In recent years more South Africans have turned to credit cards to cover their day-to-day living expenses. This trend is particularly concerning given the country’s economic instability, high unemployment rates, and rising cost of living. While using a credit card can offer short-term relief, it poses significant financial risks if not utilised and used sparingly.

The Temptation Of Easy Credit

Credit cards offer the convenience of immediate access to funds, which can be tempting for those struggling to make ends meet. However, this ease of access often leads to overspending. Because credit cards can create an illusion of financial stability, many people end up spending more than they can afford to repay. Consequently, this habit can quickly spiral into a cycle of debt where individuals use new credit to pay off old debt leading to even higher monthly payments and extra costs.

Make Sure To Understand These Points Before Using Your Credit Card At Every Opportunity

1. Credit Cards Carry A High Cost

Credit cards typically come with high interest rates and fees, especially when balances are not paid in full each month. In South Africa the interest rates on credit card debt can exceed 20% which significantly increases the overall cost of living when used for daily expenses. 

Furthermore, late payment fees and penalties can quickly add up making it even harder to manage your finances. Although many banks offer interest-free periods, by relying on your credit card it is easy to exceed these timeframes and become liable for interest costs.

2. Falling Into A Debt Cycle Can Put Extreme Pressure On Your Finances

Using credit cards for everyday expenses can quickly lead to a vicious debt cycle. Initially it might seem convenient to charge purchases especially during financial shortfalls. However, by relying on dipping into your credit card each month, it becomes very difficult to break the habit. Before you know it, you are unable to make it through the month without using credit. 

If you miss credit card repayments, interest accrues on unpaid balances and monthly payments can escalate making it harder to pay off the principal. Consequently, relying on credit cards becomes a habit further increasing your overall debt level. Eventually, this cycle of borrowing to pay off previous debt traps individuals in a financial spiral that is difficult to escape causing long-term financial stress.

3. Owning A Credit Card Can Lead To Additional Forms Of Debt

Using credit cards for daily expenses can serve as a gateway to other, easily accessible forms of debt. Initially, it might seem manageable but as balances grow and interest accumulates the financial strain increases. 

Consequently, individuals may turn to payday loans or high-interest personal loans to cover their credit card payments compounding their debt problems. These quick-fix loans often come with exorbitant interest rates and fees leading to a dangerous cycle of borrowing and escalating debt ultimately jeopardizing financial stability.

4. A Lack Of Savings Puts You At Risk Of Needing To Use More Debt

When people rely on credit cards for everyday expenses, they often neglect to save money. This lack of savings can be particularly problematic in emergencies, such as sudden job loss or medical expenses. Without savings individuals are forced to rely even more on credit, further deepening their debt. Therefore, building an emergency fund should be a priority over-relying on credit.

Alternatives To Using Credit Cards For Living Expenses

• Use Debit Instead of Credit: Whenever possible use a debit card instead of a credit card. This ensures that you’re spending money you actually have helping you avoid accumulating debt.
• Create A Realistic Budget: Start by tracking your income and expenses to understand where your money is going. Allocate funds for necessities like rent, groceries, and utilities, and identify areas where you can cut back.
• Look For Additional Income Streams: Explore opportunities for additional income, such as selling old gadgets or part-time jobs. Extra income can help cover living expenses and reduce reliance on credit.
• Consider Debt Counseling: If you’re already struggling with debt seek professional advice. Vantage can help you develop a plan to manage and reduce your debt repayments to an affordable level. We offer a free financial assessment to assist tailor a plan suitable for you so you can have more disposable income.

Using credit cards to cover living expenses is a risky strategy especially in the context of South Africa’s challenging economic environment. High interest rates, the potential for debt accumulation, and the psychological burden of debt stress make this approach unsustainable. 

By adopting healthier financial habits such as budgeting, saving, and seeking professional advice consumers can achieve greater financial stability and reduce their reliance on credit. The key to financial health is living within your means and planning for the future.