Credit

Your credit history gives you access to obtain loans or to enter into financial contracts such as rental or telephones.

• If you default on a credit contract, you may get a bad credit rating.
• When your loan or finance applications are assessed, the finance or service company generally checks your credit rating.
• Any bad credit rating will make it difficult for you to borrow in future.
• Interest rates and loan fees can vary enormously depending on your credit rating. A bad credit rating may only make you eligible for high interest rate loans.
• If you are offered additional credit, for example on your credit card, only accept it is you have calculated that you can afford to use it and make the higher repayments involved.
• If you have bought goods and services on credit, for example using a credit card, make sure you understand your payment obligations and the fees and penalties involved if you face difficulties making repayments. If you are not sure, talk to your finance company or seek help from a financial counsellor. (see our help section).

Credit cards

• Compare interest rates and any fees charged, interest rates can vary from around 11% to as high as 35% and fees can vary enormously. There are fixed regular service fees and penalty fees.
• Get the best deal. If you have a bad credit rating, you may only be eligible for the high-interest card.
• Make at least the minimum monthly payment by the deadline, if you don't you will incur interest plus additional penalties.

Beware of a credit card advertised as "low rate for first-year". What are the penalties? When you are in debt after the first year, what will be the interest rate?

Another catch is, "no annual fees". What other fees such as monthly charges or membership fees will you have to pay?

If you are offered a credit limit increase on your card, do not accept automatically. Do you really need the extra credit? Can you afford additional repayments? Accepting such offers has started many people on the road to unmanageable debt.

TIPS

Limit yourself to one credit card only. Keep your monthly statements. Check if your balance is creeping up. If so, it is a danger signal.

If you want the convenience of credit card payments but don't want debts, get a debit card instead.

DO NOT use credit cards to pay other bills and debts Do you need HELP with sorting out your credit?

If you are having trouble managing your credit card debts, talk to a financial counsellor, contact numbers can be found in our help section.