A credit card acts as a revolving loan. If you are only paying off the minimum instalment required each month, it will take forever to settle the outstanding balance because the minimum instalment is only a fraction of the total amount you owe, and it reduces along with the outstanding balance.
This means you are mostly paying interest and very little capital. For example, if your credit card only requires a minimum instalment of 3% of the balance and your interest rate is 25%, it would take you around 25 years to pay off a R20 000 credit balance.
If there is a big-ticket item like a television or kitchen appliance that you decide to purchase on your credit card, then you should rather use the budget facility. If you select the budget facility on your credit card it acts like a term loan rather than a revolving loan.
You can select to pay off the item over three, six or twelve months and that instalment is shown as a separate item on your credit card statement. Although the same interest rate will apply, if you meet those budget repayments, your purchase will be fully paid off over the period you selected. This allows for better financial management.
Using your credit card’s budget facility would be preferable to taking those online loans that are often advertised on online shopping sites. Those loans will attract additional initiation and service fees. With your credit card there is no loan initiation fee and you are already paying the monthly service fee as part of the facility. But this only works for you if you select the budget option.
If you have to use credit, manage it responsibly.