How to manage your credit card debt

Thousands of South Africans apply for debt counselling each month, and in many cases this is due to credit card debt.

If you’re unable to pay off your credit card, or find it difficult to control your credit card spending, here are some strategies for managing your credit card debt effectively.

Credit Cards – Are They a Good Idea?

Most of us spend on our credit cards, often on a daily basis. The benefits we enjoy from rewards programmes and the convenience of swiping our cards instead of paying cash, not to mention the status that many consumers enjoy when they swipe their gold or platinum cards.

Credit cards serve a very useful purpose – they allow us to charge our expenses as the month goes on, and repay them when our salaries are paid. Credit cards are also essential for booking air tickets, making hotel reservations, and paying deposits – they are even required before many patients are admitted to private hospitals in South Africa. The key to managing your credit card is not to spend more than you can afford to repay – here’s how and why:

Using Your Credit Card Wisely

• If you charge purchases to your credit card, make sure that you can pay the total balance off at the end of the month. Interest on credit card balances is very high, and you’ll end up losing hundreds of Rand each month in interest payments alone.

• If you don’t receive SMS notifications when your card is swiped, ask your bank to activate this feature right away. Each time you swipe your card, you’ll receive an SMS which tells you how much was spent and your total credit card balance – you can use this to ensure that you stay within your monthly budget

• Resist the urge to apply for more than one credit card. You may think that having three cards is harmless enough, but the amount of debt you could run up is enormous. By using one credit card with a reasonable limit, you’ll keep your spending habits out of temptation’s path as you go about your day-to-day purchases. However, if you’re a disciplined spender, you could keep an emergency credit card in the safe in case of a medical emergency or other serious expense.

If you have accumulated credit card debt and are unable to pay it off, you may need to stop using your card altogether for a while. You’ll need to pay the monthly interest of course, but you could opt to use your cheque card for purchases and ensure that you spend less than you earn so that your credit card debt can be paid off. Once you’ve repaid your credit card in full, you can decide whether to use it again on a regular basis, or save it for emergency expenses only.