Standard Bank recorded a 52% increase year on year in new credit cards issued up to the end of August 2024 compared to the same period in 2023. But the average approved limits are slightly lower this year.
“With living costs soaring in the past two years, these high volumes suggest consumers could be relying on credit cards more. However, we’ve noticed that an increasing number of people are treating their credit cards as transactional accounts. This trend suggests that the rise in credit card usage might be driven by consumers looking to earn more UCount reward points,” says the Head of Credit at Standard Bank, Tumelo Ramugondo.
Ramugondo adds that while a credit card was traditionally a useful borrowing option to finance big ticket purchases, its role has evolved into an everyday payment tool. It has become especially useful for consumers who want to spread the cost of items purchased during big sales to take advantage of flexibility offered by buy-now-pay-later options.
Consumers are also using their credit cards as budgeting tools because they can benefit from up to 55 days of interest-free grace period on purchases. Additionally, if they pay their balance in full each month, they can continue to benefit from this grace period for the next 30 days.
“However, Standard Bank’s credit card division data shows that some consumers aren’t using their credit cards optimally. We see a lot of transactions that are costly to pay with a credit card, like cash withdrawals. We don’t encourage cash transactions because they attract interest from day one,” says Ramugondo.
Below, Ramugondo provides a list of things consumers can do to make your credit card work for them, and items they should avoid buying with a credit card.
WHAT TO DO:
- Settle the amount owed or make the minimum repayments.
Clear your credit card balance in full to avoid monthly interest. If you can’t pay the full amount, aim for a payment above the minimum due each month. Familiarise yourself with their credit card providers’ rules to anticipate what you’ll pay. For instance, Standard Bank’s minimum is 3% of the outstanding balance.
2. Avoid excessively high outstanding debt
Excessively high outstanding credit card balances make it difficult to use your credit card as a revolving facility, especially if they do not maintain their minimum repayments. It also makes monthly repayments much larger. If you are using your credit card as a transactional product, make sure that you transfer enough funds to your credit cards. Don’t spend beyond your means.
WHAT NOT TO BUY WITH YOUR CREDIT CARD
- Paying off other debts
Consumers struggling to pay-off their other monthly debt obligations might be better off using a consolidation loan. Because it’s a line of credit that does not revolve, it creates certainty with fixed monthly repayments.
- Don’t withdraw or transfer cash
Standard Bank discourages cash transactions because they accrue interest from the moment you transfer of withdraw the funds. You don’t benefit from the 55-day interest-free period. Instead, it’s better to use your card directly for the expenses you need cash for.
- Excessively large ticket purchases
Buying something like a car using credit card may not be the best solution as vehicle finance usually attracts lower interest rates.
- Large medical procedures and certain medical expenses
There are other products in the market that cater to this need. Customers are encouraged to take up medical aids and medical gap cover policies.
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