Understanding how a credit card works

Credit cards are becoming an increasingly popular way for South Africans to make purchases, pay bills, and even book holidays. But before you apply for a credit card, it's important to understand what it is and how it works. In simple terms, a credit card is like a loan that you can use to make purchases.

When you apply for a credit card, the bank or lender will look at your credit history and financial situation to determine your credit limit - that is, the maximum amount of money you can borrow on your credit card. You can then use your credit card to make purchases up to this limit.

Each time you use your card, the amount is added to your balance - essentially the amount of money you owe on your account. You’ll then need to pay off this balance over time with interest, usually in monthly instalments.

There are many different types of credit cards available in South Africa, with varying interest rates, fees and rewards programmes. Some cards offer cashback or loyalty points when making purchases while others may offer travel benefits such as free travel insurance or access to airport lounges.

However, with all these perks comes great responsibility – if not used correctly – it could lead one into debt that they may struggle to pay off. It's important before signing up for a new line of credit one understands fully how they work in order not only to save themselves from falling into financial trouble but also taking advantage of the benefits offered by their lender.

Applying for a credit card

How to apply for a credit card

If you’re considering applying for a credit card in South Africa, there are several ways to go about it. Most banks offer online applications, as well as paper applications that you can fill out and submit in-person or by mail.

Online applications tend to be the quickest and easiest option, as they can be completed from the comfort of your own home at any time. It is important to ensure that you have all required documents on-hand before you begin the application process.

Requirements needed to apply for a credit card

To apply for a credit card in South Africa, there are certain requirements that must be met. Firstly, applicants must have a good credit score and credit history - this is used by banks to determine whether or not they will approve your application. In addition, applicants must provide proof of income (either through payslips or bank statements) and proof of residence (such as utility bills). Some banks may also require additional documents such as ID copies or employment contracts. It is important to review each bank's specific requirements before applying, as they may vary slightly depending on their policies and procedures.

Credit limits

The basics of credit limits

Credit limit is the maximum amount of money that a lender, typically a bank, will allow you to borrow using your credit card. This limit can vary between different individuals and is determined by several factors such as the individual's income level, credit history, and current financial obligations.

In simple terms, it means the maximum amount of debt that you can incur on your credit card. The credit limit for your card is usually set at the time you apply for it and will be based on various financial factors.

One important factor that determines your credit limit is your income level. Most lenders would want to ensure that you have enough income to repay what you borrow from them.

Another factor that could affect your credit limit is how good or bad your credit score is. A poor credit score indicates that borrowers may be unable to repay their debts on time and too much unsecured debt may indicate higher levels of risk for lenders.

Factors that determine your credit limit

The main factors influencing how much a bank or lender will extend as a line of credit include:

• Your income: This gives lenders an idea of how much money you have available each month to pay off any debt.
• Your employment status: If the same company has employed someone for several years or has tenure in their profession, this lends stability which can increase their chances of obtaining approval.
• Payment history: If someone has a solid payment history with other accounts such as utilities or other loans they are more likely to receive approval than those who have missed payments in the past.
• Credit score: Your FICO score helps lenders assess risk when reviewing loan applications.
• Current debts: Lenders look at all outstanding debts including loans, home loans, and other lines of credit when assessing risk levels.

Once approved for a line of credit most lenders will set a credit limit. This amount is based on a variety of factors and can be increased over time.

It’s important to remember that the credit limit on your card represents the maximum amount you can borrow, and not necessarily what you should borrow. Keeping your balance at or below 30% of your total available credit line can help keep your credit score high and ensure that you’re able to pay off any debts in a timely manner.

Interest rates and fees

Types of interest rates and fees

When it comes to credit cards, there are several types of interest rates and fees that you need to be aware of. Firstly, there is the annual percentage rate (APR), which is the amount of interest charged on your outstanding balance. This rate can vary depending on your credit score, income, and other factors that may influence your creditworthiness.

