Save money by using my credit card?! With the various clever ways that credit card issuers are able to haul money out of card holders, you might say that saving money by using your credit card is an oxymoron. You might even go on to add that the poor interest rates that prevail on positive credit card balances, make using a credit card as a savings instrument a very bad idea. Well, you are right on both counts.

Fortunately there are two areas where you can achieve some savings: Interest rates and fees. With a bit of effort and a good old dollop of fiscal self-discipline, chances are that you should reap your reward in the end.

Find a Low Interest Credit Card

Interest rates vary greatly from one card issuer to the next, and even between different credit cards from the same issuer. What is quite disconcerting is that very few people, when asked, know what the interest rates on their cards are, or even how much interest they are paying per month at the moment. If you discover that you are one of the unfortunate many who pay more than they should, you would do well to go shopping for a more competitive offer.

To give you an idea, if you are currently paying 24% on a R 10,000 credit card balance that you aim to settle within 24 months, you will be wasting at least R 600 more on interest than somebody who is paying down the same amount over the same period at a rate of 19%.

Although it is always a good thing to keep a hawk’s eye on interest rates, you shouldn’t forget to keep a vigilant watch on the grace period as well.

A grace period is the interval between the time you make a purchase and the time the credit card issuer starts calculating interest on the new purchase. Although the standard grace period is between 20 and 55 days, your credit card issuer could shorten this period or change the rules. If you are not aware of these changes, you could end up paying extra.

Making full use of this interest free period will help you to cut down on interest payments. Try to understand the calculation method on your credit card. There are variations, but the typical grace period works like this: You must pay off your monthly statement in full. If you do this, your new purchases will not be interest bearing until they appear in a subsequent statement.

If you have maintained a good credit rating, it should be easy for you to get approved for a new credit card. Try to find one that offers a low introductory rate on balance transfers. Once approved, take note of the duration of the introductory period. This is a low interest loan that settles your old balances so take good advantage of it. You will definitely save money on this. But, make sure you pay off the balance within the introductory period because if you don’t, you will get whacked with a very high interest rate.

Don’t use the low interest balance transfer credit card for new purchases. Leave it at home if you must. If you buy something with the card, any payments you make will be applied to the low interest balance first. This means that your new purchases will continue to accumulate compound interest charges, month after month, until the balances transferred have been settled in full. Rather use a different credit card for your day-to-day purchases and try very hard to pay each month’s bill in full.

As is the case with interest rates, there are only a few consumers who are really on top of their personal credit card fee situation. The difference these fees make can be substantial.

To prove the point, here is a comparison:

Virgin Money

• Annual Fees:
• Annual Service Fee: R 0
• Garage Card Fee: R 0
• Rewards Programme: R 0

• Penalty Fees:
• Late Payment: R 0
• Over-Limit: R 0

Standard Bank Achiever

• Annual Fees:
• Annual Service Fee: R 140
• Garage Card Fee: R 93
• BA Rewards Programme: R 160

• Late Payment:
• Late Payment: R 110
• Over-Limit: R 85

To put this in perspective: If you had to make one late payment and go over the limit once in a year, you could end up spending R 588.00 per year more on a basic fee-bearing credit card, such as the Achiever, than on a fee-free credit card, such as Virgin Money.

All these little bits add up in the end. You may be surprised at what it is you discover once you start scratching beneath the surface of your own credit card…