Using your credit and debit cards more efficiently can save you a lot if you get to understand them a whole lot better.

Debit Cards                                                                                                                

Debit cards are linked directly to your bank account. So when used to buy something
the money is immediately debited off the balance in your account. Pretty useful for those who are weiry of overspending during the month.

Credit Cards                                                                                                              

Credit cards work a bit differently. The bank allows you a limit to use the card for during the month. However, you need to pay back the amount owing at the end of the month otherwise you pay around 20% interest on the balance. The bank gives you around 3 weeks from statement date to make this payment before it levies the interest. So you need to be aware of the balance and make your payment in time to avoid the costs.

At the outset it appears that debit cards are the way to go. Less hassle as you are spending your money and don’t need to worry about getting into a debt which costs you interest.

If you planned your month more carefully setting aside an amount of money which you intend to use then you should use your credit card for all transactions, saving you a fortune in transaction fees. Come the end of the month you have the money set aside to settle the balance and avoid the interest.

So the outcome of using a credit card wisely is that you are using the banks money free of charge. You can get extra mileage if you keep the money in your access bond or a interest bearing bank account. You could get even more savvy by linking these accounts to your internet banking profile so that you can keep an eye on the credit card balance and transfer the balance immediately when you need to.

Understanding the way these cards work can turn the costs into a benefit…..

Assume you make 20 transactions on your debit card in a month. You pay R4 per transaction which amounts to R80. Using your credit card will save you this R80. If you have a spend of R10 000 in a month and keep this in your bond @ 10% then you receive and extra R80. You then have made R160 for the month. If you reinvest this earning say 5% then you will have R10894 after 5 years.

So getting savvy with your cards can make a difference if you really set your mind to it. It takes focus and discipline.