How to use your credit card in tough times

Credit cards are known as one of the most expensive debts you can have because you pay so much interest on what you owe, but if you use your credit card in the right way, it can actually help you survive tough times.

Despite this, Standard Bank’s credit card division has found that despite South Africa’s high interest rates, only a small percentage of users of these cards take advantage of interest-free periods.

According to the bank’s analysis, only 20% of credit card holders benefitted from its 55-day interest-free period at least once in the previous 12 months to December 2023, while only 11% benefited more than once.

What is an interest-free period? Tumelo Ramugondo, head of credit card at Standard Bank, says the concept of an interest-free period simply means that the bank will not charge you interest if you pay off your card balance in full from purchases made before the due date.

“Interest-free periods can be an effective way to help you better manage your money because if you follow this concept every month, you simply pay the same amount that you used without incurring any additional interest.”

ALSO READ: More SA consumers battling to pay their home loans and credit cards – report

Do not treat your credit card like a personal loan

Ramugondo says several factors contribute to some consumers missing out on these benefits, including the reality that most over-rely on their cards due to financial pressure or treat them like a once-off personal loan.

However, he says, credit cards are designed to serve as transactional tools that yield greater value with regular use. “As a result, we are investing heavily into educating our own customers on how to use credit cards to take advantage of vital perks such as no interest and rewards.”

While it is absolutely necessary for consumers to be responsible with managing any debt, a credit card can be a useful tool in meeting your short-term transactional needs and ensuring you get more value from your money, he says.

The South African Reserve Bank (Sarb) will announce its latest interest rate decision next week, after keeping the repo rate unchanged at 8.25% in March.

“While most analysts believe interest rates will begin to fall in the short-to-medium future, consumers have had to endure the current cycle. This is primarily due to volatile inflation and market factors like high fuel and food prices,” Ramugondo says.

This graph shows how it works: