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.

Article Image

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
work out loan affordability

work out loan affordability

Affordability is about how much money you have left after all your necessary expenses and financial obligations have been paid, which could be used to repay the loan you apply for.

Read More
travel better with your capitec credit card

travel better with your capitec credit card

Our credit card is your perfect travel partner, locally and abroad. Here are 5 ways it can help you bank better to live better.

Read More
The Credit Boot Camp part 3: Making good credit decisions

The Credit Boot Camp part 3: Making good credit decisions

In this instalment of The Credit Boot Camp, we’re going to talk about managing credit. As with anything in life, good habits are better than bad ones when it comes to debt.

Read More
The Credit Boot Camp part 9: 3 times you could say yes to more debt

The Credit Boot Camp part 9: 3 times you could say yes to more debt

We don’t like talking about our financial responsibilities, especially when it comes to debt. But, what if we told you there are certain instances when you should say yes to more debt? Intrigued? Read on.

Read More
View All Other Articles