Choose your card based on a preferred feature
Before you choose your next credit card, it’s important to assess your finances and pinpoint what you’re seeking. Is it rewards? Miles? Low rates? All of these matter greatly.
5 credit cards for low credit scores in South Africa
It's totally possible to have a great credit card even with a bad credit score and we can prove it! Check out our list below and learn more!
But you don’t have to sift through the options to find the best deal—we are here to help. Read on to learn the nuances behind credit cards and find the one that’s tailor-made for you!
How do credit cards work?
Firstly, a credit card provides a line of credit from a bank, allowing you to spend now and pay later. It’s a convenient financial tool for managing purchases and cash flow.
When you use a card, it’s the bank that covers the costs of your transactions. You then repay the bank, in full or in installments, often with interest if not paid in full.
Understanding interest and fees is essential before you choose a credit card. These are costs for borrowing and can vary based on your repayment habits and creditworthiness.
Lastly, credit cards contribute to building your score. Consistent and mindful use, including on-time payments, influences your credit history, which is crucial for future financial needs.
Credit card glossary
The world of credit cards can be incredibly confusing, especially when dealing with all the different rates, fees, terms, and conditions.
Understanding these terms is crucial in making informed decisions.
Here, we’ll demystify key concepts, helping you confidently choose the right credit card for your needs.
Credit limit
First and foremost, your credit limit is the maximum amount you’re allowed to use on your credit card.
It’s determined by your creditworthiness and financial status in South Africa.
Deciding on a credit card involves understanding and respecting your credit limit. It’s imperative to manage spending within this limit for a healthy financial life.
Minimum payment
Your credit card’s minimum payment is the lowest monthly payment you can make on your bill. Paying just this amount usually leads to more interest.
Consequently, paying more than the minimum helps reduce interest accumulation. It’s a strategic move for those aiming to manage their credit effectively.
Monthly fee
A monthly fee is a regular charge for your credit card. It includes various services and perks like reward schemes or security features.
Thus, when you choose a credit card, examine the monthly fee. It’s a crucial factor in assessing the card’s overall cost and suitability for your budget.
Initiation fee
An initiation fee is a one-off charge for opening a credit card account. It’s essentially the cost of processing your application.
Therefore, while selecting a credit card, inquire about the initiation fee. Some financial institutions may offer to waive this fee, increasing the card’s appeal.
Interest rates
Lastly, interest rates are what you’re charged for borrowing through your credit card. The lower the rate, the less you’ll pay over time for any borrowed funds.
Hence, when you choose a credit card, an important step is to compare interest rates. Opting for a card with a lower rate can lead to significant savings.
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Types of credit cards
Recognizing the range of credit card options in South Africa is essential for aligning your choice with your financial goals, spending habits, and lifestyle.
Each type offers unique features and benefits, catering to diverse needs. Now, let’s delve into the assortment of credit cards available in the country:
- Standard Credit Cards: These are basic credit cards offering essential functions like making purchases. They typically have lower credit limits and fewer perks.
- Rewards Credit Cards: Designed for those who want to earn rewards on their spending. These cards offer points, cashback, or other incentives.
- Low-Interest Credit Cards: Best suited for those who carry a balance from month to month. These cards offer lower interest rates, reducing the cost of borrowing.
- Balance Transfer Credit Cards: With these cards, you can move a balance from one card to another, often at a reduced interest rate.
- Travel Credit Cards: Designed for avid travelers, these cards usually come with perks such as miles, lounge access, and travel insurance.
- Student Credit Cards: Geared toward students, these cards typically come with modest credit limits and fundamental features, allowing students to establish credit.
- Business Credit Cards: Aimed at business owners and entrepreneurs, these cards often include features like higher credit limits and expense tracking.
It’s important to assess your personal or business financial needs and spending habits before deciding which type of card is the most suitable for you.
Can a credit card impact your credit score?
Undoubtedly, a credit card can have a substantial effect on your credit score.
Responsible use, like timely payments and low credit utilization, reflects positively on your financial habits.
So when you choose a credit card that aligns with your lifestyle, consider its influence on your credit history. Using it with care can improve your creditworthiness.
Conversely, irresponsible use of a credit card, such as overspending or late payments, can harm your credit score. Therefore, it’s essential to manage it carefully.
What are the requirements to apply for a credit card?
Understanding the requirements for a credit card application is a crucial step before you choose a credit card.
These prerequisites ensure that applicants are financially stable and capable of managing credit. Here’s a detailed overview of what’s needed to apply for a credit card:
- Age Requirement: Applicants must be at least 18 years old, the legal age for entering into financial agreements in South Africa.
- Stable Income: Proof of a regular income is required. This demonstrates the ability to repay any credit used. Applicants must submit recent payslips or bank statements.
- Good Credit History: Your credit history being positive is fundamental. It shows past responsible credit usage, making you a lower-risk borrower.
- South African ID or Valid Passport: A South African ID or, for foreigners, a valid passport is required for identification purposes.
- Proof of Residence: Applicants must provide recent proof of residence, like a utility bill or a lease agreement, to verify their living arrangements.
- Bank Account: A current bank account is typically required. This is where repayments will be drawn from and where the credit card will be linked.
- Additional Documentation: If self-employed, additional documentation such as a letter from an accountant or tax returns may be needed to verify income.
Meeting these requirements is the first step in the journey to acquiring a credit card, paving the way for responsible and beneficial credit usage.
How to make the most out of your credit card?
To maximize your credit card benefits, always pay more than the minimum amount due. This reduces interest and helps you maintain a healthy credit score.
Moreover, once you choose the credit card that’s right for you, take advantage of its rewards and cashback offers.
Use these perks for everyday purchases to earn more benefits.
Finally, make sure to review your credit card statements for any discrepancies regularly. Staying informed helps you manage expenses and spot unauthorized charges.
If you’re looking for suggestions, check the link below to discover how the African Bank Gold Credit Card can be an excellent choice for smart financial management!
African Bank Gold Credit Card: check out how to apply!
Apply for the African Bank Gold Credit Card! Access a card that offers basic credit services and 60 days with no interest rate!
5 credit cards for low credit scores in South Africa
People with bad credit can also have reward program cards and other perks. So we prepared a list of the best cards available for customers with credit scores below 618 points.
Find out some of the advantages of these cards
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