Credit card in South Africa
If you are reading this text, you have probably used a credit card in South Africa for your financial transactions during your life, haven’t you? But do you really know how it works? It’s important to understand what we are doing daily, so we can be prepared. Especially if we are talking about finances.
A long time ago it used to be common to make financial transactions using paper money every single time. Then, the same money stays in a bank account and there are different ways to use it in a negotiation. One of them is the credit card. So, let’s talk about it!
How credit card works
A credit card is a type of payment card that allows you to borrow money from a bank or credit card company to make purchases. You can use a credit card to pay for goods and services at merchants that accept credit cards. When you use your credit card, the bank or credit card company pays the merchant on your behalf. You are then responsible for repaying the bank or credit card company the amount you borrowed, plus interest and any other applicable fees.
To use a credit card, you first need to apply for one and be approved. Once you are approved, you will be issued a credit card with a credit limit. Your credit limit is the maximum amount of money that you can borrow on your credit card.
When you make a purchase with your credit card, the merchant will swipe your card or enter your card number into a terminal. The terminal will then send a request to the bank or credit card company to authorize the purchase. If the purchase is authorized, the bank or credit card company will approve the transaction and the merchant will be paid.
You will need to repay the bank or credit card company the amount you borrowed, plus interest and any other applicable fees, by the due date on your credit card statement. If you do not pay your bill in full by the due date, you will be charged interest on the remaining balance.
Advantages of credit card
If you know how to use a credit card e how it works, you will notice there are several advantages to using a credit card. Let’s check it together!
- Convenience: Credit cards are an easy way to pay for goods and services, especially when you are shopping online or over the phone. You can also use your credit card to withdraw cash from ATMs.
- Rewards: Many credit cards offer rewards programs that can save you money on your purchases. For example, you may earn cashback, points, or miles that can be redeemed for travel, merchandise, or statement credits.
- Purchase protection: Some credit card companies offer purchase protection benefits, such as extended warranties and return protection. This can help you save money if you have a problem with a purchase that you made with your credit card.
- Building credit history: Using a credit card responsibly can help you build a good credit history. A good credit history can make it easier to qualify for loans and other forms of credit in the future.
Credit card care
As with many things in our life, credit cards need some care. But, don’t worry: there are a few things you can do to use your credit card responsibly and avoid financial problems! Let’s check it below:
- Only borrow what you can afford to repay. It is important to only borrow money on your credit card that you can afford to repay by the due date on your statement.
- Make at least the minimum payment on time each month. Even if you cannot pay your bill in full each month, you should always make at least the minimum payment. This will help you avoid late fees and interest charges.
- Pay off your balance as quickly as possible. The longer you carry a balance on your credit card, the more interest you will pay. Try to pay off your balance in full each month to avoid interest charges.
- Be aware of your credit limit. Do not spend more money on your credit card than your credit limit. If you exceed your credit limit, you will be charged over-limit fees.
- Monitor your credit report regularly. You should review your credit report regularly to check for errors and unauthorized activity. You can get a free copy of your credit report from each of the three major credit bureaus once a year at annualcreditreport.com.
Categories of Credit card in South Africa
There are many different types of credit cards available in South Africa, each with its own unique features and benefits. Some of the most popular types of credit cards in South Africa include:
- Rewards credit cards: Rewards credit cards offer rewards programs that can save you money on your purchases. For example, you may earn cashback, points, or miles that can be redeemed for travel, merchandise, or statement credits.
- Travel credit cards: Travel credit cards offer benefits such as travel insurance, airport lounge access, and rewards points that can be redeemed for travel.
- Business credit cards: Business credit cards offer features and benefits that are specifically designed for business owners, such as rewards on business expenses and the ability to earn separate credit limits for different business needs.
- Student credit cards: Student credit cards are designed for students with limited credit history. They typically have lower credit limits and interest rates than other types of credit cards.
Using credit card in South Africa
Credit cards can be a useful financial tool, but it is important to use them responsibly. If you use your credit card responsibly, you can enjoy the many benefits that they offer, such as convenience, rewards, purchase protection, and the ability to build a good credit history.
Don’t forget to check with your bank what the rules and specific benefits of your credit card are. So, you could enjoy all the advantages of them.