Additionally, there are also transaction fees for each purchase made using the card, penalties for late payments or exceeding your credit limit, and cash advance fees if you use your card to withdraw cash. Credit card companies in South Africa often offer promotional rates such as low or zero interest for a certain period of time.

These offers may come with specific terms such as a minimum spend requirement or an expiry date. It’s important to read the fine print before accepting any promotional offer so that you know exactly what you’re signing up for.

How to avoid paying high interest rates and fees

To avoid paying high interest rates and fees on your credit card, it’s important to stay within your means and make payments on time. Try not to exceed your limit or carry too much debt from month-to-month as this can result in high-interest charges. Make sure to pay off the minimum amount due every month at least so that you don’t incur late payment charges.

It’s also helpful to look out for cards with low-interest rates or even 0% introductory offers if you need to make a large purchase that will take some time to pay off. Additionally, some cards offer rewards programs where you earn points or cashback when using your card which can offset some of the costs associated with maintaining the account.

Understanding how interest rates and fees work with credit cards is essential for managing your finances effectively. By staying informed and responsible with your spending, you can avoid costly charges and make the most out of your credit card benefits.

Using your credit card

How to make purchases using your credit card

Using a credit card is not complicated, and it is an incredibly convenient way of shopping. Before you start using your credit card, ensure that it’s activated.

Activating a credit card is easy and can be done by calling the bank or via their mobile app. To make purchases with a credit card, present the card to the merchant during checkout.

The merchant will swipe or insert the chip into their point of sale (POS) terminal, and you may need to enter your PIN or sign for the purchase. Some merchants may ask for identification, like your ID book or driver’s license.

Benefits of using your credit card instead of cash or debit cards

Using a credit card has many benefits over cash and debit cards. Firstly, when making purchases with a credit card, you don’t have to carry large sums of cash on you; this reduces the risk of theft in case you lose your wallet or are robbed.

Secondly, with a credit card, you have access to funds immediately without having to check if there’s enough money in your account before making purchases like with debit cards.

Thirdly, using a credit card comes with added perks such as travel insurance and reward programs that allow you to earn points based on how much you spend; these points can later be redeemed for “gifts” such as flights, accommodation bookings or even groceries at select stores.

Last but not least is fraud protection measures offered by banks when transactions occur from fraudsters which means that if someone steals your information and uses it to purchase something online - banks will usually cover losses related to those fraudulent charges so long as they were made within 60 days from when an account holder discovered them!

Repaying your debt

Now that you've made purchases with your credit card, it's important to know how to pay off the debt that accumulates. You have a few different options for repaying your debt on time. First and foremost, make sure you always pay at least the minimum amount due on your monthly statement.

This amount is typically a percentage of your balance and is calculated by the bank as the lowest amount you can pay to avoid being late. Another option is to pay off your entire balance each month.

This may not always be possible, especially if you have a large balance, but it's definitely preferable since it will save you from accruing interest charges. If you do carry a balance from month to month, make sure to keep track of when payments are due so that you don't miss any deadlines.

Consequences of not paying off your debt on time

Failing to repay your debt on time can have severe consequences for both your credit score and financial situation. Late payments can negatively impact your credit score and make it more difficult for you to obtain future loans or lines of credit. Additionally, failing to pay at all can result in legal action taken against you by the bank or collection agencies.

If you miss multiple payments in a row or fall significantly behind on payments, the bank may even consider closing out your account entirely. It's important to prioritize paying off any outstanding debts before they spiral out of control and cause even more problems down the line.

Keeping up with timely payments is crucial when using a credit card in South Africa or anywhere else in the world. Make sure to stay informed about payment deadlines and methods available so that you can make smart financial decisions and stay out of trouble with creditors.

Rewards Programs

When it comes to credit cards in South Africa, there are a variety of rewards programs offered by different banks. These rewards programs can provide a range of benefits, including cash back on purchases, airline miles, hotel stays, and more.

