for the year passed and indulge their families with food, gifts and trips away, but many face the festive season with tight purse strings because of inadequate financial management,” says Du Plessis. “Planning ahead will enable them to save enough money to spread over a couple of weeks, rather than in one short and stressful burst.”

So how do you strike a balance between rewarding yourself and celebrating the year end without overstretching your finances? The answer is to get a head start by saving and eliminating debt, and an ideal tool to use is your credit card.

Budget, debt-management tool

“A credit card should be an essential part of personal finance management,” says Du Plessis. “Using one effectively is about making payments on time and keeping spending under control.”

The key to making a credit card a crucial part of your budgeting activities is taking a strategic and responsible approach to its use:

• Set a limit to cover your daily needs, but one that is not large enough to overstress your budget.

• Keep track of your purchases by examining your statement and balance regularly.

• Pay as much of the outstanding balance as you can every month. This will prevent unnecessary and expensive interest.

The above advice is important to implement throughout the year for a healthy bank account, but the subsequent tips will transform your credit card into a valuable financial management tool that will save you money and lessen your debt in time for December’s festivities.

Tips

Make your credit card part of your monthly budget. How you manage debt will play a vital role in achieving your financial goals, be they gifts for family and friends, or a holiday abroad.

List what payments need to be made for your bond, car, credit card fee and other regular accounts. Include a budgeted amount that covers day-to-day purchases and planned bigger expenses for that month. Make sure all these debts can be paid for on time with money to spare before you purchase anything else.

Know your limit and keep track of your spending with SMS or email notifications. This will help you avoid impulse spending.

Study your card issuer’s terms and conditions, and benefits. Take advantage of the benefits that suit you. Most credit cards offer an interest-free period of 55 days, so strive to repay your debts in this time to avoid paying any interest and save money.

A budget facility is a good way to manage payments, especially for larger purchases. When you’re at the point-of-sale, select ‘budget’ instead of ‘straight’ and choose your payment terms, which can be anything from six to 60 months. This means you’ll pay a set amount in instalments in those months.

Loading a debit order on your credit card ensures it is always paid on time and avoid paying penalty fees for missed payments. A debit order allows you to pay the minimum percentage of the outstanding balance, a set amount or the full payment, although it is best to avoid paying the minimum and try to pay as much as you can.

Close unnecessary accounts and transfer the money into your credit card. Consider transferring your balances from all your other cards and clothing accounts into one card to simplify your finances and pay a discounted interest rate.

Costs

Understand all the costs associated with your credit card.

Credit Card purchases at Point of Sale generally attracts no transaction fees and self-service banking channels (internet banking, mobile banking apps) are cost effective and convenient to check your balances or making predefined payments.

“When it comes to personal finances, small, consistent behavioural changes in how you transact and pay on a daily basis can result in big savings if they are implemented with a medium- or long-term view,” concludes du Plessis. “Start planning for the holidays now and you will be almost guaranteed a carefree festive season.”