Shop around for the best credit card deal available, writes Charlene Smith
Despite the entry of more than 70 foreign banks into the local market, the South African commercial banking sector, protected by a R1-million limit on deposits to locally based foreign banks by individuals, is plodding along in its same uncompetitive way – unless you’re a top earner.
Although low-income earners form the bulk of the potential market, banks are not interested in the lot of the poorly paid worker. Indeed, a low earner who wishes to draw R10 or R20 will be charged the same R5 per withdrawal from an ATM (the average charge) as a high-income earner withdrawing R1 000.
Banks defend this, saying it costs the same to service both accounts, but in truth, South African commercial bankers remain among the least innovative in the world.
All local and foreign banks are pursuing the favour of the few clients in the heady clouds of the top-income strata. At that level competition abounds, but further down the scale competition is all but non- existent and bank charges close to extortion.
The lack of innovation and competitive apathy is also apparent in the credit-card sector, and the low entry requirements of some to the world of plastic money may explain why debt ratios are so high in South Africa.
The Mail & Guardian’s requests for information from major banks and credit- card purveyors found scant information trickling in late.
The exception was American Express (Amex), which appears to be making a concentrated thrust for a larger slice of the South African credit card pie. In the past week it launched its platinum card and a new card-based system that will gradually replace traveller’s cheques.
To obtain a platinum card, you have to have been an Amex cardholder for a year, spend an average of R20 000 a month on your card for personal expenses, earn more than R750 000 a year and have personal assets worth more than R3-million.
Craig Bond, MDof Amex South Africa, gave an example of the services its card provides: Nedcor CEO Richard Laubscher used his card to obtain tickets to the premiere of the stage production of The Lion King in New York, “when there were none available”. All he had to say to Amex was, “I want,” and he got.
The platinum card has teams of consultants to reserve tables at restaurants around the world, get tickets to exclusive sports and entertainment events and special hotel, travel and cruise programmes, as well as travel insurance, including R10-million worth of medical insurance, flight booking and hotel reservations.
It will put card members in touch with business services ranging from secretaries to interpreters. It will even send wine or birthday cakes anywhere you choose, or find a plumber, electrician or tree feller.
We mere mortals, however, have to shop around for the best credit card services. Most credit card companies demand that applicants be over the age of 21, have permanent employment and a stable financial record, be resident in South Africa and have no black listings at credit bureaux.
Diners Club seems to be the most conservative. It offers only one card and, to qualify, you have to own a home, earn more than R120 000 a year, have stable employment, a good financial history, and have R12 000 in your bank account.
An advantage mentioned by Visa for cardholders is its extended credit for purchases of over R300, allowing clients to pay off an item over six to 60 months with interested calculated on a reducing balance. This is not unique to Visa, however.
Standard Bank, which uses Mastercard, has a system called Accolades, which gives points for money spent on the card. Diners Club offers something similar in Voyager miles.
With the exception of Mastercard, companies struggled to give information about how many countries in Africa accepted their card, and how wide acceptance was in China.
Diners Club could only say that its South African operation was responsible for the card being accepted by nine countries in Africa, while other franchises were “responsible for the rest of Africa”.
Visa is accepted by 16 countries in Africa, but the widest card acceptance in Africa is that of Mastercard, which, according to Mastercard executive Vince Pribble, is accepted in 46 African countries. It is also accepted most extensively in China, including Hong Kong, Beijing, Guangzhou, Shenzhen, Nanhai and Shanghai.
Pribble says Mastercard has the world’s largest ATM network, with more than 350 000 ATMs. Mastercard is accepted at more locations than any other card.
Travel insurance is noted as a perk by all credit card companies – which means it is not a perk at all, but par for the course. Investigate the parameters of the travel insurance offered, because it is sometimes less than adequate, particularly when it comes to lost baggage and clothes replacement allowances.
Visa, and some other cards, allows its users to make international telephone calls using their credit cards instead of cash, which can save on expensive hotel phone bills, and the credit card telephone rate is often more competitive than the usual international call charge.
In the R15-trillion-a-year travel industry, traveller’s cheques are also becoming card smart. Amex is introducing cards instead of traveller’s cheques for selected destinations. Mastercard already advises travellers to use their cards instead of cheques.
Amex anticipates that it will gradually replace cheques in this lucrative market – and Amex alone earned $26-billion from traveller’s cheque sales in 1996.
In recognition of the growing importance of the South African travel market, Amex has begun issuing traveller’s cheques in rands, only the 12th of its foreign-currency cheques.