Before signing up for a credit card rewards program, it's important to compare the options available to determine which program will provide the most value for your lifestyle and spending habits. Many banks offer credit cards with rewards points that can be earned each time you use your card for purchases.

These points can then be redeemed for various items or experiences depending on the specific program offered by the bank.

SA’s most popular credit card rewards programmes

Absa Rewards

Absa Rewards is one of the most popular rewards programs in South Africa. With this program, you earn cash-back on all eligible purchases made using your Absa credit card. The cash-back amount varies based on where you shop and what you buy but can be as much as 15% at participating retailers.

Nedbank Greenbacks

Nedbank Greenbacks is another popular rewards program that allows customers to earn points on their purchases that can then be redeemed for products or services from participating partners such as Woolworths, Pick n Pay, Dis-Chem Pharmacies and many more stores across South Africa.

FNB eBucks

FNB eBucks is a unique rewards program offering customers significant discounts when using their FNB Credit Card at selected retailers across the country ranging from fuel discounts to discounts at grocery stores like Checkers or Shoprite/Checkers supermarket chain.

Earning points through these rewards programs may require meeting certain criteria such as minimum spend thresholds or purchasing within specific categories, such as groceries or travel expenses. Be sure to read the fine print to fully understand how to earn rewards points and what they can be redeemed for.

Security measures

Credit card fraud and theft is a serious issue and it is imperative that banks take measures to protect their customers from such incidents. In South Africa, most banks offer security measures that safeguard your credit card details. One of the most common measures used by banks is fraud alerts, which notify you when an unusual transaction has been made on your credit card.

This way you can immediately contact the bank if you did not make that transaction. Banks also use encryption to ensure that your data is safe during online transactions.

Encryption involves converting information into code so that only authorised persons can read it. This means that even if someone intercepts your data, they won't be able to decipher it without the encryption key, which only the bank has access to.

Top 10 South African credit card providers

1. FNB

FNB offers a range of credit card options that come with attractive rewards and benefits. Their credit cards are known for their flexibility and reliability, allowing customers to conveniently manage their finances. With FNB credit cards, customers can earn eBucks rewards, enjoy seamless online application processes, and access a variety of reliable credit card options tailored to their needs.

FNB credit cards currently available

Aspire is designed for individuals with an annual income ranging from R84,000 to R449,999. Premier caters to those with an annual income between R350,000 and R849,999. Private Clients, on the other hand, is tailored for customers with an annual income of R750,000 to R1,799,999.

Private Wealth targets individuals with an annual income of R1,800,000 or more. Lastly, the Petro Card is available for individuals with an annual income of R84,000 or more. These different credit card options cater to varying income levels, providing customers with choices that align with their financial circumstances and goals.

2. Absa

Absa provides credit cards that offer full ATM functions, allowing customers to withdraw cash and manage their accounts easily. These credit cards also provide opportunities to build a credit history, which can be beneficial for future financial endeavours. Absa credit cardholders can earn great rewards, such as cashback or loyalty points, while enjoying the convenience and security of using their cards for day-to-day transactions.

Absa credit cards: What’s available

The Gold Credit Card is all-inclusive with lifestyle offers, a monthly fee of R55, and a minimum monthly income requirement of R4,000. The Premium Banking Credit Card provides access to Absa accounts, a monthly fee of R92, and a minimum monthly income of R25,000. The Private Banking Visa Signature Credit Card offers flexibility, support from a private banker, a monthly fee of R185, and a minimum monthly income of R62,500.

The Flexi Core Credit Card allows for convenient purchases, a monthly fee of R44, and a minimum monthly income of R2,000. Students can benefit from the Student Credit Card, helping build their banking profile with no monthly fee and a minimum monthly income of R800. Absa also offers debit card packages, partner credit cards like the British Airways Credit Card, and various perks and rewards.

