Most of us find it hard to imagine life without the credit cards we have become so accustomed to. Let’s face it, they make spending easy and eliminate the need to carry cash. Yet, for some of us, the convenience can cause problems in the long run.

According to the 2005/2006 South African Income and Expenditure Survey, the average value of outstanding debt on bank overdrafts and credit cards is around R16 000 for households with per capita income of between R4200 and R8400 per month. For households with a per capita income of more than R8400 per month, the corresponding amount is around R28 500.

When using credit cards, we are ultimately tempted to make indiscriminate and unnecessary purchases. This increases our debts and can have a serious impact on our long-term financial well-being. The ‘buy now pay later' attitude leads to punitive interest being accumulated if instalments are not paid in time. Yes, you can pay the minimum monthly instalment, but if you keep on spending, you will soon find yourself playing a catch-up game with high costs and an ever-increasing mountain of debt.

Tips to avoid common credit card pitfalls

So what can you do to avoid the pitfalls often associated with credit cards? Before reaching for the scissors, try to develop the following good habits when it comes to the using your credit card:

  • Keep a record of all credit card purchases and review these at the end of the month — identify purchases that were unnecessary and learn from your spur-of-the moment buying mistakes. Keeping the receipts in plain view also serves as a visual reminder of exactly how much you are spending on credit. Keeping record further avoids nasty surprises in the credit card statement at month-end.

  • Resist the urge to buy on impulse. If you are unsure of a purchase, take a 24-hour 'cooling off' period to consider the purchase and the impact it will have on your budget and savings in the long-run.

  • Start a disciplined savings or investment plan that automatically saves a portion of your salary every month. In this way, the money is saved before you are able to spend it.

You can get out of the red, but you need discipline and a plan

For those already entangled in the debt trap, you can get yourself out of the red but you will need to be disciplined and have a plan.

  • Stop uncontrolled spending immediately and stick to a budget.

  • Try to pay each month’s credit card bill on time and in full to avoid further accumulation of penalty charges, late payment fees, etc.

  • Dedicate a fixed portion of your salary to paying off credit cards and when you receive any extra income, like a bonus, first pay this towards your debt to take a substantial bite out of what you owe.

  • If you find temptation lurking in your wallet every time you go out shopping, consider cutting up your credit cards altogether. Not having the card within reach will make you reconsider the value and necessity of every purchase. When paying with cash, you will be far more aware of what your hard-earned money is being spent on. Somehow R500 in cash is harder to spend than R500 on credit.

While getting out of high credit card debt can be done, it won’t always be easy. The key is to remember that getting out of debt is a prerequisite to taking a firm hold of your finances and ensuring your future financial security. So next time you reach for your card when something catches your eye, stop and think.