Picture: Robert Tshabalala. © Financial Mail

STAY out of trouble by paying back your balance on time, writes Brendan Peacock

Credit cards can come in handy to deal with unexpected financial challenges, provided they are used sparingly and you are able to pay off the debt before it spirals out of control.

Here are some tips for getting the most out of your plastic helper:

If you pay back your outstanding balance on purchases within a certain number of days stipulated by your bank it is interest-free, said Arnold Dippenaar, head of personal markets unsecured lending and credit card at Standard Bank;

In some situations, using a credit card can be much better than taking out a loan for the same amount.

Credit ombudsman Manie van Schalkwyk said where buying things on a credit card may involve interest of up to 21%, taking out a short-term loan can cost you up to 60% interest.

"That means if you're borrowing to buy a R1000 gift, at the end of the first month the amount owing is not just the R1000, but with the costs and interest, it can already be as much as R1257 - excluding any insurance fees."

Dippenaar said that being responsible in managing your financial affairs and ensuring your personal budget could cope with any repayment obligations meant that you kept a healthy credit record and it allowed you to cover other financial obligations.

Making repayments is not the only potential danger in using credit cards. Theft and fraud are, unfortunately, common, so to avoid some major unexpected damage to your bank balance, keep your card in a safe place.

Dippenaar issued a few golden rules. "Never let your card out of your sight. Also, your PIN should be your secret, so never write it down or tell it to anyone.

Check your statements regularly so you can identify any unauthorised transactions on your account as soon as possible. If you discover any, contact your bank's fraud centre immediately."

He said it was a good idea to notify your bank if you were travelling overseas during the holidays, in case they needed to contact you or suddenly found withdrawals from your account from a foreign location.

The benefit of using a credit card to book overseas flights is that you get automatic travel insurance thrown in, along with various options to top up that insurance.

Don't forget to check the expiry date on your card before you leave, though. "Make sure your card will not expire while you are in another country.

If it is close to expiry, you will also need to provide for time for the new card to be delivered to you before leaving on your holiday.

"Also, check your current credit card limit to ensure that you are able to fund your trip, and should you need a limit increase, contact your bank," suggested Dippenaar.

"The same rules for keeping your credit card safe apply overseas as they do in South Africa: never let your card out of your sight and be cautious when inputting your PIN, so that no-one can see what the number is."

A further hint from Dippenaar is to enter the full five digits of your PIN for your credit card - if yours has five - even if foreign machines only seem to provide space for four.

"Most overseas ATMs and point-of-sale devices require only a four-digit PIN when using these machines, but to ensure the transaction is not declined, remember to use your full five-digit PIN on your credit card when withdrawing money overseas."

If you don't draw cash from ATMs in South Africa using your credit card, chances are you may have forgotten your PIN. Don't get caught standing in front of a foreign ATM trying to remember it. Memorise it before you leave.

Also make sure you have your bank's emergency contact details written down and in your wallet in case your card is lost or stolen. Dippenaar said emergency cash assistance could usually be made and replacement cards even issued.

*This article was first published in Sunday Times: Money & Careers