Credit Card Budget Facility

[TMoose]

Hey guys,

I actually feel a bit stupid posting this. I've never used the budget facility on my credit card, so I don't really understand how it works and searches around the Internet have produced nothing.

No speeches about how evil debt is, I think we all know that. I want to understand how it works.

If you have a straight limit of R1000, and you buy something for R800 on straight then you have R200 left to spend on your card.

If you have a budget limit of R1000, and you buy something for R800 over 12 months and the repayment is R84, how does it affect your balance? Do you still only have R200 left? If so, how is the budget facility different from normal credit?

 

[RazedInBlack]

I think you can only buy on budget if the item or purchase is R300 or over. I paid off my CC long time ago so this might have changed I'm not sure.

Also, they charge you interest, so you have to factor that in as well when you do your calculations.

 

[hashbrown99]

Hey guys,

I actually feel a bit stupid posting this. I've never used the budget facility on my credit card, so I don't really understand how it works and searches around the Internet have produced nothing.

No speeches about how evil debt is, I think we all know that. I want to understand how it works.

If you have a straight limit of R1000, and you buy something for R800 on straight then you have R200 left to spend on your card.

If you have a budget limit of R1000, and you buy something for R800 over 12 months and the repayment is R84, how does it affect your balance? Do you still only have R200 left? If so, how is the budget facility different from normal credit?

You will still only have R200 left on your budget. The difference between budget and straight is that you can select a repayment period of between 6-60 months. Also some cards have only one credit limit which you can use anyway you see fit i.e budget or straight transactions

 

[Chaos247]

Hey guys,

I actually feel a bit stupid posting this. I've never used the budget facility on my credit card, so I don't really understand how it works and searches around the Internet have produced nothing.

No speeches about how evil debt is, I think we all know that. I want to understand how it works.

If you have a straight limit of R1000, and you buy something for R800 on straight then you have R200 left to spend on your card.

If you have a budget limit of R1000, and you buy something for R800 over 12 months and the repayment is R84, how does it affect your balance? Do you still only have R200 left? If so, how is the budget facility different from normal credit?

lets start here. say you have R1000.00 on your straight and R1000.00 on budget as limits.

If you make a purchase for R800 on budget you would use the following formula to calculate the interest and repayment amonunt.
FORMULA (PURCHASE AMOUNT x PERIOD x INTEREST RATE) / 365

So lets say you have used your budget and your installment is R84.00 a month.

When your credit card bills for the moth, you need to ensure that you have atleast R84.00 on your straight facility in order to accomadate the budget facility installment.

What i mean is that when the statement bills, the budget installment gets moved to the straight facility. They take 5%(depending on the bank) of whats owing on your straight facility and add it to the budget installment. Next comes any interest and service fees, this becomes you minimum payment for the month. So you cant max out your straight facility every month. They will charge you penalty fees for going over the limit.

this was just an overview. if you have specific question, i'll try and help.

 

[wikk3d88]

Hey guys,

I actually feel a bit stupid posting this. I've never used the budget facility on my credit card, so I don't really understand how it works and searches around the Internet have produced nothing.

No speeches about how evil debt is, I think we all know that. I want to understand how it works.

If you have a straight limit of R1000, and you buy something for R800 on straight then you have R200 left to spend on your card.

If you have a budget limit of R1000, and you buy something for R800 over 12 months and the repayment is R84, how does it affect your balance? Do you still only have R200 left? If so, how is the budget facility different from normal credit?

just some advice

throw in a R100 into the cc every month, that way when you do make a purchase you can avoid the nasty charges and interest the banks like to throw at you

and its better to charge an item straight, using the budget facility is the bank's way of screwing you

 

[diabolus]

It's actually very simple:

You have 2 separate limits on your CC. There's a straight limit and a budget limit. You can ask the bank to adjust these limits to suit you, i.e. more straight or more budget. In the OP example, if you have R1k on straight and R1k on budget = you technically have R2k credit total, but you'll have to split your purchases if you want to fully max it out (R1k on straight and then R1k on budget).

