As a first-time worker, getting a credit card can be tempting, especially given how expensive things can be. However, it is crucial to remember the reason why you have a credit card and ensure that you have the discipline to spend the money wisely.
A lack of knowledge surrounding credit cards causes people to have low credit scores, or be in debt as they do not how they work.
Standard Bank states that credit cards provide flexibility for large expenditures and cash flow management, as they supply pre-approved funds up to a certain amount and demand repayment within a predetermined window of time. If the minimal amount is only paid, interest may be charged.
When applying for a credit card, consider why you need it. Do you want it for convenience, to build your credit, or for quick access to funds? Choose a card that fits your needs and budget and offers the features you want.
The Chase hub provides 10 ways that you can manage a credit card:
- Prioritise timely payments: The money hub encourages timely payments to build a positive payment history, prevent late fees, and protect credit scores.
- Try to exceed the minimum amount required: Paying the entire balance each month can prevent interest accumulation.
- Have a budget: Calculate earnings, bills, savings, and spending to understand your spending relative to income.
- Check your credit card statements: Regularly check your statements to track expenses and detect credit card fraud or identity theft.
- Develop good spending habits: Identify increasing expenses and purchases that cause overspending.
- Review your credit report: Check your credit report annually to manage credit cards and detect fraud.
- Maintain a low credit utilisation ratio: Keep your utilization ratio under 30% to increase your credit score.
- Use cash back or rewards: Earn points and redeem them for travel, gift cards, cash back, etc.
- Combine debts: Transfer balances to a credit card or take out a debt consolidation loan.
- Create an emergency fund: Use both cash and your credit card for emergencies.
Also see: Why should you avoid impulse buying?
