As a consumer, it is important to understand the distinctions between different types of debt. The term ‘debt’ can conjure up anxiety; however, managing good debt responsibly can allow consumers to foster a good credit rating. Simply put, bad debt would be in reference to any debt that would essentially depreciate in value over time, such as buying a new car, which would depreciate in value upon exiting the car showroom. Good debt would refer to debt that benefits personal growth, such as student loans and maturely managed credit card facilities. Building a Positive Credit Score There is a camp of thought that suggests that paying cash for everything will bring about a solid credit rating with financial institutions. At face value, this suggests that if you are not knee-deep in debt, banks will be interested in loaning money to you. This is, however, only partially true. For banks to understand and scrutinise your financial status, they will need to see your credit score or financial track record. By trading constantly in cash, you would essentially be invisible in the eyes of some financial institutions; so what can be done? Being able to prove that you, as a consumer and potential client, are able to handle money responsibly is the first step in fostering financial growth. Monthly financial transactions, such as rent payments and paying utility bills, may not be aiding in you in proving that you are able to manage a good-standing line of credit. One guaranteed way of proving your ability to be financially responsible is to apply for a credit card – even the cautious can benefit by starting small and thinking big. Does Debt Equal Credit? A common misconception is that consumers need to accrue large amounts of debt, charged with interest, to build credit. However, this is not the case. By using a credit facility via your bank issued credit card, you would be able to build a credit history without sinking deep into debt. The trick is to pay the credit balance in full each month before the loan amount attracts interest. How to Apply for a Credit Card The first step in knowing how to obtain a credit card would be to understand what is available to you as a potential or existing client of your financial institution. Banks typically have a tiered system when it comes to tailor-made packages that suit your lifestyle. Usually classified as silver, gold or platinum credit cards, these packages not only relate to having a clean credit history, but also to the earning ability of you as a client and, therefore, how much you are able to repay. Entry-level packages usually cater for clients who earn below R100 000 per month with additional packages catering to the R100 000 to R349 000 and R350 000 to R1.1 million a year earners. These packages typically include additional benefits such as reward points initiatives when used at partnered vendors which have been allied with your chosen financial institution. Making an appointment to meet with your to discuss your credit options would be the first step towards obtaining a credit card. Some banking institutes are also offering credit analyses online. Having your pay slips and earning history on hand will allow your bank to advise which packages would be available to you.