Also note , even if you have a 20k straight limit and only a 1k budget limit, believe me your card will be declined if you try to put more than 1k on budget. Seems banks prefer giving you huge straight limits (or rather, that's the only limit they ever raise, i always have to ask them to adjust my budget limit)

If you bought something on budget, what happens is it dig into that budget limit (instead of your straight limit) . It will then deduct every month an amount from your straight account to "refill" your budget limit back to 0/full . It sometimes looks a little odd on your statement, because you will see the actual full amount going off (as if you bought it on straight) , but your straight limit won't be affected, and then they basically just move money in monthly increments from straight to budget

Note: "They" being the bank, the shop already got their money, you're not actually paying the shop in increments, you're paying the bank/your own account

With ABSA you can now actually pay your budget off "early" (settle budget) directly in internet banking if you feel you have enough in your account to do so (in the past you had to go into the bank to do this). I tend to do this, i.e. i buy something on 6 months budget, 3 months in i see i have extra cash and pay it off in one straight amount.

Now again, ABSA in the last year changed their online banking to show your account balances of your credit cards split into "Straight and Budget". So it will actually look like 2 accounts. Not sure the other banks do this. This obviously goes along with all the budget tools ABSA have available in their online banking [a year+ ago it was very obscure to find out what is going on with your budget account, now it is pretty clear] .


At the end of the day, a budget is actually like having a seperate credit card and you're paying it off with another credit card monthly. The only reason i ever use it is for cash flow reasons (so i still can purchase day-2-day stuff)

 

[Chaos247]

It's actually very simple:

You have 2 separate limits on your CC. There's a straight limit and a budget limit.
(You can ask the bank to adjust these limits to suit you, i.e. more straight or more budget)

If you bought something on budget, what happens is it dig into that budget limit you have and then deduct every month an amount from your straight account to "refill" your budget to 0 .

With ABSA you can now actually pay your budget off "early" (settle budget) in internet banking if you feel you have enough in your account to do so. I tend to do this, i.e. i buy something on 6 months budget, 3 months in i see i have extra cash and pay it off in one straight amount.

You can settle your budget early on any credit card. saves tons of interest.

 

[diabolus]

You can settle your budget early on any credit card. saves tons of interest.

Yea, what i meant was you can do it "instantly" online with ABSA (wasn't always the case). In the past i had to go into the bank to do it [or phone]. I'm not sure all banks have this "feature" in their online banking...

 

[Sensorei]

If you need to be considering the budget payment option on your credit card you clearly can't afford what you want to buy and should not buy it. Your parents should have taught you that lol. The interest you pay on budget makes whatever you are paying not worth the price anyway. Don't do it! Its designed for stupid people who can't realise they are being trapped. Its one way to never be rich. Do the math and you will be shocked dude!

 

[diabolus]

If you need to be considering the budget payment option on your credit card you clearly can't afford what you want to buy and should not buy it. Your parents should have taught you that lol. The interest you pay on budget makes whatever you are paying not worth the price anyway. Don't do it! Its designed for stupid people who can't realise they are being trapped. Its one way to never be rich. Do the math and you will be shocked dude!

It's actually no different than buying a car on a loan. If everyone always bought things they can afford, no one would "have" a car or a house before they retire. Budget is just on a smaller scale [instead of a 5 - 20 year loan, it's a 6-24 month loan].

You -could- theoretically just go to the bank and ask for a R10k loan instead and pay that off, might be better on the interest, but the concept is the same (get credit, pay it off, pay interest).

 

[milomak]

If you need to be considering the budget payment option on your credit card you clearly can't afford what you want to buy and should not buy it. Your parents should have taught you that lol. The interest you pay on budget makes whatever you are paying not worth the price anyway. Don't do it! Its designed for stupid people who can't realise they are being trapped. Its one way to never be rich. Do the math and you will be shocked dude!

the same could be said of anything you buy using your credit card where you have not first deposited the purchase price into your credit card before buying the item.

 

[Paul_S]

It's actually no different than buying a car on a loan. If everyone always bought things they can afford, no one would "have" a car or a house before they retire. Budget is just on a smaller scale [instead of a 5 - 20 year loan, it's a 6-24 month loan].

Financing a house and car on credit is understandable because it takes years to build up capital.
However if you're squeezing your credit card every month then you're living beyond your means and you're on a slippery slope IMO.

 

[diabolus]

Financing a house and car on credit is understandable because it takes years to build up capital.
However if you're squeezing your credit card every month then you're living beyond your means and you're on a slippery slope IMO.

