How credit cards work in South Africa: limits, interest-free days, fees and applying

A credit card gives you a revolving limit to spend against and repay each month. Pay the full balance by the due date and qualifying purchases carry no interest, for up to 57 days at Absa. Pay less and interest applies, capped by law at repo plus 14 points, or 21.25% a year at today's repo rate. Lenders check affordability before setting a limit.

What is a credit card?

A credit card is a revolving credit facility from a bank or retailer: you get a limit, spend against it, and pay back some or all of what you used each month. As you repay, the limit frees up again. A personal loan pays out once and then runs down to zero, while a card stays open for as long as the account does.

That flexibility is the whole appeal, and also the risk. Nobody asks you to pick a term when you tap the card, so the debt can sit for years without anyone noticing.

How does a credit card work month to month?

Each month the bank sends a statement with your purchases, fees, interest and a minimum payment, plus a due date. Pay the full balance by that date and, on qualifying purchases, you pay no interest. Pay less and interest is charged on what remains. Absa's credit card explainer gives its minimum on the straight facility as 3% of the outstanding balance plus fees and interest, and the exact figure is in your own agreement.

Absa also describes a budget facility, where a purchase of at least R300 is split into fixed monthly instalments over a term you choose, from 3 to 60 months when set up through a merchant or the card division. Budget purchases accrue interest from the first day. Fuel cannot go on a budget plan.

What is the interest-free period, and when does it not apply?

The interest-free period is the stretch between the purchase and the due date during which a qualifying purchase costs no interest, on condition that you clear the full balance. Absa says up to 57 days. Other banks quote their own number, so check the one on your agreement.

Several kinds of transaction are left out. On Absa's list, interest runs from the day of the transaction for cash withdrawals, fund transfers, casino transactions, lotto, prepaid purchases and garage card transactions including fuel. A cash advance on a card is therefore the costliest way to use it. The same page notes that the period depends on the account status, product and bank, so one missed payment can change the picture.

How much interest can a card charge?

For credit facilities, which includes credit cards and overdrafts, the legal maximum is the Reserve Bank repo rate plus 14 percentage points a year, according to Regulation 42 of the National Credit Regulations. With the repo rate at 7.25% that comes to 21.25%. Your own rate may sit below that ceiling, depending on the card and your profile. The cap moves with every Reserve Bank decision, and our repo rate guide explains why.

Here is what that means on R10 000. At 21.25% a year, one month of interest is about R177. A 3% minimum payment is R300, and after the interest only about R123 of it reduces what you owe. That is before any monthly fee.

How do you apply for a credit card?

You apply with a bank or retailer, in a branch or online, and the lender checks your identity, income and credit record before it sets a limit. Expect to provide your South African ID, proof of residence and recent proof of income. Absa's student credit card page lists a valid ID book or smart card, proof of residence and the latest proof of income for three consecutive months, plus proof of full-time registration at a qualifying institution, with a minimum monthly income or allowance of R800 for ages 18 to 30.

The lender must assess whether you can afford the credit before it extends it. Before you apply, see what the lender will see: your own report, through our guide to checking your credit score for free.

Is there an easy credit card to get?

Not one that works for everybody, since each issuer runs its own affordability and credit checks. Some products start lower, though. Absa's student card asks for R800 a month in income or allowance, which is a modest bar, and approval still depends on the checks. Whatever card you try, expect a small starting limit.

If your record has defaults or judgments, see loans for bad credit and what counts as a good credit score before applying. Registered lenders and their products are listed in the lender directory.

Can the bank raise my limit without asking?

Only in narrow cases. Under section 119 of the National Credit Act, a provider may raise a limit temporarily, by agreement with you, or unilaterally if you specifically asked for automatic increases in writing. Even then it can happen only once a year, and the rise cannot exceed the lesser of your average monthly purchases or your average monthly payments over the previous 12 months. An agreed increase requires a fresh affordability assessment. If you receive a limit offer you did not want, you can say no.

How much interest can a card charge?

For credit facilities, which includes credit cards and overdrafts, the legal maximum is the Reserve Bank repo rate plus 14 percentage points a year, according to Regulation 42 of the National Credit Regulations. With the repo rate at 7.25% that comes to 21.25%. Your own rate may sit below that ceiling, depending on the card and your profile. The cap moves with every Reserve Bank decision, and our repo rate guide explains why.

Here is what that means on R10 000. At 21.25% a year, one month of interest is about R177. A 3% minimum payment is R300, and after the interest only about R123 of it reduces what you owe. That is before any monthly fee.

How do you apply for a credit card?

You apply with a bank or retailer, in a branch or online, and the lender checks your identity, income and credit record before it sets a limit. Expect to provide your South African ID, proof of residence and recent proof of income. Absa's student credit card page lists a valid ID book or smart card, proof of residence and the latest proof of income for three consecutive months, plus proof of full-time registration at a qualifying institution, with a minimum monthly income or allowance of R800 for ages 18 to 30.

The lender must assess whether you can afford the credit before it extends it. Before you apply, see what the lender will see: your own report, through our guide to checking your credit score for free.

Is there an easy credit card to get?

Not one that works for everybody, since each issuer runs its own affordability and credit checks. Some products start lower, though. Absa's student card asks for R800 a month in income or allowance, which is a modest bar, and approval still depends on the checks. Whatever card you try, expect a small starting limit.

If your record has defaults or judgments, see loans for bad credit and what counts as a good credit score before applying. Registered lenders and their products are listed in the lender directory.

Can the bank raise my limit without asking?

Only in narrow cases. Under section 119 of the National Credit Act, a provider may raise a limit temporarily, by agreement with you, or unilaterally if you specifically asked for automatic increases in writing. Even then it can happen only once a year, and the rise cannot exceed the lesser of your average monthly purchases or your average monthly payments over the previous 12 months. An agreed increase requires a fresh affordability assessment. If you receive a limit offer you did not want, you can say no.