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Together with our partners, we provide access to up to 19 reputable banks and lenders. Explore offers tailored to your needs and choose the most suitable offer. Each lender abides by the regulations outlined by the South African National Credit Regulator (NCR).
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How Do Credit Cards Work?
A credit card enables the cardholder to borrow funds from the lender for making purchases. Upon issuing a credit card, the bank sets specific conditions, including spending limits, minimum payments, and the applicable interest rates. The cardholder is required to repay these amounts in instalments when the credit card is used.
When a cardholder makes a purchase, the lender settles the payment with the merchant on their behalf. Subsequently, the cardholder receives a statement from the bank (the card issuer), which outlines the transactions made, the outstanding balance, interest charges, fees, and the repayment due date.
Payments made by the cardholder can either cover the minimum required amount or a portion of the outstanding balance. If the full balance is cleared each month, no interest is charged.
However, if only a partial payment is made, interest will be charged on the remaining balance. Several South African banks provide up to 55 days of interest-free credit, provided the full balance from the previous month is repaid.
This is crucial: Timely repayments can save money by reducing the amount of interest charged. Essentially, the sooner the balance is paid, the less interest the cardholder incurs.
Credit Card Minimum Payment
The minimum payment represents the least amount that must be paid each month to ensure that a credit card account remains in good standing. In South Africa, this amount typically ranges from 3% to 5% of the outstanding balance, or it may be a fixed minimum, whichever is higher. By making the minimum payment, one can prevent late fees, but interest charges will continue to accrue, which can lead to an increase in the total debt over time.
Paying only the minimum is similar to staying in place—there is no significant reduction in the debt. A more effective approach is to repay the balance as quickly as possible.
How to Qualify for a Credit Card in South Africa
To be eligible for a credit card in South Africa, you need to meet specific requirements, such as proving a steady income and having a sound credit history. Banks will also assess any outstanding debt to ensure that you can responsibly manage further credit.
The main qualifying criteria include:
- Being at least 18 years old.
- Holding a valid South African ID or passport.
- Providing proof of income (typically a minimum monthly income of approximately R3,500, depending on the bank).
- Maintaining a good credit score and a positive credit record.
- Satisfying the bank’s affordability criteria, which include reviewing existing debts and monthly expenses.
If you can demonstrate financial responsibility, the likelihood of being approved for a credit card increases.
Comparison of Credit Card Terms Among South African Banks
| Feature | African Bank Black Credit Card | Capitec Bank Credit Card | Standard Bank Gold Credit Card | Absa Private Banking Credit Card |
|---|---|---|---|---|
| Credit Limit | Up to R350 000 | Up to R500 000 | Up to R250 000 | Up to R228 000 |
| Interest-Free Period | Up to 62 days | Up to 55 days | Not specified | Up to 57 days |
| Monthly Fee | R65 | R50 | R54 | R80 |
| Initiation Fee | R140 | R100 | R190 | Not specified |
| Interest Rate | Personalized | 11.50% – 22.00% | Personalized | Competitive |
| Rewards | None | 1% cashback on all spending | UCount Rewards | Up to 2% cashback on purchases |
| Travel Insurance | None | Up to R5 million | Automatic travel insurance | R10 million for international trips |
| Additional Benefits | Earn 3% interest on positive balances | Zero currency conversion fees | Discounts on Emirates flights, lifestyle offers | Visa airport dining privileges, no annual fee |
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What is a Credit Card Loan?
A credit card loan refers to borrowing funds against your existing credit card limit, which you then repay on a monthly basis, including interest, over a predetermined repayment period. Since this is not a new application for credit, there is no need for a credit check to access this type of loan.
While credit card loans offer quick access to funds and are more affordable than cash advances, personal finance experts caution that these loans can still be expensive. They can also negatively impact your credit score, potentially making it more challenging to secure credit at lower interest rates in the future.
How Does a Credit Card Loan Work?
You may come across an offer for a credit card loan either through your online account or the bank’s mobile application. To apply, you will need to select the amount you wish to borrow and assess the available repayment options. The loan amount you can access depends on factors such as your available credit, regular spending patterns, and your creditworthiness.
After choosing the loan amount and repayment period, the issuer will usually transfer the funds to your bank account within a few days or may issue a cheque.
Credit card loans typically have repayment terms ranging from six months to five years. Monthly repayments are added to the minimum payment due on your card, meaning you only need to track a single payment. These repayments are reported to credit bureaus as credit card payments, rather than as separate loan repayments.
You can continue to use your credit card, but it’s important to monitor your balance and ensure you stay within the credit limit to avoid incurring extra charges.
Why Use Arcadia Finance?
- 100% free: The application is free and does not include any hidden fees.
- Quick & easy: The whole application process is done online in minutes.
- Convenient: Compare up to 16 banks & lenders with one application.
