A credit card is a useful tool for money management and to boost your financial security. With proper use, a credit card can help with making big purchases which would otherwise not have been affordable. They can bring many benefits from membership rewards programmes and are an option as a savings plan with good interest rates. Cards can also be used for building a credit history and increasing credit scores. Regular and punctual payments prove to financial institutions that the cardholder can be trusted with much larger loans such as a mortgage or car loan.
The wide variety of credit cards in South Africa allow for almost anyone over the age of 18 with a stable income to enjoy the benefits. However, with all of the credit cards on offer to you, how do you decide which card is the best choice for you? The differing rewards programmes, interest rates and fees can make the decision process complicated as there are so many factors to consider.
Tips on choosing a suitable card
Everyone has a different lifestyle composed of different circumstances. A card that is perfect for one person may be a disaster for another. The fundamental question you need to ask yourself before choosing a credit card is - why are you getting a credit card?
1. Motivation
Looking at the motivation behind why you want a credit card should help you to focus on which type of card would suit you best. For example, if you are thinking of getting a card to fund a large purchase which you plan to repay over an extended period of time, you should be looking at cards with a lower interest rate. There is no point in spending a large amount of money on a card which charges you high interest rates because you will spend a lot of money paying off the interest.
Alternatively, if you plan on using a card for emergencies and want to pay off the balance at the end of every month, you could consider a card with a higher interest rate but a much better rewards programme such as a cash-back facility. Most cards offer a grace period during which no interest is charged and if the balance is repaid in full before the grace period is over, you will still reap the rewards of the benefits programme and avoid paying any interest. You will be borrowing money free, except for an annual card fee.
2. Educate Yourself
Making an informed choice involves doing your homework. You need to look honestly at your financial situation. Choosing a card based on what your friends have or the first offer made to you is pointless. You need to research the finer details of credit cards – find out how they work, the different benefit programmes available and how you can use the card to your advantage. Staying informed about the latest credit card news and information means that your choice will be based on fact rather than opinion. The internet is an excellent resource of information concerning credit cards and also contains many helpful sites with credit card comparison facilities.
3. Make a credit card comparison
A credit card comparison is an incredibly important tool for narrowing down your choice of card. When you compare credit cards, you can eliminate the options which do not suit you and focus on the most relevant ones for your needs. You should try to narrow your search to a final three choices of credit card and proceed to make your decision from there, based on the fees, APR (annual percentage rate) and the rewards programmes most relevant to your situation. As an example, if you travel frequently, using a credit card which offers frequent flyer miles as a reward could be a good choice.
Applying for a Credit Card
The process for applying for a credit card is not the long-winded experience it was previously. Online applications are quick, easy and safe, and do not take three weeks as postal applications do. Applying for a card online is especially easy through a site featuring a credit card comparison tool and secure application facilities.
It is important that you do not apply for a card on impulse. Make sure that you have noted the above suggestions and are making an informed choice. Reading the fine print, especially details concerning the APR is important when you apply, as there may be important information stated which you were unaware of. Make sure that you understand the fine print and do not feel ashamed of asking for an explanation of anything you do not understand. Your financial stability is more important than pride.
Once you have filtered your options to one card through careful thought and an informed credit card comparison, you can apply. The information that financial institutions will need for a successful credit card application are your full name and address, identity number, proof of address, three months bank statements and your latest pay slip. Your credit rating will be examined and your APR adjusted according to the risk involved in lending money to you. This is why having a good credit rating is so important: if you have a good score, you will be less of a potential liability to the company and your APR will be lower than if you had a bad score.
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Plastic is a
credit card comparison website featuring a variety of credit cards, important card information and tips and tricks for better
management of your credit cards.
