Standard Bank recorded a 52% increase year on year in new credit cards issued up to the end of August 2024 compared to the same period in 2023. But the average approved limits are slightly lower this year.
“With living costs soaring in the past two years, these high volumes suggest consumers could be relying on credit cards more. However, we've noticed that an increasing number of people are treating their credit cards as transactional accounts.

This trend suggests that the rise in credit-card usage might be driven by consumers looking to earn more UCount reward points,” says the head of credit at Standard Bank, Tumelo Ramugondo.

Ramugondo adds that while a credit card was traditionally a useful borrowing option to finance big-ticket purchases, its role has evolved into an everyday payment tool. It has become especially useful for consumers who want to spread the cost of items purchased during big sales to take advantage of flexibility offered by buy-now-pay-later options.

Consumers are also using their credit cards as budgeting tools because they can benefit from up to 55 days of interest-free grace period on purchases. Additionally, if they pay their balance in full each month, they can continue to benefit from this grace period for the next 30 days.

Costly credit mistakes

“However, Standard Bank's credit-card division data shows that some consumers aren’t using their credit cards optimally. We see a lot of transactions that are costly to pay with a credit card, like cash withdrawals. We don’t encourage cash transactions because they attract interest from day one,” says Ramugondo.

Ramugondo advises consumers to make their credit card work for them. He recommends that they settle the amount owed or make the minimum repayments; clear their credit-card balance in full to avoid monthly interest. If they can’t pay the full amount, they should aim for a payment above the minimum due each month.

"They should familiarise themselves with their credit card providers’ rules to anticipate what they’ll pay. For instance, Standard Bank’s minimum is 3% of the outstanding balance," he says.

He suggests too that they avoid excessively high outstanding debt. "Excessively high outstanding credit-card balances make it difficult for consumers to use their credit card as a revolving facility, especially if they do not maintain their minimum repayments. It also makes monthly repayments much larger.

"If using a credit card as a transactional product, transfer enough funds to the credit card. Don’t spend beyond your means," he said.

Avoid costly mistakes too by knowing what not to charge to your credit card, he says. "When it comes to managing debt, those facing challenges with monthly obligations might find that a consolidation loan offers more stability. This type of loan provides fixed repayments, which can be more predictable than a credit card’s revolving credit.

"Also, withdrawing cash from a credit card isn’t the best move. These transactions start accumulating interest right away, and they don’t benefit from the typical interest-free period. Instead, it’s often smarter to use the card directly for necessary purchases rather than taking out cash.

"For big purchases, like buying a car, a credit card might not be the most economical choice. Vehicle financing usually comes with lower interest rates, making it a better option for such expenses.

"As for large medical expenses, there are specific products designed to help with these costs. Medical aids and gap cover policies can offer better financial support than a credit card in these situations."

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