Bank Better, Live Better

what credit's right for you?

Knowing the difference betweenthe types of credit available will help you make the best credit decision for your needs.

Different types of credit

  • Short-term: You have to pay it back within a few days or months
  • Long-term: You pay it back over a longer period such as 2 – 5 years

3 categories of credit

  • Revolving (such as a credit card)
  • Instalment (such as a term loan)
  • Open (such as a credit facility)

1. Revolving (credit card)

  • You pay interest only on the amount you use
  • You get approved for a set amount (your credit limit)

Why do I need it?

  • Revolving credit is good for taking care of unplanned expenses that may need more money than you have in your emergency savings fund
  • You can earn more interest on your transaction account by keeping your money in it for longer, using your credit card for your daily purchases, and paying it off at the end of every month

How to repay your credit card

  • Minimum payment: Normally 5% of the outstanding balance. You repay a lower amount per month but it takes longer to repay the total outstanding balance, which costs you more in the long run
  • Full balance: You pay the outstanding balance in full every month, so there’s no extra interest on the balance

Tip: Only use your credit card if you know you’ll have the money to pay it off.

2. Instalment (term loan)

  • Achieve a financial goal now and then pay it off, such as buying a car, starting a business or renovating your home

Why do I need it?

  • If you have some money saved towards your dream but not yet enough, a loan can make up the difference

How to repay your term loan

  • Use a debit order to make it easier to keep track of all your payments. Make sure you keep enough money in your account to repay any debit orders you have
  • Make extra payments into your term loan whenever you can. This will help you pay it off quicker, reducing the amount of interest you pay over the term

3. Open (credit facility)

  • There are no monthly instalments
  • The balance must be paid in full every month

Why do I need it?

  • If you don’t have a credit card but need access to money for an unexpected expense

How to repay your credit facility

  • Use a debit order. The full amount will be repaid every month

Was this article helpful?

you may also like...

View All Other Articles View All
the one cost you can avoid this festive season

the one cost you can avoid this festive season

The festive season is known to stretch everyone’s bank accounts. The 55 day interest-free period on our credit card can help you prevent a financial hangover in January.

Read More
live better with our credit card

live better with our credit card

You get access to all your accounts and a credit limit of up to R250 000.

Read More
the only way to hack Black Friday 2019

the only way to hack Black Friday 2019

If you plan to make this year’s mega shopping event a solution rather than a problem, there’s only one way to do it…

Read More
using your credit card

using your credit card

Your credit card gives you more ways to get what you need. Use it for everyday purchases and online shopping.

Read More
View All Other Articles