How to properly use a credit card and save money!

I hear it all too often from people that credit cards are “bad“. “Credit cards are so expensive to use!” say some, and the the most common one is “The banks just charges way to much interest on credit cards.“. The funny thing is that a credit card is the best financial product offered by banks, in the world. There is no other banking product that allows you to keep your money for 55 days, gives you substantial interest on a credit balance and charges you no transaction fees!

The only reason people are scared of using credit cards is that they are misinformed. You just see people flashing their credit cards all over the show, and you think to yourself, “shame, that person can’t manage their debt.” But the truth is, that using a credit card properly, actually can save and make you money! So listen up, and adhere to my tips on credit card usage, and you will save money!

Choosing the right credit card

Every single banking institution, and lately, large corporate companies offer some sort of credit card. All have different interest rates, annual fees, rewards schemes, etc. So finding the credit card that is right for you is very important. Once you have all the facts, you can make the right decision on which card to choose.

Virgin Money

If you have never owned a credit card before, or are new to the whole credit card thing, go straight to Virgin Money and sign up. As long as you are earning a living, you should qualify. The reason I choose Virgin, are two simple factors. No annual fees, which in essence makes owning a credit card free, and their 5% credit interest rate. But you might be on Discovery Medical, and their credit card might appeal to you more because of their rewards scheme etc. Choose wisely, but don’t not choose a credit card!

How to use a credit card wisely

This is the step where a lot of people get caught, and get stuck in the never ending spiral of debt and interest-on-debt repayment. Your credit card will have a limit that you are allowed to spend. Remember, this doesn’t mean you must spend that amount every month! Draw up a budget, and the amount of money you spend a month on your credit card must be on that budget, so that at the end of the month, you haven’t spent more money than you earn.

The rules of a credit card are so, that if you buy a pair of shoes on your credit card today, you only have to pay the bank back for those shoes in 55 days time. 55 days! That is almost two months! This is where you can make money from the bank. Using this rule means that the money that you owe for those shoes should be sitting in an interest-bearing account so that for 55 days you can earn interest on the money that the bank just lent you for 55 days, interest free! Confusing you hey? Look at this example…

  • I have R1000 in my savings account, and I want to buy a pair of shoes.
  • Puma sneakers: R1000 (Some bling man!)
  • Pay for these sneakers using your Credit Card.
  • Transaction fees buying sneakers: R0
  • For 55 days that R1000 is earning interest sitting in your savings account.
  • After 55 days, you transfer that R1000 into your credit card – in order to pay the bank back for your funky shoes.
  • You get charged not 1 cent from the bank, but you have just earned interest on the bank’s money for 55 days!

Stick to these 3 rules, and make money with your credit card!

  1. Do not spend on your credit card what you cannot buy with hard cash. Buy that pair of sneakers on your credit card, but if you do not have the hard cash in the bank, do not charge it!
  2. Pay back the full amount you owe on your credit card every single month. By missing just one payment, all your hard work saving, can be lost, because of the high rate at which you get charged for late, or not paying up in full. Sometimes up to 25% on your outstanding amount!
  3. If you do not have a savings account to utilise, put all your monthly spending budget into your credit card, and earn interest that way! That means you can earn up to 5% on your spare cash lying around!

24 thoughts on “How to properly use a credit card and save money!”

  1. Nice one. I’ve been a big fan of credit cards ever since I realised they charge the vendor, not me, for every transaction. It can, however, stretch your maths skills to the limit when you’re out stocking up on those Puma’s.

  2. Thats very true Freddy!

    In the states there are a couple of really awesome credit cards. Some pay you back 1-5% of all your purchases for that year! Thats one cool Christmas present if you use your card wisely.

  3. Hi
    What happens if you pay R500 for the Puma on the Friday and the following thursday you pay R500 for a Puma Jacket.
    You still utilised the full R1000 that you had in saving. but There are now 2 transactions paid on differents dates!

    My question, how will the interest be calculated and paid?

  4. Good question Anon.

    What the credit card companies do is have a cut-off date that all transactions up to that day will have 55 days to be paid.

    For example is the cut off date is the 12 July, and you buy a t-shirt on the 11th, you will have to pay for the shirt with all other purchases that you made before the 11th, on the payment date – which is around 2 to 3 weeks from the 12th. But if you purchase shoes on the 13th of July, that will only be included in your next statement, which will arrive in 1 months time!

    Does that help?

  5. The cut off date is determined by the bank. For example, my CC statement runs from the 17 June to the 16 July. I then only receive this statement around the end of July. I then have a due date for payment which fluctuates anything from 5 August up to 18 August. (Tends towards the latter more often than not)

    So you can see that any purchases I made around the 17 June I only have to pay on the 18+- August. Thats 2 months! Obviously anything I bought around the 16 July, I also have to pay for on the 18+- of August, which is around 1 month.

    But all of this shows that you are getting interest free loans from the bank from between 1 and 2 months! Which if that money is sitting in your savings account, you are earning interest in that time – thanks to the way credit cards work!

  6. That 5% is linked to prime, so currently it’s 7.5% interest on positive money!

    I wonder if banks would give credit cards with zero credit? In other words, an awesome bank account.
    But, do they give you credit because they want you to spend on it? Mmm….

