Demystifying Credit Cards: How They Work in South Africa


Credit cards are a popular choice for many consumers in South Africa, offering convenience and flexibility when it comes to making purchases. However, there are many misconceptions about how credit cards work and the costs associated with them. In this article, we will demystify credit cards by providing valuable insights and tips so that you can make informed decisions about using credit cards.

Understanding Credit Cards

A credit card is essentially a form of borrowing that allows you to pay for goods or services without having to use cash upfront. When you use your credit card to make a purchase, you’re essentially borrowing money from the bank or financial institution that issued the card. You then have to repay this amount at a later date, along with any interest charges or fees.

Types of Credit Cards

There are several types of credit cards available in South Africa that cater to different needs and lifestyles:
– Standard Credit Card: This type of card allows you to borrow money on an ongoing basis up to your approved limit.
– Premium Credit Card: These offer higher limits and additional benefits such as travel insurance, airport lounge access etc.
– Business Credit Card: Designed specifically for business owners who need access to funds on an ongoing basis while keeping their finances separate.
– Secured / Prepaid Credit Card – Requires customers depositing security funds into their account for usage.

How Interest Works

One of the most important things to understand about credit cards is how interest works. Every time you carry over balances from one month to another – known as revolving debt – it attracts interest which is calculated annually (APR). The APR advertised by each provider differs but usually ranges between 15% – 25%. For example if your balance was R10 000 at month end it would incur +/- R180 monthly finance charge with average APR rate being quoted by providers around 20%.

Credit Card Fees

Credit cards can come with several fees, so it’s important to understand what they are and how they work. Here are the typical credit card fees you may encounter:
– Annual Fee: The amount charged annually for having a credit card.
– Transactional Fees: Bank charges applied when using credit for cash withdrawals or buying foreign exchange at an ATM.
– Late Payment Fees: Charged if you don’t make your minimum payment by the due date stipulated on your statement – this can be up to R200;

Using Credit Cards Responsibly

To avoid penalties and spiraling debt, here are a few tips for using your credit card wisely:
* Pay off balances in full every month if possible to save yourself from accumulating interest costs.
* Keep track of your spending carefully and keep within your means.
* Make sure you read all terms and conditions before opting in.


Credit cards can provide convenience when shopping but it is not free money. It’s wise to understand well their functionality as well as any attached hidden costs that could impact on one’s overall finances. Use them responsibly and stay informed about the types available, associated fees structure along with providers’ policies around them should one have problems unable resolve satisfactorily independently.

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(Note: Prices are subject to change and may vary based on the retailer.)


Sure, here are three popular FAQs and their answers for “Demystifying Credit Cards: How They Work in South Africa”:

Q: What is a credit card?
A: A credit card is a payment method that allows you to borrow money from a bank or financial institution for purchases you make. With a credit card, you can buy items now and pay back the borrowed amount over time, typically with interest.

Q: How do I apply for a credit card in South Africa?
A: To apply for a credit card in South Africa, you’ll need to meet certain eligibility criteria set by the bank or financial institution offering the card. This may include having a good credit score, regular income, and being over 18 years old. You can usually apply online or at your local branch of the issuing bank.

Q: What are some benefits of using a credit card?
A: Some benefits of using a credit card include:

Convenience when making purchases
The ability to earn rewards points or cashback on your spending
Purchase protection against fraud and faulty goods
Building up your credit score if you pay off your balance consistently
It’s important to note that while there are benefits to using a credit card, it’s also crucial to use it responsibly by paying off the balance on time each month and not overspending beyond what you can afford.