Put credit card into the hands of many otherwise intelligent, well-organised people and they turn into helpless spenders. Reining in the power of your credit card takes some getting used to but instead of thinking of it as a fountain of wealth it might be better seen as an economical form of cash.
If you simply use your credit card to pay for ordinary retail purchases, excluding petrol, and settle before the due date, the only charge you pay is the 20c government levy on each transaction. The costs for your petrol or garage card are 20c government levy and 90c per transaction. VAT is also levied on any financial service charge.
Using your credit card to withdraw cash from an automatic teller machine costs the same as using your ATM card - eg, if you are a First National Bank customer, the charges are R1,25 at BOB ATMs, R2,45 at Saswitch, R12 overseas and R3 from a teller, or if you are a Standard Bank customer, R1,70 for the first R100 drawn and then 19c for each additional R100 or part of R100.
If you don't clear your credit card debt, interest rates are quite severe - between 24 and 29 percent on any money owing. If you use the card as a debit card, in other words you put a lump sum into your credit card at the beginning of the month and your transactions are withdrawn from it, then you earn between six and 14 percent interest on the credit balance.
This is how your interest-free period is calculated, according to First National Bank:
Statement dateJan 14 1997
Payment due dateFeb 8 1997 (25 days later)
Transactions reflectedDec 14 1996 to Jan 13 1997
Interest free period56 days
If your credit card statement only shows transactions conducted since your last statement date and you pay this balance in full before the "payment due date" then no interest is charged. Standard Bank adds that if you withdraw cash on your credit card resulting in a debit balance, interest will accrue from the date of that transaction.
The risks of credit cards are that you could lose control of your spending or that you could be robbed of the card or the number could be misused.
To control your spending, Standard Bank suggests you apply for a set spending limit of your choice and that you consolidate all your spending onto one card rather than holding a number of different credit and in-store cards.
When a card is lost or stolen, report it immediately and, for times when you may not have noticed it is missing, consider taking lost card insurance.
Always ensure that the card returned to you in restaurants, shops and garages is yours. Read your statements carefully and if there are any unrecognisable transactions, contact your card issuer.
You may have discovered that you can make direct purchases by telephone or internet by giving only your credit card number. The way to protect yourself from having the number misused is not to give it to unknown companies that solicit you for business. Deal only with reputable service providers and direct mail companies belonging to the Direct Marketing Association.