Mid this year, Absa Bank unveiled Buy Now Lipa Later, a financial offering in which credit card holders can purchase items and pay via structured repayment plans spanning from three to 12 months. This is quite a timely offering at a time when the economy is getting tougher on Kenyans, and yet we still need to make purchases. Instalment payments ease the financial strain on customers, enabling them to purchase desired items without compromising on their budgets.
Not too long ago, credit cards sounded like a distant financial facility that was only for a select few. Cards have, however, been demystified to some extent over the years, though the perception that they are only for the wealthy is still out there. The truth is that as much as some healthy financial status is required to use them, they are accessible to people with various income levels.
This is where the bank comes in to evaluate the financial positions of those wishing to use them and advise on credit levels. This way, more customers can enjoy the convenience, purchasing power and financial flexibility that they offer. Cards also come with security of finances, rewards like cash back and redeemable points, and in the case of Absa’s Buy Now Pay Later facility, a solution for unplanned emergencies like hospital bills.
Credit cards have many benefits. But like every other good thing, credit can be a pitfall if not used within the confines of strict financial discipline.
Improper use of credit cards can lead to a debt spiral that can be difficult to escape. In many unfortunate instances, people have been known to spiral into debt and this has often given cards a bad rap. But cards in themselves are not the problem, rather lack of adequate knowledge on how to use them, misuse of what looks like easy money, and ultimately lack of financial discipline in repayments.
So, what can one do to make the best of credit card use?
Since credit card trouble boils down to delayed payments or nonpayment, it follows that one of the best things an individual can do to have a successful journey with them is to pay their balances in full and on time. This is the golden rule of responsible credit card use and is a sure route towards a smooth run and a good credit score with the bank.
Work on a budget
Fit your purchases and monthly card repayments within a budget as a sure way to seamlessly meet your monthly obligations. Budgets cushion us from overspending and helps us define our financial goals and life milestones and follow through.
Limit the number of credit cards
Having multiple cards increases the risk of accumulating debt especially for individuals struggling with financial discipline. It would be more prudent to stick to one or very few cards and space out purchases within comfortable timelines.
Live within your means
This is for general financial wellbeing and not specifically for cards. It earns a mention here because cards can be a sure gateway to stepping out of our financial boundaries and not aligning our expenses with our incomes. Living within your means is freedom from constant anxiety and stress, and a route to long-term financial security.
Take advantage of sales
One of my favourite features of Absa’s Buy Now Pay Later offering is that I can take advantage of massive annual or anniversary sales from outlets. These often come and pass people by because at the time they are running, funds are not available. But with credit, we can take advantage, jaza our houses with electronics and continue paying long after the sale windows have closed.