Rose Miller, grants manager at the JN Foundation, says a credit card used wisely and responsibly, can be a helpful financial tool for graduates in their first job. In addition, making consistent, on-time payments will boost one’s credit rating, and some cards offer attractive rewards for purchases.
However, if your credit spending gets out of control, monthly payments and accumulated interest will become a problem.
Mrs Miller, who also leads the JN BeWi$e financial empowerment programme, advised that one of the most important steps to follow is to ensure that one uses a credit card wisely, by paying the balance in full every month.
“A credit card is an unsecured loan, which uses plastic. You can spend sums up to a pre-set credit limit, which might be a few, or several thousand dollars. It depends on how confident your card provider is that you’ll pay it back,” she explained.
The JN Foundation grants manager advised that the key to avoiding interest payments is to pay off the full balance, on time, each billing cycle.
“Resist the temptation to spend more than you can pay for any given month, and you’ll enjoy the benefits of using a credit card without acquiring interest charges,” she said.
She also advised that persons should use their credit card for “needs” and not “wants,” and warned that, “A credit card should be used carefully. Frivolous purchases can lead to unnecessary debts. It is also not a good idea to take cash advances against your credit card.”
Her recommendation is that, “Credit cards should be used to cover normal expenses for which you have budgeted, as well as in emergency situations, such as illness or for car parts, if your vehicle unexpectedly breaks down. However, your aim should be to repay the amount as soon as you can, to decrease or avoid interest charges altogether.”
Additionally, Mrs Miller said card holders should never skip a payment. Pay your bill in full, on time every month. If that is not possible, rather than skipping, make the minimum payment if that is all you can afford. Missing a payment could result in a late fee, penalty interest rates and ultimately impact negatively on your credit rating.
She further advised to use a credit card that offers rewards.
“To achieve maximum benefit from a credit card facility, do all you can to avoid interest payments and use the credit card for most or all of your purchases and take advantage of the rewards offered,” she explained. Also, earn rewards such as discounts on purchases, including hotel and travel, food and drinks, beauty and spa, fashion as well as home-and-garden supplies
The JN BeWi$e financial leader also informed everyone to protect themselves from credit card fraud. “While there is no foolproof way to prevent all instances of credit card fraud and theft, understanding and adopting a few best practices can help to reduce your risk,” she pointed out.
She noted that one way to reduce risk is to use a card that offers additional security.
“There are credit cards available with an EMV chip, which provides an additional layer of security. It’s more secure, because you cannot copy the chip. Each time the card is used for payment, the card chip creates a unique transaction code that cannot be used again,” she said.
Mrs Miller also advised that persons should be generally wary of requests for personal card information, regardless of the source. “Independently verify the legitimacy of those persons requesting your credit card number,” she counselled.