6 ways to use your credit card to make better money choices

Used responsibly, a credit card can be a very helpful financial tool, but if your credit spending gets out of control, monthly payments and accumulated interest can become a nightmare.

Privesan Naidoo, executive: trading products at Nedbank, shares six ways you can use your credit card to manage your money better, especially during this time of the year where many South Africans are having to reach for it more frequently:

1. Manage your spend

This is probably the most valuable benefit of a credit card. Most people get into financial trouble because they don’t really know how they spend their money—and what you can’t measure, you can’t manage. People who use a credit card for all their purchases, online and in the real world, can manage their expenses via their banking apps and the dashboards available in these platforms that track their spend.

2. Use your card to achieve your goals

Credit cards are astonishingly flexible. Once you understand how you spend your money, make the changes needed to match your stage of life. For example, a student would find a card to be a convenient, secure way of receiving an allowance and making payments, while building up a credit history. As they climb the ladder of success, cardholders can use their increased purchasing power to access a greater quantum of rewards that can be used to travel, upgrade or purchase. Seniors would focus more on using their cards to keep their money secure and to make payments easily and securely.

3. Make your money go further

A credit card is essentially a way to get free credit for a limited period. Your cash can safely earn interest during that period, or it could provide the leeway you need before the next salary cheque comes in. If you pay off the full amount each time it becomes due, you will not incur finance charges and thus your credit will effectively be free.

4. Get the rewards

All credit cards have reward programmes, some better than others. Look out for a rewards programme that is simple to understand and use and offers genuine benefits. Just taking a little bit of extra trouble to understand all the rewards on offer can unlock significant extra amounts of cash, as well as access to special offers and discounts. For example, credit card purchases can generate points that can be used to buy or upgrade air tickets, and certain purchases made on a credit card attract discounts and/ or bonus rewards points.

5. Benefit from secure, convenient digital payments

Digital payments using a credit card have a number of benefits relating to convenience and security and have been a lever for innovation. Payment can be made instantly, through options such as Tap and Go or Scan to Pay, without the need to carry or draw cash—a major advantage in a country with such a high crime rate. There is a lot of publicity about card fraud, but following a few security precautions, one can continue to transact safely.

6. Look out for purchase protection

This is something that only some cards offer and is a form of insurance that allows cardholder to make a claim for reimbursement of eligible spend on items that are damaged, broken or stolen a specified time after they were bought on the card.

If you use it correctly, your credit card is an incredibly powerful tool for acquiring goods and services you want.

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