3. Capitec

Capitec credit cards come with generous credit limits, offering customers significant spending power. These cards also offer the opportunity to earn cashback rewards, providing financial benefits for cardholders. With free card delivery services, Capitec ensures a convenient and hassle-free experience when obtaining a credit card.

No choice needed: Get a Capitec credit card option tailored to you

Capitec provides a single credit card option designed to match your lifestyle. With a credit limit of up to R500,000, this card offers attractive features such as 1.5% cashback on spending and banking activities, zero currency conversion fees, and free local swipes. Enjoy additional benefits including up to 55 days interest-free, secure online shopping, free travel insurance up to R5 million, and assistance in building your credit record.

4. African Bank

African Bank credit cards are designed to provide customers with financial freedom and convenience. They offer personalised card options, allowing you to select features and benefits that align with your lifestyle and preferences. One notable advantage is that African Bank credit cards have no monthly fees, making them cost-effective choices. With these cards, you can enjoy the freedom to make purchases and manage your finances without worrying about recurring charges.

Convenient features and benefits with the African Bank Black Credit Card

The African Bank Black Credit Card offers convenient features and benefits for peace of mind. It provides a globally accepted, personalised embossed card with safer transactions through tap, dip, or swipe with a PIN. Online transactions are secure with an OTP, and cash withdrawals are available at participating POS locations. Enjoy up to 62 days of interest-free credit on purchases by settling the balance in full. Additional benefits include credit life insurance, free online/mobile services, and the ability to manage transactions easily. Eligible cardholders may qualify for a limit increase after six months.

5. Tyme Bank

Tyme Bank offers credit cards with a 55-days interest-free period, giving customers a window to make purchases without incurring additional charges. Their credit cards can be personalized to match individual preferences and come with the added benefit of earning SmartShopper Points, which can be redeemed for various rewards. Tyme Bank aims to provide a convenient and rewarding credit card experience to its customers.

Features of the TymeBank credit card

You can earn 4x Smart Shopper Points when swiping and paying at Pick n Pay, as well as everywhere else you shop. The promotion period for this reward program has been extended. The credit card provides the convenience of withdrawing cash from any ATM (with a small fee) and enables shopping online. Additionally, you can enjoy up to 55 days of interest-free transactions when the account is paid in full and on time. It includes features such as SMS notifications and monthly statements. Various fees apply for specific services, while customer protection insurance is available as an optional feature.

6. WesBank

WesBank credit cards are known for their simplicity, security, and range of benefits. The fast online application process makes it easy for you to get one. You can enjoy various benefits such as cashback rewards, travel perks, or exclusive discounts at partner merchants, providing added value and savings opportunities.

Top Wesbank credit card features

The WesBank Classic Credit Card Account and Credit Facility go beyond a simple credit facility by providing customers with a range of rewards and benefits. These include popular features like eBucks Rewards, Travel Insurance, Automatic Debt Protection, Lost Card Protection, PIN Replacement, Online Banking, inContact, and Decline InContact.

Similarly, the WesBank Gold Credit Card Account and Credit Facility also offer an array of attractive features and benefits, such as eBucks Rewards, travel insurance, automatic debt protection, PIN replacement, online banking, inContact, and Decline InContact. Additionally, the WesBank Petro Card Account and Credit Facility provide customers with Automatic Debt Protection, inContact, and Decline InContact features. These value-added benefits enhance the overall experience of using WesBank credit cards.

7. RCS

RCS credit cards provide a 55-day interest-free period, allowing customers to manage their expenses without immediate interest charges. These cards offer flexible payment options, giving cardholders the freedom to choose repayment terms that suit their financial circumstances. RCS also provides customer protection insurance, offering added peace of mind in case of unforeseen events.

RCS credit card: Simple, convenient, accessible

The RCS credit card is a MasterCard that can be used worldwide wherever the MasterCard logo is displayed. You have access to cash withdrawals anytime and anywhere. One of the key benefits is the option to enjoy up to 55 days interest-free if you pay the full outstanding amount each month. There are no transaction fees, whether you're making purchases locally or overseas.

