A Fin24 reader asks:
Is it a good idea to have a credit card? How will it benefit
me? How will it affect me? I have been using one for two months.
Barrett Whiteford, head of marketing at FNB Card,
Swiping a credit card places the account holder in a unique
position. The goods are paid for and ownership is transferred but the buyer
does not have to pay back in full and no interest is charged for several weeks.
The key to low-cost buying with a credit card is full
payment by the due date. Credit cards eliminate the need to carry cash and can
be used 24 hours a day at merchants around the world without incurring
Credit card funds are made available in the form of a
short-term loan. A credit card expresses the account holder’s creditworthiness
as issuing banks regularly review your disposable income and your credit
Arrie Rautenbach, managing executive of Absa Card,
offers a contrary view:
The decision to own a credit card is not one to take
lightly. It is important for customers to understand the risks of credit cards.
Granting a credit facility to a customer comes with certain
fees and finance charges. As with any credit facility, bank charges and
interest form part of the agreement.
Johan Borcherds, a financial planner at PSG Konsult,
has some words of caution:
Credit cards offer consumers short-term gain but that could
lead to an untold debt trap. There is high interest on short-term debt. Because
credit cards make it easier for consumers to spend on their monthly budget,
they get tempted to spend when they do not even have money.