Throughout the world, credit cards have gained prominence as a purchase enabler that empowers consumers to conveniently spend while also having access to a credit facility 24/7 as well as the gateway to purchasing goods and services online. Credit cards have made a cashless society possible and have its benefits but also has its shortcomings don’t get me wrong. However, very few consumers really know all there is to be known about how a credit card works and how it can be used effectively.

Instead, some consumers continue to grapple with misleading perceptions that are widely spread about this product. So in a bid to debunk these myths and give you the real deal on what a credit is, what it does and how you should use it, check out these 7 myths we’d like to address.


Don’t let credit cards scare you, they can be a powerful financial tool

1. Credit cards are bad and cause you to become indebted

Of course abusing your credit card could lead to debt issues, that’s a no-brainer. But when used correctly, your credit card can provide convenience and safety through transacting on the account day to day when you need it most. Like any financial instrument it should be used wisely and its no more dangerous than store credit, buying on accounts or financing a large purchase through the bank in this regard.

2. Spending more is good for your credit score

When used responsibly a credit card can help you build a good credit history. In addition, when you manage your spending responsibly it becomes a great tool to earn rewards and benefits. So make sure you pay back your credit card regularly and on time so you can build a reliable record.

3. Credit cards have the highest interest rate compared to other loans

Interest rates on all credit facilities vary depending on your individual risk profile. Using money from a credit card can actually be less expensive depending on the amount, what you want to use it for and when you will repay it back.

4. Credit cards should just be used for emergencies

A credit card’s budget facility could be useful if you want to make a large purchase but it can also be used for everyday purchases. If you pre-fund your credit card you’ll be able to use it like you would use your credit card and you’ll earn more rewards.

5. Credit cards are not safe

This is not true. The responsibility is on the user to apply all available safety precautions and ensure that the card and pin are safe at all times.

6. You start paying interest from the minute you use it

If you pay the full outstanding amount you owe on or before the due date on your monthly account statement, no interest will often be charged on your credit facility. Lenders often give you up to 55 days free to repay your debt.

However, if you don’t repay the full amount by the due date, the interest-free period is often deferred and interest continues to be charged from the date of each transaction until you pay in full.

Cash withdrawals mostly accrue interest from the date of withdrawal.

7. It’s your money and you can use it as you like

This is money which the bank has lent you and cannot be used for illegal and online gambling activities. Furthermore, if you use the credit card outside the country, you must comply with applicable exchange control regulations.

When shopping around for a credit card, it is essential to do your homework and know what value, benefits as well as any restrictions that may have been set out by your provider. Therefore, the decision should not be solely based on the credit limit and interest rate you are charged, but also consider whether the card suits your lifestyle and needs.

Give credit where credit is due

We hope you now have a better understanding of credit cards, how they work and how it can be put to good use. If there’s anything you are unsure of or require clarity on the terms of your credit card, it is best to contact your provider instead of relying on hearsay or information from untrustworthy sources, which can often be misleading.

Manage your debt effectively

If you’re feeling overwhelmed by your current financial situation, feel free to contact us. To Speak to one our consultants about debt review contact us here.

Source: Jonathan de Beer, head of collections at FNB

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