Our Group CFO, Ricardo Sardien, emphasises the importance of financial education for young individuals in Botswana. Many young people in the country have not received adequate financial education at home or in school, leaving them unprepared to handle financial responsibilities such as signing lease agreements, opening credit accounts, or obtaining credit cards. Without a credit rating, accessing credit becomes challenging within the financial system.

To overcome this hurdle, one solution is to open a small account with minimal exposure or have a parent or trusted friend act as a guarantor, agreeing to assume the debt if necessary. Although not ideal, this approach helps demonstrate financial responsibility. Our Group CFO, Ricardo Sardien, advises that instead of acquiring multiple store accounts, it is better to start small and gradually build a credit profile. Managing credit cards effectively is key to establishing a healthy credit history.

"To build a good credit record, you must use debt responsibly," states Sardien. "The key is to adhere to payment arrangements, always pay on time, and avoid excessive credit exposure, as this can burden you over time and negatively impact your credit rating. Remember that the goal is to develop a strong rating gradually, so as a young person, time is on your side." Missed payments can remain on your credit record for up to six years, potentially jeopardising your chances of accessing favorable credit, such as a home loan, in the future.

Understanding your credit utilisation limit is crucial. Credit utilisation refers to the percentage of your total available credit that you have used. For instance, if you have P10,000 credit available and have utilised only P3,000, your credit utilisation is 30%. It is advisable to keep your credit utilisation within 30% as it demonstrates financial control and improves your chances of accessing credit when needed, such as for purchasing a house. Higher credit utilisation rates reduce your likelihood of obtaining credit in the future.

Here are a few credit management tips to keep in mind:

1. Pay the full monthly installment to avoid high interest charges. If you have a credit card, settle the amount within 55 days to avoid interest.
2. Establish a budget. Your card's spending limit does not mean you must spend the entire amount. If the offered limit may tempt you to overspend, request the bank to lower it.
3. Pay your card expenses on time, every time. Even a single day of late payment can negatively affect your credit rating.
4. Aim to spend less than your limit each month and maintain available credit to showcase your financial responsibility. Keeping spending at around 30% below your limit is generally beneficial for your credit rating.
5. If you need to pay less than the full amount due on a credit card, pay more than the minimum to minimise the interest charged. Accumulated unpaid balances and interest can lead to financial difficulties over time.

"When choosing a credit card, it can be challenging due to the numerous options available from different operators and banks," advises Sardien. He suggests considering the following factors when applying for your first credit card:

1. Carefully read and understand the terms and conditions associated with different types of cards, including:
   • Duration of interest-free credit offers.
   • Card costs.
   • Interest charges for budget purchases and late payments.
   • Conditions for international card usage.
   • Card validity period.
   • Frequency of card limit and cost reviews.
2. Consider including credit insurance to cover risks such as retrenchment, death, and disability.

"The choice of credit cards is yours. Many options are available online and at financial institutions," concludes Sardien. "What matters is establishing a relationship with a service provider who can offer additional services and solutions as your credit rating improves. Above all, always use credit responsibly."