Customers are being swindled by credit card loyalty programmes, claims Virgin Money

Robert Laing

Robert Laing

Credit card holders are being taken for a ride by "free" air miles and other loyalty programmes, said Virgin Money.

Virgin Money released a study yesterday showing the average South African credit card holder pays about R252,70 a year in loyalty programme fees.

The study estimates that the local banks have issued about six million credit cards, meaning loyalty programme fees add up to more than R1,5billion a year.

"As for loyalty fees, they must be the greatest credit card swindle ever played on unsuspecting South Africans," John Maxwell, Virgin Money managing director, said.

"How on earth can the banks think it is okay to charge a yearly fee to a cardholder for being 'loyal' or to 'reward' them, especially when these loyalty schemes need an actuary to understand how to use them," Maxwell said.

The Virgin Money Credit Card was launched by Virgin Group chairman Sir Richard Branson a year ago. Currently there are 180000 cardholders.

"Virgin Money launched in South Africa to do one thing: shake up the financial services industry and offer customers a better deal," said Branson.

In the year since Virgin Money launched its credit card, the plastic deck has grown to include cellphone networks Vodacom and MTN, airlines SAA and, and retail chain Clicks.

The lure of co-branded credit cards is that consumers can use them anywhere that MasterCard or Visa is accepted while gaining loyalty points in the form of shopping discounts, air miles or airtime.

According to Virgin Money, South Africans who have opted to have an air-miles programme linked to their credit card have to spend, on average, R188370 over five years in order to qualify for a 'free' return flight between Johannesburg and Cape Town. During this time, the average cardholder is hit with R1563 in yearly card fees.

Considering that consumers can pick up a return flight from Johannesburg to Cape Town for under R1000, perhaps a "free" flight isn't so "free" after all.