How Do Credit Cards Work In South Africa? (2022)

On how credit cards work in South Africa, a credit card is a payment card that is issued to people to allow them to pay for products and services by borrowing from the card issuer just like loan apps.

How Do Credit Cards Work In South Africa?

Credit cards helps you pay emergency bills as well as buy stuffs when you run out of cash. When you pay with a credit card, your card information is transmitted to the seller’s bank and the bank then sends a request to the credit card issuer to proceed with the transaction.

Then the card issuer will check your information and decide whether to allow or reject the transaction.

If the transaction is approved, the money is credited to the seller’s account while the amount spent is deducted from the available credit on your card. 

The period between the date of transaction and the due date indicated on your statement is called the GRACE PERIOD. If you pay your loan in full within this time, no interest will be charged.

However, your card issuer may add interest if you carry a negative balance for several months. The annual percentage rate (APR), on your credit card, is the annualized cost of holding a balance. If your card has an annual fee, it will also be included in your APR along with your interest rate.

A penalty APR, which may be as high as 30%, may be struck on your card if your balance is not cleared within 90 days.

Types of Credit Cards in South Africa 

Balance transfer credit cards

When you receive a Balance credit card, it repays your debts on other credit or shop cards, so you owe it instead, but at 0% interest. This means you’ll be debt-free sooner because your payments will go toward paying down the debt itself rather than paying with interest.

The longer the 0% period is, the more time you have to pay off the amount without incurring interest. The longest deals usually have a one-time fee based on a percentage of the loan amount, but there are other cards that don’t charge a fee, allowing you to transfer debt for free.

Cashback, Airline, and Reward Credit Card 

When you spend money on a reward card, you get cash or loyalty points. So long as you pay them off in full each month and don’t go over your credit limit, the card’s ‘debt aspect’ is nullified, and you’re left with plastic that pays you to spend it.

To get the most out of it, put all of your regular spending on the card, though this isn’t an excuse to overspend. However, if you don’t always pay off your debt in full (or can’t), don’t bother because the interest will outweigh the benefits. 

0% spending credit cards

These cards give a lot of months with no interest on new purchases, so there’s no cheaper borrowing if done correctly – yet they’re not an excuse to overspend.

It’s recommended that you use this credit card to finance a necessary or an important bill – like medical payment or fixing important appliances in your home. 

All Rounder credit cards

Most credit cards are ideal for both new spending and debt reduction, but an all-rounder card gives 0% initial rates on both for a period of time.

A dedicated balance transfer card normally gives a longer 0% period, but if you need to borrow more, an all-rounder card got you covered – safeguarding your credit score.

What Is The Difference Between a Credit And a Debit Card?

Debit cards allow you to spend money by withdrawing funds from your bank account while credit cards allow you to borrow money from the card issuer for purchases or cash withdrawals up to a set limit.

As a result, the phrase “credit card” isn’t very useful; instead, it’s best to refer to it as a “debt card” or a “borrowing card.” Any purchases made with the card result in a debt that must be repaid, rather than using credit that has been extended to you.

List of the most exclusive credit cards in South Africa

FNB Private Wealth Credit Card 

The FNB Private Wealth Credit Card is offered to those with a net asset value of more than R15 million and an annual income of more than R1.8 million.

The card is metal, thus making it more sturdy, durable, and versatile. One of the key attractions of this card is the special eBucks lifestyle perks, which include 55 days of interest-free purchases and customised interest rates.

Cardholders also enjoy exclusive access to perks such as specialized lending, personalized financial advice, and access to over 1,000 airport lounges worldwide for a comparatively cheap initiation charge of R175, compared to other exclusive cards.

American Express Credit Card 

American Express is one of the oldest and most popular credit cards. However, it is only open to those who apply or are invited. In order for your application to be considered, you must have a personal yearly income of at least R1.5 million or investable assets of at least R5 million, excluding your primary residence.

Signature Credit Card from Standard Bank

The Standard Bank Signature credit card has a sophisticated black and blue design and offer an R480 monthly spend. However, to be eligible, you must earn R92,000 monthly.

Although the card is not invitation-only, you must contact Standard Bank to obtain one. Some of the advantages of this card include the potential to enhance your wealth through bespoke portfolio management, the possibility to bank abroad,  a specialized banker to assist with any financial concerns, and 24/7 emergency assistance.

Credit Card from Investec Private Banking

Investec provides prospective clients a Visa platinum credit card with up to 45 days of interest-free purchases, unlimited free ATM withdrawals locally and abroad, and complimentary access to local and foreign lounges through its Private Banking Account.

Only persons with an annual salary of R800,000 are eligible for this credit card.

Private Fusion Credit Card in RMB

The RMB credit card is entirely metal and offers customised credit solutions, complimentary access to SLOW and Bidvest Premier Lounges, and a 55-day interest-free period.

The RMB Private Fusion Account offers similar benefits to the FNB eBucks rewards program, which offers discounts on technology, travel, and lodging.

To be eligible for this card, you must earn R750,000 or more per year or have a net asset value of more than R15 million, according to RMB.

ABSA Private Credit Card

The Absa Private Banking credit card is the second purple card on this list. It is Absa’s answer to the needs of their upper-income clients. To qualify for this card, you need a monthly salary of R62,500.

This card features no transaction fees on purchases, an interest-free period of up to 57 days, a credit limit of up to R228,000, and a swiping limit of R90,000.

What Is The Difference Between a Credit And a Debit Card?

Debit cards allow you to spend money by withdrawing funds from your bank account while credit cards allow you to borrow money from the card issuer for purchases or cash withdrawals up to a set limit.

As a result, the phrase “credit card” isn’t very useful; instead, it’s best to refer to it as a “debt card” or a “borrowing card.” Any purchases made with the card result in a debt that must be repaid, rather than using credit that has been extended to you.

What Is The Difference Between a Credit And a Debit Card?

Debit cards allow you to spend money by withdrawing funds from your bank account while credit cards allow you to borrow money from the card issuer for purchases or cash withdrawals up to a set limit.

As a result, the phrase “credit card” isn’t very useful; instead, it’s best to refer to it as a “debt card” or a “borrowing card.” Any purchases made with the card result in a debt that must be repaid, rather than using credit that has been extended to you.

Related:

• How Do Trust Work In South Africa?
• How Do Small Claims Court Work In South Africa?

Conclusion

Credit Cards can provide valuable free protection, a chance to (re)build your credit rating, and special 0% deals offer the lowest option to borrow if used appropriately. 

This article has provided you with some important information on the types of credit cards available as well as where to get them in South Africa.