Credit cards provide 'a great way to spend money, but they are dangerous'
Credit cards are the best spending mechanism "by far" but they are also the most dangerous, according to Razor's Edge Business Intelligence managing director Bruce Conradie.
Razor's Edge recently released its annual Value in Credit Cards South Africa survey in the hope of improving consumer education.
A total of 99 cards were surveyed for 2006 compared to 59 in 2005. Credit cards were rated on a net value basis where total benefits were measured against overall costs. Loyalty points, rebates, frequent flyer miles, travel insurance, interest free periods, free services and other benefits were given a monetary rand value and measured against costs such as annual card fees, loyalty benefit fees and interest rates.
The survey found that the SAA Voyager Premium card was South Africa's most valuable standalone credit card last year while the Platinum Discovery Card was the most valuable card overall, offering rebates of up to R15000 a year. The most valuable card overall in the consumer spend category was the Woolworths Silver card.
Executive director of African Bank Tami Sokutu said that in the past year consumers had been given a "greater choice when it comes to accessing credit".
"In the second half of the year in particular, a number of new credit cards became available," Sokutu said. "This surge in credit cards came about despite the finance minister saying that he was worried about how many households are using credit today."
In June the outdated Usury Act will be replaced by the more stringent National Credit Act.
This new piece of legislation is aimed at stopping "reckless lending" and the practice of providing credit that would leave consumers over-indebted.
Conradie said the act would be good, but that it would not help people in the long term. "While it will create some control, it won't have any value for those without financial discipline."