  7. How does it work if you have a positive balance? Do they take it off immediately?

    So the best way is to have two credit cards? – one with your money earning interest, and another for the free credit facility to spend. Then you pay the one with the other when the time comes.

  8. David, if you have a positive balance, then yes, when you swipe the card, the money comes off immediately. Actually not immediately as it normally takes a few days for a charge effect to go through, but yes, the money goes off once that is done.

    2 credit cards is probably the best. One with your beloved bank, so they will like you, and the other a Virgin CC. Use your banks CC to make them happy and earn rewards (if they offer that sort of thing) and one with your savings in your Virgin CC. Then time comes to pay your BCC back, pay it from your VCC. In that time you have earned lekker interest on the VCC!

  9. How to pay a virgin money credit card on Standard Bank internet banking:

    In order to load the beneficiary details, please follow the guidelines provided below:

    * Log onto Internet Banking with your Card number, CSP and Password
    * Click on Payments
    * Select Beneficiaries from the sub menu
    * Click on Add New Company Beneficiary

    – Enter your one-time password

    * Type the first letter of the name of the company you are trying to add, e.g. ‘Absa’ for ‘Absa Credit Card Division’
    * Click on ‘Search’ to find the company that you would like to add
    * The ‘Beneficiary reference’ field is usually the reference that the company being paid has issued to you, e.g. Credit Card number
    * Enter a narrative in the ‘My reference’ field
    * Click on ‘Continue’, confirm the details and click on ‘Confirm’

  10. Hi I never understand about the 55 days free thing, can someone explain to me please.

    So if i buy this pair of shoes at the 1st of January for about $100, I only need to pay it back on about near the end of March right?

    Say between that period at about 25 January I bought a bag for $100. Then on Febuary the sent me a credit card statement owing $200 total due on March, so how much should I pay? The whole balance? or i can just pay off my shoes first and wait about 20 more days to pay off the bag?

    Iam confused about this can any of you please explain to me, it will be a great help!

  11. hi

    i was wondering what interest could be made if i had a positive balance of R30000 in my standard bank credit card. i notice that they charge a monthly interest rate on debt on my credit card, my question is would i earn interest on a positive balance on my credit card?

  12. There was this guy see.
    He wasn’t very bright and he reached his adult life without ever having learned “the facts”.
    Somehow, it gets to be his wedding day.
    While he is walking down the isle, his father tugs his sleeve and says,

    “Son, when you get to the hotel room…Call me”

    Hours later he gets to the hotel room with his beautiful blushing bride and he calls his father,

    “Dad, we are the hotel, what do I do?”

    “O.K. Son, listen up, take off your clothes and get in the bed, then she should take off her clothes and get in the bed, if not help her. Then either way, ah, call me”

    A few moments later…

    “Dad we took off our clothes and we are in the bed, what do I do?”

    O.K. Son, listen up. Move real close to her and she should move real close to you, and then… Ah, call me.”

    A few moments later…

    “DAD! WE TOOK OFF OUR CLOTHES, GOT IN THE BED AND MOVED REAL CLOSE, WHAT DO I DO???”

    “O.K. Son, Listen up, this is the most important part. Stick the long part of your body into the place where she goes to the bathroom.”

    A few moments later…

    “Dad, I’ve got my foot in the toilet, what do I do?”

  13. I think this info is good for those that are misinformed. I however experienced that credit cards such as Jet/ Edgars, (to name but a few)are being managed by their own financial companies,and not by Standard Bank as initially thought. Your payments are gladly excepted by Standard Bank, but if and when you encounter a problem, Standard Bank simply refers you to those companies ( Read HelloPeter Website) This is unfortunate, as customers are being given the run around. I still agree that a credit card, when properly managed, can be a great plus – but my worry is the important after sales customer service.

  14. I read a complaint on Hellopeter webste: A Standard Bank Customer applied for a bond with Standard Bank, and his application as a first time buyer was Unsuccessful/ declined. They however offered him a Credit Card. This is the part that he found strange :( and so do I – why would he qualify for a CC and not for a bond. Surely it is in the bank’s best interest to rather finance a property – reel in interest over a period of plus minus 20 years – as suppose to issuing a short term credit card. My thoughts are this: if the client’s bond application was declined due to a judgment or due to a payment default, why issue him with a credit card? Chances are that if he plans to buy immovable property ( house/flat) he is likely to become a regular payer if given the chance to prove himself. Most people that were defaulters, tend to become regular payers when they invest in property. They themselves are then aware of the investment and value of their property that will grow over time. The banks are sitting with re-possessed properties/ houses that are targeted by vandalism, yet they still decline the first-time buyers bond applications. Any thoughts on this? Come on guys – share your thoughts – Lets support the payment defaulters in their quest for bond/ property/ vehicle finance. I think the banks and the national credit act are much too strict, and this is crippling the economy – not noticeably,but it is surely adding to the poor economy. Many people staying in shacks are earning a good livable income, but they do not qualify due to some R500 the did not pay on time somewhere, somehow. It is nowadays much too easy for companies to list individuals with the Credit Bureau, and it sometimes costs more to have your name removed from the ITC listing, than the amount that you are listed for. I think the National Credit Act should stipulate and benchmark an amount that would regulate the listings- For example- A company can only list you with ITC, if you default on an amount above R5000.00. Your response on this will be highly appreciated – Lets learn together how we can make the financial institutions happy, and how they can make us extremely happy in return.

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