The card also provides free SMS notifications and monthly statements, making it easy to manage your account securely. The RCS App, available for iOS and Android, allows you to conveniently manage your account on the go. Optional Customer Protection Insurance is available, offering coverage in case of death, disability, or loss of income. To apply for an RCS Credit Card, you need to be 18 years or older, have a valid South African ID or driver's license, and earn a monthly income of R 3000 or more. Once approved, your card will be couriered to you within 5-7 working days.

8. Makro

Makro credit cards offer personalized credit limits, allowing customers to control their spending within their desired range. These cards come with competitive interest rates, making them an appealing option for cost-conscious individuals. With repayment terms of up to 36 months, Makro credit cards provide flexibility for customers looking to manage larger purchases over time.

Apply for a Makro credit card to get up to 2% back on purchases

The Makro Credit Card offers exclusive benefits and features for cardholders. You can earn up to 3% back on online purchases at Makro, Game, and Builders, and up to 2% back on in-store purchases at Makro, Game, and Builders. Shopping at any RCS network retailer earns you 1% back. Enjoy flexible repayment options and access to Self-Service via the Makro website. The card includes free SMS notifications, a monthly statement, and Customer Protection Insurance. Apply online or in-store to benefit from these features.

9. American Express

These credit cards are globally accepted and known for their low-interest rates.

These cards provide an opportunity to earn reward points on purchases, which can be redeemed for various travel, shopping, or lifestyle benefits. With American Express, customers gain access to exclusive global benefits and a wide network of partner merchants.

American Express Cards offer more than just convenience

They come with a range of benefits such as rewards, travel protection, purchase protection, and fraud protection guarantee. The American Express Platinum Credit Card offers exclusive perks like earning 30,000 bonus Membership Rewards points upon activation, access to The Centurion Lounge, and unlimited complimentary entry to Bidvest Premier Club airport lounges in South Africa, all for a monthly fee of R490.

For those who love to travel, the American Express Gold Credit Card provides stylish travel experiences with features like a monthly complimentary lifestyle reward voucher for spending R3,500 or more per month and earning 5,000 bonus Membership Rewards points upon activation, all for a monthly fee of R124. Apply online and enjoy the benefits and trusted service that American Express provides at numerous locations worldwide.

10. Woolworths

Woolworths offers two premium Credit Cards - the Gold and Black Credit Cards - designed to elevate your shopping experience. With the Woolworths Gold Credit Card, you can enjoy exclusive benefits such as earning more Woolworths Rewards points on your purchases, priority access to sales and events, and complimentary delivery for online orders.

Woolies Black and Gold credit cards

The Woolworths Black Credit Card takes it a step further, offering even higher earn rates on rewards points, enhanced travel benefits including access to airport lounges, and dedicated customer service. Both cards provide the convenience of contactless payments, secure online transactions, and global acceptance. With attractive interest rates and flexible payment options, the Woolworths Gold and Black Credit Cards offer a seamless and rewarding shopping experience.

Choose a lender and apply for a credit card

A credit card is a powerful financial tool that can provide convenience and flexibility. It allows you to make purchases without carrying cash, earn rewards, and build a credit history. However, it also comes with responsibilities such as repaying debt on time and avoiding high interest rates and fees.

When applying for a credit card, it’s important to do research on different banks and their offerings. Look for cards with low interest rates and fees, as well as rewards programs that align with your spending habits. While we’ve included the ten biggest South African credit card providers in this article, our dedicated credit card page includes many more (lesser-known) options for you to review.  

Once you’ve been approved for a credit card, be sure to use it responsibly by making timely payments and keeping your balance within your credit limit. It’s also important to protect yourself from fraud by monitoring your account regularly and reporting any suspicious activity immediately.

With the right knowledge and practices in place, a credit card can be a valuable asset in managing your finances and reaching your goals. It’s a smart money move and one of the most useful financial tools in existence.