Credit cards are a ready source of funds to tide you over in an emergency, or to buy something you need that you can’t immediately afford. However, there are conditions attached to using this form of credit, and running up too high a balance can plunge you into debt.
We explore how to use credit cards responsibly, and compare the cards offered by six South African banks.
Tip: Use this budget calculator to get a better handle on your finances.
Everything you need to know about credit cards
The August 2023 Consumer Default Index from Experian indicates that South Africans are reaching for their credit cards to make ends meet. However, this can plunge consumers into a cycle of debt.
Before using a credit card, or applying for one, it’s vital to understand how the product works and how best to use it.
Let’s start with understanding what a credit card is
A credit card allows you to pay for items or services with funds that belong to the card issuer, which partners with a payment-card processing network, such as Visa, Mastercard, or American Express.
These networks enable you to use your credit card anywhere in the world that the network is recognised.
How does a credit card work?
A credit card gives you access to a pre-approved sum of money, up to a specified limit, provided your account is in good standing.
“You’re required to pay the money back within a set time – all of it, or at least a minimum amount,” explains Tumelo Ramugondo, credit card head at Standard Bank South Africa. “If you’re only paying back the minimum, you’ll be charged interest on the outstanding amount.”
The importance of credit cards, and why they’re beneficial
Francois Viviers, group executive of marketing and communications at Capitec, explains that credit cards typically offer a range of benefits and rewards, as follows:
- Transactional benefits. These include safe and free transactions; rewards linked to spending, such as cashback vouchers; and discounts on swipes and benefits for in-store and online purchases. Credit cards are also convenient, and compatible with e-wallets (e.g., Samsung Pay).
- Insurance benefits. Credit cards often come with insurance benefits, such as credit life insurance, travel insurance, purchase protection, and ATM robbery insurance.
- Travel benefits. Many credit cards offer travel-related perks, such as low currency-conversion fees for overseas purchases, complimentary travel insurance, airport lounge access, and discounts with travel partners.
- Credit benefits. Among these benefits are interest-free periods for purchases, competitive interest rates, the opportunity to build a credit record for future loans (e.g., home purchases), access to credit during emergencies, and structured budget facilities to manage larger purchases with fixed repayment plans.
Building your credit record
Nedbank head of retail trading Thabo Monkhe explains that credit cards are often used as a simple way to build a credit record by establishing a history of making repayments on time.
“Even if you don’t use it often, this record of regular payments helps boost your credit score. It shows lenders that you can be trusted the next time you apply for a credit card or loan. Credit agencies look closely at your debt and how you manage it. One of the factors they consider is how much of your debt you’ve used up,” he says.
“As a cardholder, try to ensure you don’t miss repayments, and at least repay the minimum amount stipulated by the credit company. If under strain, make arrangements with the bank instead of missing repayments.”
Who can get a credit card?
To obtain a credit card in South Africa, you must be 18 years old, have a South African identity document or a valid passport and work permit, provide payslips or stamped bank statements for the previous three months, and submit proof of residence not older than three months.
You must also earn the minimum income specified by the credit card issuer.
Credit card approval is subject to credit checks and Financial Intelligence Centre Act (FICA) requirements.
The credit card application process
Most banks allow you to apply for a credit card via internet banking, their banking app, cellphone banking, or by visiting a branch.
Which bank in South Africa offers the best credit card?
The credit card that’s best for you depends entirely on your needs.
“Choosing an appropriate credit card involves careful consideration of several factors, particularly the benefits and rewards on offer,” says Viviers. These include:
- Interest rates and monthly fees. Evaluate the interest rates and monthly fees associated with the credit card to determine its overall cost. If you don’t intend to repay your credit card in full, determine how much you will pay in interest and fees every month. A high interest rate can cost you far more than the perceived benefit of a “free” monthly reward.
- Rewards and loyalty programmes. Assess the rewards, cashback, or loyalty programmes offered, including partnerships with businesses, to understand the regular benefits the card provides.
- Travel benefits and foreign transaction fees. If you travel frequently, choose a card with travel benefits and low foreign transaction fees to reduce costs.
- Additional benefits. Consider other benefits such as travel insurance, extended warranties, airport lounge access, or concierge services.
- Security features. Ensure the card has adequate security features to safeguard against fraud.
- Credit limit. Check whether the credit limit offered will cover your financial needs and expenses.
- Online banking and mobile app. Consider the convenience of a user-friendly online banking platform and mobile app.
- Terms and conditions. Read the fine print, paying particular attention to any limitations, exclusions, or restrictions that may apply to rewards and benefits.
Credit card comparison
Standard Bank Gold Credit Card | Minimum income required
Credit limit
Rates and fees
Rewards and discounts
Convenience and control
Travel benefits
Security
|
ABSA Gold Credit Card | Minimum income required
Credit limit
Rates and Fees
Rewards and discounts
Convenience and control
Insurance and cover
Travel
Security
|
FNB Premier Credit Card | Minimum income required
Credit limit
Rates and fees
Rewards and discounts
Convenience and control:
Insurance protection:
Travel:
Security
|
Nedbank Platinum Credit Card | Minimum income required
Credit limit
Rates and fees
Rewards and discounts
Convenience and control
Insurance and cover
Travel benefits
Security
|
Capitec GlobalOne Credit Card | Minimum income required
Credit limit
Rates and fees
Rewards and discounts
Convenience and control
Insurance and cover
Travel benefits
Security
|
Discovery Gold Credit Card
| Minimum income required
Credit limit
Rates and fees
Free benefits
Rewards and discounts for Vitality members
Convenience and control
Travel
Security
|
*Terms and conditions apply
Managing credit card debt responsibly
Ramugondo suggests taking the following steps to manage your credit card wisely:
- Keep track of your purchases and stay on top of how much you owe the bank.
- Know what your interest rate and credit terms are. Only spend what you can afford to pay back.
- Always pay off your outstanding balance on time to avoid penalties. Try not to carry over balances from month to month, as you’ll be charged interest, and it will become more expensive to pay off those amounts.
- Avoid accumulating too much debt and paying unnecessary costs – use your card for the right reasons and only when needed.
Biggest credit card mistakes to avoid
Monkhe says credit card newbies are often starstruck by the “magic plastic” possibilities. “There is a secret to owning a credit card, and that is knowing when to use it,” he points out.
Monkhe lists the following mistakes and pitfalls.
Missing payments
The biggest mistake you can make on your credit card is to pay late or miss a payment, which can affect your credit score and reduce your chances of getting a loan in future. You will also be penalised and pay more interest if you don’t make up for it.
Paying only the minimum
Paying back the full amount you owe every month is a double win, says Monkhe.
“Firstly, you don’t pay interest if you settle the borrowed amount within 55 days,” he says. “Secondly, using your card in this way means you’re getting better at managing your finances. The faster you reduce the outstanding balance, the more you reduce the total interest you pay.”
“Maxing out” your card
“Maxing out” your card by using up all of your available credit is inadvisable.
The interest for that month, and other charges, will be added to your balance when your statement is issued. If your card is already maxed out, these charges will push your balance over your credit limit, which can result in penalty fees.
The biggest downsides to having a credit card
Having too many cards can be a significant issue, says Monkhe.
“Remember, you’re paying admin fees on every card, and that’s an expense that may not be worth the benefits,” he cautions.
“Too many cards and store accounts can be bad for your credit profile if you struggle to repay them monthly. You also risk a lower credit score if you apply for several credit cards in a short period.”
Tip: Don’t let credit-card and other debt prevent you from reaching your financial goals. Consider debt consolidation.