Special offers

Isaac Moledi

Isaac Moledi

Cash-strapped consumers could save money by shopping around for special deals offered by banks and credit card companies.

Deals such as low-interest rates on credit cards and "cash-back" rewards for bank accounts are being promoted to drum up new business, according to research by justmoney.co.za, a South African guide to money.

Though these special offers look tempting, the money specialist warns consumers to be careful that the products still give good value once the deal is over.

Paul Beadle, general manager of www.justmoney.co.za, says: "People are usually stuck for money after the festive holiday, so banks and credit card companies use these sweeteners as a way of attracting new business.

"If people 'shop around' they can find some good New Year's savings - but remember there is no such thing as a free lunch."

He advises consumers to take the time to compare these offers with ordinary products and to make sure that they know how much they will have to pay when the offer period is over.

It is only then that they will know whether it's a good or a bad deal, he says.

FNB, for instance, encourages customers to take out its credit card balance - including store cards, personal loans and other credit cards - and to transfer and switch all their debts to it. It offers to pay a debit interest rate of prime minus 1percent for nine months.

Balance transfer deals are hugely popular in the UK with customers who jump between cheap deals being dubbed 'interest rate tarts'.

The FNB offer ends at the end of March.

Beadle says that the upside of this is that at a current interest rate on 13,5 percent, it makes the FNB card cheaper than any other credit card and much cheaper than personal loans and store cards that can charge anything from 20percent to 40percent in debit interest.

But the card rate will increase if the prime rate goes up.

Beadle says the downside is that once the deal is over, clients will have to pay the prevailing interest rate on any balance remaining and any future spending.

Currently, FNB cards charge about 21percent, which isn't bad, but Beadle says you can get cheaper deals.

With Nedbank R750 Bank Account Reward, Nedbank will pay new clients a reward of R750 if they open an Nedbank Ordinary Current Account, Everyday Current Account, N-5000 Investment Account or Optimum Current Account before the end of March, which Beadle says could be a nice financial boost.

The upside, says Nedbank, is that the R750 reward could be equal to five month's free banking, with the bank claiming to already offer some of the most cost-effective bank accounts around.

The downside is that customers have to have salaries paid into the account and send an SMS to get a reward.

Beadle advises consumers to check his company's website www.justmoney.co.za to be sure that, even with the R750 cash back, it's the best account for you.

Virgin Money Credit Card's 0percent for three months is one of the cheapest credit cards around at 19,5percent debit interest (what you pay on outstanding balances) and no annual fees.

This means that it will charge new customers no interest at all for a three-month introductory period. Virgin Money have not said when the offer will end.

The upside is that if customers buy major items such as furniture or electronics, they can pay it off over three months and pay no interest.

The downside, says Beadle, is it's still a good credit card once the deal is over, but customers have to understand their obligations for paying off any debts they run up on a credit card - it's not free money.

Other banks have not made similar offers available, but Beadle believes that they will follow suit once they see the benefits.

He says www.justmoney.co.za has been created to help South African's save money by demystifying financial services and helping them to make informed decisions about their money.