By: Privesan Naidoo
In recent years, high inflation and soaring interest rates have made financial management a tightrope walk for many South Africans. These challenging economic conditions can understandably make people a little careful of applying for credit. However, a well-chosen and responsibly managed credit card can be a strong financial ally, especially during difficult times.
Beyond its role as a payment method, the right credit card can be a powerful tool for personal cash flow management and expense tracking and even a source of valuable rewards. When used wisely, a credit card can help you navigate turbulent economic times more effectively and make the most of your finances.
Here are some tips to harness your card's full potential:
Make sure your card delivers the best possible rewards. Choose a credit card that offers rewards aligned with your spending habits and use it strategically to maximise these benefits. The key is to choose a credit card that offers the most valuable rewards in the least complicated way, then use that card to pay for as many of your expenses as you can, and settle the balance in full every month. That way, you’re earning the maximum rewards without paying any interest.
Use your card as an expense-tracking and budgeting tool. Credit cards can be powerful allies in tracking your spending, offering detailed statements that categorise your expenses – which can then help you analyse and adjust your monthly budget. Using your credit card for most purchases creates a clear transaction trail, and when you can access this information immediately using your bank’s digital platforms, it’s easy to monitor your spending patterns and identify areas where you might be overspending.
Look for the best interest rates and low fees. In a high-interest environment, finding a credit card with competitive rates from prime is crucial. The interest rate on your credit card can make a significant difference in how much you end up paying, especially if you carry a balance beyond the interest-free period. So, it's worth shopping around for a card that offers a great rate.
Make your card the ultimate travel companion. Most credit cards offer valuable benefits beyond just convenient, cash-free purchases. Many cards come with a range of travel and lifestyle benefits that can save you money and enhance your experiences. When choosing a credit card, look beyond just the interest rates and fees, and also consider the additional benefits like travel insurance and flight and accommodation discounts, which can add up to substantial savings on your travel expenses, making your trip more affordable and freeing up cash to spend on tourist activities.
The key to getting the most out of any credit card is to understand your card's features and use them to your advantage, and in that way, you can turn everyday transactions into opportunities for savings and rewards. In challenging times, it's these smart money choices that can make a real difference to your financial well-being and ensure that your credit card is a powerful tool in your financial toolkit.
* Naidoo is an executive for Trading Product (card and payments) at Nedbank.
PERSONAL FINANCE