Bank Better, Live Better

reduce the cost of credit

Managing your monthly credit commitments doesn’t have to come at a high price. There are small, easy steps you can take to reduce the cost of credit; saving you money!

The 7 tips below will help you to reduce the cost of your credit the smart and easy way. For more info you can also download our free Good for Credit booklet.


1. Choose a short repayment period

A longer repayment period allows for a lower monthly instalment, but because of the interest charged, you’ll end up paying more overall. Choose the shortest term that you can afford to repay.

Tip: Use our credit calculator to see how much you need and the length of time you need to repay it. 


2. Look at how much interest will you pay

A low interest rate doesn’t necessarily mean it’s the best deal. Consider all the factors, look at the interest charged over the whole credit term. Paying a lower interest rate over a longer term doesn’t necessarily mean that you’re getting the best deal. Weigh the interest charged over a shorter term with that of a lower interest rate charged over a longer term.

Tip: If you’re planning on applying for credit, here are the numbers you’ll need to know


3. Pay more than the minimum amount due

Try to pay a little more than your monthly instalment. It doesn’t have to be a large amount, even a small extra amount makes a difference. Credit is expensive, with the interest charged on credit contributing to the overall cost. By paying more than the instalment amount, you pay off the interest quicker and bring down the capital balance (the original amount borrowed before interest is applied).


4. Don’t skip a payment

Contact your credit provider and make a payment arrangement if you are unable to meet the agreed monthly repayment. If you skip a payment, it’s recorded at the credit bureaus. This could give you a bad payment profile, affecting your future credit applications. It could also mean that you’ll be charged higher interest rates on future credit applications from all credit providers.

Tip: Choose to repay your credit with a monthly debit or stop order. You don’t need to remember to pay your instalments, and will avoid late payment fees.


5. Pay on time

Always pay your credit instalment on or before the due date to avoid additional charges. Paying late affects your credit rating negatively, and interest or penalty fees may also be charged on overdue accounts, increasing the cost of your credit.


6. Reduce unnecessary credit limits

If you have a high credit limit, it’s likely you’ll end up using it. Re-evaluate all your credit limits, including your retail account cards. If you don’t need a high credit limit, have it reduced or close the account.

Read: How to build a strong credit history


7. Avoid being overinsured

When buying a car on credit, you must have it insured. The book value of your car depreciates annually. This means the resale value of your car decreases each year. Find out your car’s book value by using free online tools, asking a car dealership or contacting your insurance provider. Adjust your car insurance annually to reflect the lower book value – this will lower the insurance premium. Consider paying any insurance money that you’ll be saving into your vehicle loan.

Read: Questions to ask before you buy a car

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