M&G Money has previously warned against falling for the status appeal of a gold card. The annual fees are higher, but the benefits are much the same as any other credit card — especially if you use it sensibly and pay off your full balance each month.
In fact, having a gold card increases your chances of becoming a victim of fraud, according to the South African Police Service, because these cards are targeted by wayward waiters for cloning as they generally indicate a higher credit limit.
Virgin Money recently researched whether gold cardholders received benefits equal to the annual card fee. It concluded that the R104-million a year in additional income the banks charge for gold cards was a rip-off.
Virgin Money provided sound recordings of call centre staff at various banks agreeing that gold cards are nothing more than a status symbol and that there are few differences between gold cards and entry-level cards, despite annual card fees on gold cards being 38% higher.
The results show that the average annual fee for an entry-level credit card is R137,28 and for a gold credit card it is R189,44.
This is a R52,16 difference and, with an estimated two million gold credit cards in circulation in South Africa, equates to more than R104-million.
According to the research, on a positive balance, the average rate for entry-level cards is 2,58% and on gold cards it is 2,63% — a difference of 0,05%. The average rate for a negative balance on an entry-level card is 20,32% and on a gold card it is 19,94% — a difference of 0,38%.
Virgin Money points out that a gold cardholder with R5000 owing on his or her credit card ends up paying R1,58 less in interest a month than an entry-level cardholder, and would earn 21c more in interest a month if they had a R5000 positive balance.
The research also found that most banks were willing to give the same, or higher, credit limits to someone applying for an entry-level credit card as they would have obtained on a gold credit card. The credit limit was solely based on consumers’ income and their creditworthiness — not the colour of the card.
‘Putting a gold coat of paint on your credit card doesn’t cost the banks R52,16 more than blue or silver,” says Gavin Muller, credit product director at Virgin Money.
Cursory research by M&G Money shows that you have to be playing in the platinum space before you receive real rewards.
For example, FNB Platinum cardholders pay only 15,5% on debit interest, but you need to be earning in excess of R350 000.
Standard Bank offers its by invitation only Platinum cardholders debit interest rates of 12,5% and you pay R400 a year for the privilege.