With reports consistently highlighting challenges regarding debt management, particularly credit card debt in Jamaica, to include poor usage and limited knowledge and understanding of how credit cards work, Rose Miller, financial education consultant with the JN Foundation, has issued a call for consumers to take these critical steps before getting a credit card.
Mrs Miller said although credit cards offer convenience, security and opportunities to build credit history, there are key factors to consider to help users make more informed decisions and manage credit effectively.
Establish the Reason for Acquiring the Card
She said before obtaining a credit card, individuals should first determine the intended purpose or purposes for acquiring the card. This approach, she explained, helps ensure that persons will select a card that aligns with their specific needs, emphasising that common reasons for getting a credit card include building credit history, managing cash flow, earning rewards or cashback, and accessing funds for emergencies.
Assess Your Eligibility
Mrs Miller said it is also important for consumers to carry out their own self-assessment to see whether they meet the specific criteria outlined by financial institutions for credit card applicants.
“While requirements may vary across financial institutions, meeting the basic criteria before applying significantly improves your chances of approval. For example, you will want to ensure you meet the minimum age requirement and have a stable income to demonstrate your ability to repay. Many institutions also assess your credit score, determined by your overall financial behaviour, so if you know you have significant debt and you are delinquent, that will likely impact your chances” she shared.
Understand Fees and Rates
The financial education consultant said each institution will likely have unique offerings and recommended looking for online reviews and details on fees and rates.
“Research and read all terms and conditions carefully to understand all associated costs,” she advised, pointing to some of the costs that consumers need to be aware of. These include interest rates, annual, foreign transaction and late payment fees, as well as cash advance fees.
Know the Credit Limit
She also encouraged individuals to familiarise themselves with their credit limit, the maximum amount they are allowed to charge using their credit card. She also advised keeping credit usage low to help maintain a healthy credit score.
“Consistently high credit usage may negatively impact your creditworthiness over time, since it can signal financial strain to lenders,” she explained.
Evaluate Rewards and Benefits
Mrs Miller advised consumers to carefully evaluate whether a credit card reward programme aligns with their spending habits. She said several credit cards are designed for local needs, with benefits such as discounts with partner merchants and cashback on everyday expenses.
She encouraged comparing cards to ensure the rewards offered are relevant and beneficial. However, she cautioned that “while rewards can be enticing, your spending should always remain within your budget. It’s not wise to overspend just to earn points or cashback.”
Learn How to Manage Your Card Responsibly
According to Mrs Miller, a credit card can be a valuable financial tool when managed wisely. She highlighted several tips for effective management, including paying off the outstanding balance in full and on time each month to avoid interest charges, setting up alerts through mobile banking or other apps to ensure payment deadlines are met, and regularly monitoring statements to catch unauthorised transactions or errors.
“By establishing the purpose for applying for the card, researching your options, and managing your card responsibly, you can enjoy the benefits without falling into debt,” she said. “A credit card is a good instrument to have, it can help save time, money and build credit. But how you use it is critical. It requires discipline and careful planning to ensure you enjoy the benefits and avoid the many pitfalls which can lead to it becoming a financial burden.”
