Advantages of securing a credit card

Advantages of securing a credit card
Compare credit cards benefits online

Credit cards are arguably the most important “plastic cards” anyone can have in their wallet.

Most of the major banks have a credit card facility offering that gives clients extra leverage to their monthly household budget. This card can be used to make purchases that people are unable to otherwise make when their budget runs out.

Be mindful when using your Credit card

Business Live says research by Old Mutual shows that 56% of South African credit card holders pay the minimum instalment, and only 16% pay their credit card balance in full at month-end.

It is important to understand the rule “If you buy on credit you have to pay for it into the future,” the website adds.

The bank allows credit cardholders to make purchases on credit. At month-end, the bank will furnish a statement detailing purchases, with interest. The interest owing is in exchange for the benefit derived from purchasing items without paying for them immediately.

Benefits of a Credit card

The banks have varying rates of interest and different rules that guide card ownership.

Hippo.co.za says "many South Africans are paying the maximum interest that can be charged on a credit card each year – currently 17.5% (the formula, as per regulations, is the repo rate plus 14%). However, many banks offer lower rates, so if you shop around, you can save thousands! And if you are paying more than 17.5%, please query this with your card issuer” the website adds.

Types of Credit cards

Bank credit cards

There are many unsecured credit card offerings across the major banks in the country. A gold card gives the holder extra perks, such as free VIP access at an airport lounge. Some banks will also offer 57-days interest-free payments. Other banks offer lost card protection and allow clients to swipe and use the card at any international destination.

Student credit cards

Most of the major banks offer student credit cards for those urgent purchases students have to make. The banks are strict when it comes to qualifying criteria for such a card. The first criteria are that students are between 18 and 30 years old and applicants must have SA citizenship and a valid ID document.  This card allows students to build up a credit record even before they begin working, which can help them in the future after their studies are completed. It also allows them to buy stationery and books which might not be available in the country.    

Garage credit cards

A garage card allows the holder to pay for vehicle-related purchases such as fuel, vehicle parts, service, and maintenance - and even for tollgate fees. The garage credit card is usually linked to a credit card facility. The card is only allowed for vehicle-specific transactions and the amount is debited immediately it is presented for payment. Each purchase is subject to a transaction fee - and interest. The responsible use of this card boosts credit scores.

Travel credit cards

These are available from some of the major banks, such as Nedbank. For frequent travellers, such a card comes in handy as rewards are credited to the card with every flight. These rewards are not necessarily in the form of cash, however. The benefits differ from bank to bank but mostly consist of free “voyager” miles for every rand spent. Some banks also offer free travel insurance for cardholders who travel overseas.  Rewards can also be credited for car rentals, purchases with florists, at restaurants, and taxi services.

Budget or straight?

When buying larger items such as electronic equipment or furniture customers can opt for a budget plan, with payment being required over a six-month or 12-month period – or longer. The bank foots the bill for the item and apportions the costs of the purchase against the selected payment period. The customer then technically pays off the item by settling with the bank monthly according to the budget plan.

What you need to know about interest rates

Most of the major banks allow customers to pay off purchases on their credit cards over a fair period. Most banks offer 55 days of interest-free credit, but it’s not the same for all banks. Some banks offer personalised interest rates based on credit profiles, tied to the repo rate.

If a customer’s affordability profile is exemplary, banks might offer maximum credit limits. Banks will also allow customers to either draw cash from their credit cards at a slightly higher interest rate or permit cash payments to be made into a credit card. If extra payments are made to the card, the client will pay a lower interest rate.  

Business Live says assuming you owe your bank R15,000 on your credit card, and you're being charged interest at 20.5%, if you pay 10% of the outstanding balance every month for 12 consecutive months, you will pay the bank R2,008 in interest over the year. But if you're paying interest at 10%, you'll pay the bank R943 in interest over the year. This is before fees, such as monthly admin fees, credit life insurance fees other related fees. Check which banks do and don’t charge card fees.

Popular & reliable direct lenders offering Credit cards

  1. RMB Credit card

    RMB

    • Tap to pay
    • Earn rewards
    • Interest from 15%
  2. Wesbank Credit card

    Wesbank

    • Choose a card
    • Earn rewards
    • Interest from 4%
  3. Nedbank Credit card

    Nedbank

    • Choose between cards
    • Get the best deals
    • Interest from 3%
  4. Absa Bank Credit card

    Absa Bank

    • Membership rewards
    • Low interest rates
    • Interest from 19.30%