Well of course, i wouldn't recommend this being a habit, but budget is -perfect- for that unexpected doctor bill or car repair that's hitting you for R10k (and you know if you pay for it cash, you might not be able to pay for things like groceries that month). People seem to assume everyone is using this to buy that Plasma TV [some are of course], but quite often it's for things that is not considered "wait till i can afford it" stuff.

 

[Sensorei]

the same could be said of anything you buy using your credit card where you have not first deposited the purchase price into your credit card before buying the item.

I don't buy anything I can't afford to buy with cash and that's why I actually have a nice cash savings. People living off credit cards are the ones with a 0 balance come pay day. If you can't afford to pay cash then you can't afford it. Obviously its different if its a car or house (where interest rates are low anyway). If you buy something with a credit card because you don't have the money you are just keeping yourself in debt and good luck with being rich one day, it won't happen.

 

[Sensorei]

Well of course, i wouldn't recommend this being a habit, but budget is -perfect- for that unexpected doctor bill or car repair that's hitting you for R10k (and you know if you pay for it cash, you might not be able to pay for things like groceries that month). People seem to assume everyone is using this to buy that Plasma TV [some are of course], but quite often it's for things that is not considered "wait till i can afford it" stuff.

That's what medical aid and insurance is there for

 

[diabolus]

That's what medical aid and insurance is there for

Yes, that doesn't quite fall under "unexpected not covered" expenses. I can't remember being able to replace tires (R1k a pop) under insurance or medical aid. Sure i can go "oh i can't afford new tires, i must save 4 months" ...however traffic department and general road safety will not agree with this viewpoint.

 

[Paul_S]

Yes, that doesn't quite fall under "unexpected not covered" expenses. I can't remember being able to replace tires (R1k a pop) under insurance or medical aid. Sure i can go "oh i can't afford new tires, i must save 4 months" ...however traffic department and general road safety will not agree with this viewpoint.

Well there is the problem - like most South Africans you're not saving.
Wear and tear on you car is not an "unexpected expense" - it's something you should work into your budget and set aside/save for when you need it.

I put about R500 per month aside for wear and tear and unexpected maintenance for my car. That way when I need to replace tires or something breaks I don't have to dig into my credit card.
I have to say no to extra trips to the movies and only eat out once or twice a month but at the end of the day I'm not living off my credit card.

 

[JustinB]

Well there is the problem - like most South Africans you're not saving.
Wear and tear on you car is not an "unexpected expense" - it's something you should work into your budget and set aside/save for when you need it.

I put about R500 per month aside for wear and tear and unexpected maintenance for my car. That way when I need to replace tires or something breaks I don't have to dig into my credit card.
I have to say no to extra trips to the movies and only eat out once or twice a month but at the end of the day I'm not living off my credit card.

OR you could use your credit card during the month and settle at the end and not incur interest... and earn ebucks or airmiles etc

 

[PhreeMe]

Not sure about the other institutes, but Standard gives you a 55 day interest free period. I just got a CC (always believed in paying cash) as it actually helps me out. Instead of having to fork out one lump sum that would heavily dent my balance (Im focused on maintaining a certain 'minimum' limit), I can split it up over roughly 2 months giving a little reprieve.

 

[LaPrinsipessa]

Well there is the problem - like most South Africans you're not saving.
Wear and tear on you car is not an "unexpected expense" - it's something you should work into your budget and set aside/save for when you need it.

I put about R500 per month aside for wear and tear and unexpected maintenance for my car. That way when I need to replace tires or something breaks I don't have to dig into my credit card.
I have to say no to extra trips to the movies and only eat out once or twice a month but at the end of the day I'm not living off my credit card.

Didn't the OP say "no debt is evil speeches"?

Seriously man, I fell pregnant (unexpectantly, have been married nine years, and on the pill, with NO intention of EVER having kids) and suddelnly their were new expenses I did not budget for, my monthly budget was stretched to it's limit as I took the change to invest in my future and go study (since my salary is around 5K a month), then in the last month my phone was stolen at gunpoint (access needed to be paid), my passenger mirror was driven of by a Taxi (Access on car insurance) and today an idiot (while I was driving RIGHT NEXT TO HIM) swerved out of the way for a truck that stopped suddenly, straight into me (again access needs to get paid and a deposit for the rental/courtesy car) My credit card is officially maxed out. I originally got it to save in because the interrest rates are so great. That money is now finished as well.

Please considder that everyone has different sircumstances before you judge.