Retail credit cards: Wendy on a new charge in store for you

Up to now they haven’t added a service fee to these accounts at all. But things have changed. From last month, an amendment to the National Credit Act capped the interest which can be charged on store cards to 21, 48%. Still high but not quite as high as before.

So now the retailers are clawing back the revenue lost from interest, by imposing a service fee. They say they are forced to because compulsory new, more stringent affordability testing - also part of the National Credit Act amendment  - is costing them more.

I think the retailers realised thousands of people would close their accounts if they slapped a R60 service fee on people’s accounts every month, so none of them have risked a service fee anything near as much as that.

Edcon, which has 3.5-million cardholders across its various brands, including Edgars and Jet, has come closest, having settled on what they call a “discounted”  R22, 80 a month and many of their cardholders are predictably not happy about it, because instead of imposing that fee to new accounts only, the retail giant has chosen to “re-contract” with its existing cardholders to allow them to add it every month to their accounts too, from July 4.

And if they refuse, well, then Edcon offloads you, basically - you pay off what you owe and then they cancel the account.

The Mr Price Group has imposed a monthly service fee on its brands’ store cards - also existing as well as new, but limited it to just R3. 

Even so, some people, such as Milady’s account holder Jay Moodley, are unimpressed - she has threatened to close her account.

The Foschini Group, which owns brands including Foschini, Totalsports, @Home and American Swiss settled on a monthly service fee of R8,95 but - here’s the big difference - only to to new ones. That was from May 6, and it explains why I’ve not had any complaints from that group’s existing account holders.

Woolworths’ store card service fee, by the way, is R12, 50.

Store cards are not a clever idea, financially. You’re far better off consolidating your debt onto a single credit card… the interest rate will be lower, and you get to confront what you owe on a single statement every month rather than spreading the debt across a number of cards.

And just think all the schlep and phone calls you’ll spare yourself if your wallet or purse is stolen.

Your cards and your credit record 

If you don’t pay what you owe on your store or credit card - that minimum amount due on your monthly statement, by the due date, it will cost you - not only in extra interest and penalties, but also in the form of an adverse listing, or “blacklisting”, on your credit record, which affects your ability to get new credit.

But did you know that if you only ever pay the minimum amount due every month, no more, you not only end up paying maximum interest, but your credit score will be impacted, because this indicates to credit providers that you’re only just hanging in, financially.

So always try to pay a bit extra.

What’s the difference between a credit record and a credit score? SA’s biggest credit bureau, Transunion, explains it like this: “Your credit score is calculated by a credit bureau and while it is based on your credit report, it also takes account of how you pay your bills, how much debt you have and importantly - how all of that compares to other credit active consumers.”

So it gives credit providers a quick and easy overview of your general credit behaviour. 

What can affect your credit score?

Other things that will negatively impact on your credit score, according to Transunion:

*Having too much debt; and

*Applying for or opening too many accounts in a short period of time - it signals desperation.

Check your credit record regularly - you can get a free report from each bureau once a year.

Contact details of four major credit bureaus:

TransUnion: www.mytransunion.co.za, 0861 886 466

Experian: www.experian.co.za, 0861 105 665

XDS: www.xds.co.za, (011) 645 9100

Compuscan: www.compuscan.co.za,  0861 51 41 31

If you disagree with a listing, lodge a dispute with the credit bureau. If, after 20 days, the adverse listing remains, you may approach the Credit Ombudsman for help, by calling 0861 662 837 or e-mailing [email protected]