Having to pay for an unexpected expense such as a funeral with a credit card is not ideal, but if you have no alternative, and you find yourself needing to do this on credit, one way to finance this is through a credit card.
Financing a funeral on credit
Having to finance a funeral with a credit card, there are a few things to consider. First, are you able to qualify for a credit card? To qualify you will need to be employed for no less than 3 months and depositing your salary or wages with a bank. You will also need to comply with the National Credit Act to qualify for credit. If you manage to get a credit card, your credit limit will be based on your credit or affordability profile. The interest rate will also be based on your affordability profile and banks interest fees range from 15 to 20%+.
The concern with paying for a funeral on your credit card, is compound interest. If you manage to get a credit card at an interest rate of 20% and have a credit limit of R20 000 (the average cost of a cremation or entry level funeral), you will be expected to pay back a minimum of R600 per month (3% of the outstanding debt, but this can vary), if this is all you can pay it will take you over 4 years with a total of nearly R30 000 paid back to the bank! That is the horrible effect of daily compounded interest.
Ideally the only time you want to get into credit card debt, is if it earns you rewards and you can pay within the interest free period, which is usually 55 days, but can vary. Also make sure that you do not withdraw any money from the credit card, as your interest owing will start with immediate effect and you will likely be charged a service fee for each withdrawal, so make sure you swipe only to get the 55-day interest free head start!
Emergencies and financial distress often go hand in hand, but to avoid this, make sure that you take responsibility and get funeral cover for you and your families lives, so that when death happens, you have the money to pay for it, instead of suffering high interest on a credit card.