FNB advises credit card users to apply the rule of thumb: Your debt should never last longer than the product you buy

Credit cards can offer relief to those in immediate need of cash. However, they should always be used responsibly as credit cards generally have a higher interest rate and could add to the debt burden, despite providing temporary relief at the time.

This is especially applicable to new customers looking for credit.

“People who get a credit card for the first time are more likely to default because they don’t quite know how to manage a credit card account just yet”, notes FNB Credit Card CEO, Jacques Celliers.

Besides job losses and income reductions, a key reason for credit card default is that people fall into the trap of spending more than they earn. It may be possible to increase your income but it is usually easier to cut back on spending.

Money spent on non-essentials can add up. “These are the costs that can, with practice, often be trimmed quite easily,” says Celliers.

A good start to paying off your credit card debt, is to firstly determine how much you are spending on your credit card monthly, by reviewing your statements.

“One has to make an effort to pay the full outstanding balance every month. Not only does this create a behaviour pattern of responsible spending, it also eliminates interest costs and lowers non-essential expenditure,” says Celliers.

Should you have more than one credit card, it is often difficult to determine which credit card debt to pay off first. Although it is not recommended to hold more than one credit card, Celliers advises that you need to pay off cards with the highest interest rates first or apply for a balance transfer at a reduced rate.

“This will enable you to pay off all your debt via one account, at a reduced rate,”.

Sensible Credit

“Your debt should never last longer than the product you buy. For example, paying off a new piece of furniture over a few months is reasonable. However, paying off your weekly grocceries over a few months is an indication that you are living beyond your means.”

Good money management is about understanding the difference between needs and wants. Spending your money wisely will result in you not incurring debt unnecessarily.

“The best way to deal with credit problems is by developing good money habits. Budgeting is the only way you would know where your money goes every month, and where you can cut back if you are overspending,” explains Celliers.

When you fall behind on your monthly payments, call your bank immediately. A repayment plan can be negotiated and you can avoid having your credit rating downgraded.