Last month both Kulula and South African Airways (SAA) Voyager launched their credit card offering to the market. I suspect when SAA compiled its marketing brochures leading with “nothing earns you more miles faster”, it did not know what Kulula was up to.
Kulula has designed a rewards programme that converts to air ticket discounts far quicker, but it has its limitations.
The two cards will appeal to two distinct markets. The Kulula card is for the average person who spends about R5 000 a month on their credit card and is not a frequent traveller — in other words, Kulula’s typical customer. The Voyager card is aimed at the business traveler and higher income earner who travels both abroad and locally.
Kulula launched its card first, one which earns “kulula moolah”. It is a wonderfully simple mechanism. If you spend up to R5 000 a month on your Kulula credit card, you receive 3% of the value back in kulula moolah. So if you spend R5 000, at the end of the month you will have R150 towards an air ticket. You don’t get points, just a cash value. This cash value you use to purchase a ticket on any Kulula flight, any time, to any place. No limitations on air-mile seats.
You can also use this money towards a ticket rather than having the full ticket value before booking. So if you have only accumulated R700, you can use it towards a ticket for R1 200 and pay in the difference.
This is important because there is a catch. Kulula moolah expires every six months. So, for example, if after six months you have spent an average of R4 500 a month on your card, you will have R810 of kulula moolah which you have to use or lose.
You can book a ticket in advance so you do not actually have to fly within those six months. Kulula also puts limits on the amount of kulula moolah you can earn and people spending more than R5 000 a month on their card will only receive 2% of the purchase value as moolah. That drops to 1% on amounts over R10 000, and is limited to R20 000 a month.
By having moolah expire regularly and limiting the rate of accumulation, Kulula ensures its air rewards programme doesn’t end up crippling the airline. It also rewards Kulula flyers by crediting them with an extra 3% of the value of a Kulula air ticket when purchased with a Kulula credit card. So an air ticket of R1 000 will earn you R60 in kulula moolah.
The Voyager credit card is a bit more complicated. It works like other credit cards in that for a certain amount spent, you earn a certain amount of miles. The complication is that the rate you earn depends on which card you choose. The Classic American Express Card converts at a rate of R7 for every mile. With a domestic flight costing 18 000 miles, the card holder would need to spend R126 000 to fly one way. The Gold card converts at a rate of R6,50 and the Premium card at R6 for every mile. These rates are generally better than what the banks’ credit cards offer.
But for both programmes you pay much higher annual card fees. The Kulula card fee is R150; SAA Voyager Classic card will cost R300 year, Gold R550 and Premium R1 650. Then there is another whole range of conversion rates if you opt for a Visa card rather than an American Express — but these are not very competitive.
The Voyager card does offer customers a lot of extras that appeal to frequent flyers. There is a bonus mile incentive for the first SAA flight you pay for on your credit card, ranging from 5 000 miles to 18 000 miles, depending on the card. The card also provides free entry to business lounges and other bells and whistles like companion cards and the fact that if the cardholder spends R80 000 a year on the card, the miles do not expire.
Voyager also offers a substantially lower interest rate on outstanding balances at 11,9%, compared to Kulula’s 17% — although Kulula is offering a 5% interest rate for the first six months as an attraction.
If you just want to save up for the occasional local flight and pay off your credit card balance each month, Kulula would be the right card for you. But if you prefer to spend your free miles on overseas holidays then the Kulula card would be pretty useless and the Voyager card may be more your style.
The personal finance trick with either of these cards is to pay your full balance off each month so you don’t end up paying for the “free” flights through high interest costs.