Whether you need money for an emergency or can’t afford the cost of something you want, a credit card can help. Just keep in mind that credit isn’t free. Credit cards come with expenses like interest, initiation and service fees, and much more.
That said, if you’re looking for a new credit card, you first need to learn how they work and the various sorts of credit cards accessible. That way, you’ll be ready to manage them well and further build your credit score as well. Take a look.
A credit card permits you to get to pre-approved credit offered by the bank that gave you the card. This implies that you will have money accessible to cover your purchases using a credit card. You then, at that point, need to pay that money back, either in full at month’s end or over longer time frames such as monthly installments.
You apply for a credit card the same way you would apply for a loan or any credit. Before being approved, your bank will check your credit record and also your affordability. This is to see if you have a history of paying your creditors on time and whether you can afford the installments required.
At the point when you’re finally approved for a credit card, the bank will authorize a credit card limit. This is the greatest amount accessible on your credit card. Your credit limit will be determined based on components like your other debts, your income, payment history, and how much accessible credit you have on various other cards.
Toward the end of every month, you will have the choice of paying a specific minimum amount or covering the entire balance. Paying only the minimum monthly is the most expensive choice since it will cost you the most interest. That said, when you pay in full every month, you get a grace period that will allow you not to pay any interest on your purchases.
Should you neglect to make your installments on schedule, your bank will report your non-payment to the credit bureaus. Your payment history affects 35 percent of your FICO rating (your credit score), a three-digit number that shows how risky it is to loan you money. You have to pay at least the minimum by the due date each month to prevent any late charges and possibly harm your credit score.
Credit cards always have credit card expenses. Here are a few of the expenses and charges that you might find in your pre-agreement. We propose that you ensure you fully comprehend and consent to them before signing the agreement. They include:
- Interest payments – Credit cards can have variable interest rates for various point-of-sale till points as well as ATM withdrawals. If you pay in full each month, your purchases won’t accrue interest.
- Initiation fee – A once-off charge that credit providers charge you for going into a credit agreement. The credit provider should give you a choice to pay this charge upfront and with no interest.
- Service fee – This is a charge that a credit provider charges you for administering, servicing, or keeping up with the credit agreement. Credit providers can charge this on a month-to-month basis, yearly, or per transaction.
The advantages of using a credit card responsibly offset the expenses. Here are some acceptable practices to embrace:
- Never use credit to subsidize irresponsible spending – Do not live on the accessible balance on your credit card. Try to pay the outstanding balance on your credit card each month. Do some research into credit offers from banks that incorporate long interest-free credit periods for as long as 60 days. You can use this interest-free period for purchases and settle your balance in full each month without paying any interest.
- Do not use credit to take care of debt – Rather stop and reevaluate your financial circumstance. Consult a financial advisor and see what your choices are. It might mean scaling back a few expenses, but it will always be worth it when you reduce your debt.
- Use your credit card’s interest for your potential benefit – From a credit point of view, credit card rates are generally lower than the interest rates on personal loans. The interest fees offered are based on your risk profile. A credit card might come at a lower interest cost than a personal loan on the off chance you need to apply for credit.
FASTA is an advanced digital lending fintech that has collaborated with Mastercard to dispatch FASTACard. This is South Africa’s first ever virtual credit card. FASTACard allows South Africans to have access to instant credit that is loaded onto a digital card that you can use for purchases in-store and also online. This virtual card will assist with fulfilling the needs of cash-strapped consumers who are progressively looking for ‘no contact’ digital payment options in the wake of the pandemic.
A registered and authorized credit provider, FASTA offers South Africans a minimal expense financing facility by using a high-level risk-based decision device to grant credit quickly while guaranteeing affordability. Upheld by Standard Bank and Tutuka, the virtual card replaces plastic credit cards and can also be used wherever Mastercard is acknowledged. It can likewise be added to your most loved apps like Netflix and Uber. To pay for your purchases, FASTA cardholders get a 16-digit card number, expiry date, and CVV code, which they can use similarly as they would with an actual card.
For in-store purchases, you can load your FASTACard into Samsung Pay or any other Masterpass-enabled digital wallet that is accessible from all of the major banks, including SnapScan and VodaPay. When your digital card has been loaded, you as the cardholder can use your cell phone to Scan a QR code shown at checkout at more than 200,000 retailers and billers that acknowledge Masterpass payments in South Africa.
Consumers can apply for a FASTACard at the checkout of participating online retailers by choosing FASTA as their payment option or by going to Fasta.co.za. The self-service online application process is quick and secure, requiring only your South African ID number and consent to access your transactional banking details without requesting any documents. That said, applicants must be 18 years or older with a regular, verifiable income.
Consumers can choose their credit limit up to R8, 000 and a reimbursement plan with up to three installments paid during four months. In no time, the credit application is approved, and consumers are sent a virtual card. Cardholders can check their balance and also reload their card when they reach their credit limit using the Fasta site. FASTACard is only valid for three years from when you receive your card.