Many credit card users could be paying as much as three percent over the odds for their card debts as a result of changes brought in by the National Credit Act (NCA).

In addition, according to www.justmoney.co.za, the introduction of ‘personalised’ credit card rates by a number of banks means that some customers could actually be getting even lower debit interest rates, saving more money on their card debts.

Many people who took out a credit card before the launch of the NCA last year could still be paying interest rates regulated by the previous Usury Act. Most Usury Act customers will be paying more debit interest than NCA customers if their balance is under R10 000 — for the same credit card! For example:

• Absa Silver Credit Card:

  • NCA customers pay 24% on all balances

  • Usury Act customers pay 27% on balances under R10 000

• Standard Bank Blue Credit Card:

  • NCA customers pay 25% on all balances

  • Usury act customers pay 27% on balances under R10 000

Interest charges on a R9000 balance would be R270 a year higher for the Absa Silver Card holder regulated by the Usury Act compared with a customer using the same card under the NCA rules.

Paul Beadle, managing director of www.justmoney.co.za, explains: “If credit card users have not updated their credit agreements since the NCA came into effect last year, they could well be paying a higher debit interest rate than necessary. This discrepancy shows that customers really must keep up-to-date with the different charges their banks levy, otherwise they will be out-of-pocket.

“Unfortunately it seems that most banks and credit card providers are not proactively contacting their Usury Act customers to offer them a revised agreement and a better rate under the NCA.”

Beadle says that people who took out their credit card or updated their existing credit card agreement after the NCA was introduced would automatically be paying an NCA based rate, which is usually lower for balances under R10 000.

Only Nedbank only uses just the NCA system

Currently Standard Bank, Absa and FNB have the dual interest rate system in place, whilst Nedbank only uses the NCA system. However, changes brought in by FNB and Absa mean that anyone taking out a new credit card or updating their credit agreement with those two banks will be charged a ‘personalised’ debit interest rate, which is based on their credit score and financial status.

Beadle continues: “A personalised rate makes it difficult for consumers to shop around and find the best deal, because they have to be credit-scored first before they find out what rate they’re being offered. And if people apply for a number of different cards looking for the best rate, they will get multiple credit-checks, which could actually impact negatively on their credit-score because it looks as if they are desperate for credit.”

But some customers could end up winners if they negotiate a ‘personalised’ rate, according to one www.justmoney.co.za user. He says: “I was paying 24 percent interest on my old Gold credit card and received an offer from FNB of 17.5 percent on a new Platinum card, subject to me producing proof of my monthly salary and ID.

Personalised NCA rates always better than Usury rates

“I probably qualified for it anyway, but FNB never contacted me to tell me this or suggested that I re-apply. But when their card division contacted me after I enquired about getting a cheaper bank account, they indicated that the personalised rates for existing customers on NCA are always better than the old Usury rates. People must check to see if they can get better rates for their credit cards and bank accounts.”

www.justmoney.co.za has an online guide to the big four bank credit card providers showing their Usury Act rates and NCA rates, as well those using personalised rates. Visitors to the site can also compare cards based on the lowest debit interest rate (what you pay if you don’t clear your balance each month), or highest credit interest rate (what you are paid if you have a positive balance).

Beadle concludes: “Credit accounts for such a huge chunk of our disposable income that anybody paying a higher rate than they should be is just throwing money down the drain. It’s another example of why South Africans should take control of their finances, shop around for the best deal and take their bank and credit card providers to task so they can get real value for money.”