- Non-binding: You decide if you want to accept or decline your offers.
- Safe: Your personal data is safe with us.
What is Arcadia Finance?
Arcadia Finance helps South Africans in the search for loans from different banks and lenders through our loan broker partners. We provide access to up to 19 reputable banks and lenders. By completing our loan application you will get multiple loan offers, which you can compare and select the most suitable offer. The service we offer is completely free of charge and you will not commit to anything by requesting for loan offers via Arcadia Finance. We only work with trusted loan brokers who collaborate with NCR licensed banks and lenders in South Africa.
Advantages and Disadvantages of Choosing a Credit Card Loan
Advantages
- Convenience: Accessing funds through a credit card loan can be extremely helpful in emergency situations.
- No Collateral: Credit card loans are unsecured, which means you do not have to risk any personal assets as security.
- Potential for Rewards: Some credit cards offer rewards or cashback based on the amount borrowed, providing added benefits.
Disadvantages
- Higher Interest Rates: Credit card loans often carry higher interest rates compared to traditional credit card balances or secured loans, which can increase your overall debt.
- Impact on Credit Score: If you fail to manage your credit card loan effectively, such as missing repayments, it can damage your credit score and affect your future financial options.
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Alternatives to Credit Card Loans
While credit card loans are a convenient option for quick access to funds, they may not always be the most affordable solution. Fortunately, South African consumers have several alternatives available, including personal loans, overdrafts, and payday loans.
Personal Loans
Personal loans are unsecured loans that allow borrowers to access a lump sum of money, which is then repaid in monthly instalments over a set period. These loans typically offer lower interest rates compared to credit card loans, making them a more cost-effective option for borrowing larger amounts of money. Personal loans also provide fixed repayment terms, so you know exactly how much you need to pay each month, helping to manage your finances. However, to qualify for a personal loan, you usually need a good credit score and proof of stable income. The approval process can be more detailed, and personal loans may take longer to approve than credit card loans, especially if the lender needs to assess your financial history.
Overdrafts
An overdraft is a credit facility linked to your current account, which allows you to withdraw more money than is available in your account, up to a pre-agreed limit. This option is particularly useful for short-term financial assistance and provides quick access to funds without the need for a lengthy application process. The flexibility of overdrafts means you can use them whenever necessary, which is beneficial for managing cash flow issues. However, overdrafts often come with high-interest rates, which can accumulate quickly if the overdraft is not repaid promptly. Additionally, because overdrafts are repayable on demand, the bank can ask for repayment at any time, which could cause financial strain if you are unable to cover the balance immediately.
Payday Loans
Payday loans are short-term, high-interest loans typically due on your next payday. These loans are generally small, designed to cover urgent expenses until your salary is paid. The approval process for payday loans is quick, often providing access to funds within the same day, with minimal documentation required. However, payday loans come with extremely high-interest rates and fees, making them one of the most expensive borrowing options. The short repayment terms, typically two weeks, can make it difficult to repay the loan in full, leading to increased costs. Furthermore, if a payday loan is not repaid on time, it can negatively impact your credit score, making it more difficult to access other forms of credit in the future.
Secure your loan effortlessly with Arcadia Finance
The loan application is free, and you can pick from a variety of 16 respected lenders. We only work with trusted loan brokers who collaborate with NCR licensed banks and lenders in South Africa.
After submitting your loan application to us, we will send it through our loan broker partners to a number of different banks and lenders for review. Within minutes, you’ll receive a variety of loan options that are available for you. Select the one that best fits your needs.
Remember, all offers are no-binding, so if you don’t find what you’re looking for, you’re free to decline.
Conclusion
Credit card loans can be a convenient way to access funds quickly, especially for emergencies or unplanned expenses. However, they often come with higher interest rates and the potential to negatively impact your credit score if not managed responsibly. It is essential to weigh the pros and cons, understand the terms of the loan, and explore alternative borrowing options such as personal loans or overdrafts that may be more affordable. By maintaining timely repayments and staying within your financial limits, you can make informed decisions that support your financial well-being.
Frequently Asked Questions
A credit card loan allows you to borrow money against your existing credit card limit, which you repay in monthly instalments with interest over a specified period. It provides quick access to funds without requiring a new credit application.
A credit card loan typically has lower interest rates and more structured repayment terms compared to a cash advance, which is often more expensive and must be repaid quickly.
Yes, if you fail to make repayments on time or borrow beyond your capacity, it can negatively impact your credit score, making it harder to access credit in the future.
Depending on your needs, alternatives like personal loans or overdrafts might be more affordable. Personal loans usually offer lower interest rates, while overdrafts provide flexibility for short-term financial needs.
To qualify for a credit card in South Africa, you need to be at least 18 years old, have a valid South African ID or passport, provide proof of income, and maintain a good credit history. Banks will also assess your affordability based on existing debts and expenses.
