What your bank manager knows, but won’t tell you, about credit cards

I’m a bit sceptical about whether engaging on Twitter is worth the time that goes into building a base of followers and tracking what everyone is saying. Occasionally, though, Twitter has great value as a tool for making contact with potential news sources and building new contacts.

Recently, I interviewed two people I reconnected with through  Twitter for a magazine article on the rules of social media etiquette (that piece is available in the “Recently published” section of my blog). And, last week, I was able to use great information tweeted to me by my newest Twitter friend, Thulani Shabalala of KZN, in a column for Biznewz.com (see below).

Thulani (@Thulani12) was very generous in sharing information about how he uses his credit card so that he makes money out of it, rather than giving the bank the opportunity to generate huge amounts of interest on his back. Thulani’s tips reminded me of advice I received from the editor who gave me my break in financial journalism as assistant editor of South Africa’s first consumer finance magazine, Personal Finance.

That editor’s name is Bruce Cameron. He’s not related to me, though we do have lots in common, starting with our love of investigative journalism.

I learnt a lot in my 18 months working with Bruce – not least of all how to put a high quality consumer magazine together from scratch and then get it distributed to relevant audiences around a country. Bruce also gave me great insights into money management and investing, as you will see in this column.Unknown

Top credit card tips: Lessons at the foot of the Personal Finance master

by  on October 25, 2013 in Thought Leaders
My new Twitter buddy, I have discovered, has smart money moves like the editor who first hired me as a personal finance journalist: he plays very clever games with credit cards. For more on the details about how these two maximise their salaries and keep short-term debt to a minimum, scroll down.First, though, let me introduce Thulani Shabalala (@Thulani12), who caught my eye on Twitter because his profile revealed we have some similarities: like me he is a social golfer with a 36 handicap – and not ashamed to admit it!  He is also interested in investing and personal finance issues.Thulani and I agreed to have a (slow) game of golf some time when we’re in the same city. In the meantime, he was very quick to offer some money advice when I put out a tweet asking for contributions for a follow-up to this piece: Five of the best money tips I’ve ever heard, some in strangest of places.Thanks for the excellent credit card suggestions, Thulani. I’ve added them to the list. – JC
 By Jackie Cameron
On my first day of work as a personal finance journalist some years back, my editor asked me

Thulani Shabalala

Thulani Shabalala

which credit card I had.

I was quite pleased to announce that I, in fact, didn’t have a credit card and preferred to live within my means and generally tried not to exceed the bounds of a current account overdraft facility.

He, on the other hand, was visibly appalled. You can’t be a personal finance journalist and not have a credit card, he admonished, no doubt wondering why he hadn’t asked me this question in the interview.

My editor immediately put through a call to his personal banker, who arrived later that day armed with application forms. And, shortly after that, a credit card with an enormous facility – far more than I could repay with at least three salary cheques – arrived.

It must be said: few people can move bank managers from their seats and into an office as fast as that particular editor could. Now retired, he was the ultimate news hound, getting his teeth into the proverbial jugular of anyone who wasn’t squarely on the side of the consumer in his columns.

So, don’t expect to find it as easy as I did to sign up for my first credit card. Or to be granted such an enormous credit facility. I have no doubt the bank’s generosity was linked to the public might of my former boss (yes, we share the same surname; no, he’s not related).

But do aim to get a credit card as soon as you can. You don’t have to use it; but you will find it a much cheaper form of debt, unless you’re borrowing, for free, from a friend or family member.

Signing up for that shiny piece of plastic wasn’t the end of my credit card discussions in the editor’s office. I was tasked with figuring out how to use the thing in a way that maximised my personal finances – and then writing about it so that others could benefit from my experiences.

I will always be grateful to that editor for introducing me to credit cards.

Please remember this: a credit card is a wonderful tool if you manage it the right way. But if you make a mistake, it can be very costly.

There is a dark side to a credit card and that is the budget facility. Never use it if you can possibly help it.

If you owe money through your budget facility, start clearing this as soon as you can. The interest rate is nasty and the instalments will wear you down.

If you don’t keep up with your repayments, you can easily generate a poor credit history. That, in turn, will mean the bank manager is likely to show you the door next time you ask for a loan, for example if you want to buy property or a car.

On the other hand, consider emulating my Twitter friend Thulani Shabalala (@Thulani12), who believes in maximising income by temporarily placing the bulk of it in an interest-bearing account, or in your home loan to reduce interest.

Then use your credit card for most of your spending before repaying your credit card in full by the “payment due” date. Don’t go wild on the shopping though; stick to a budget as you would if you were using cash, taking care not to spend more than you earn.

Thulani says you should only be using up to the equivalent of your “disposable money” on your credit card, and says this is money after fixed costs like bond and car instalments.

He juggles his cash in a way that he does not get hit by interest.

“Most credit cards have the 55-day interest free period, or roughly 25 days from the close of cycle). I delay the credit card payment until about three days before the end of the interest free period,” he says.

“The goal is to not use more than 90% of the daily account limit. My spending fluctuates monthly.”

Thulani has a second credit card, which he only uses in emergencies. After he has used that card, he aims to pay that debt off quickly –  in less than three months. He reduces his spending on his regular credit card for his disposable income in order to “settle the emergency card to avoid paying too much interest”.

Shop around for credit cards with low debit interest rates and no annual fees. “Here in South Africa, I personally think the Virgin Money credit card fits these requirements,” adds Thulani.

Write to jackiecameron.uk@gmail.com

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