|
 |
The R104 million great ‘gold
card swindle’ |
|
| |
Virgin Money research shows that for
credit card holders ‘all that is gold
does not glitter’ – Gold credit card
holders pay more in annual fees yet
enjoy few additional benefits
Research conducted by Virgin Money has
revealed that South African gold credit
card holders are collectively topping up
their banks’ profits by R104 million
every year, under the false impression
that they are paying for a better ‘deal’
than entry-level blue or silver credit
card holders.
The research revealed that although gold
credit card holders pay on average 38%
more in annual card fees, in return they
receive insignificant additional
benefits in terms of the interest rates
charged for both positive balances and
negative balances.
Virgin Money carried out the
investigation by comparing the
entry-level and gold credit card
offerings of six credit card issuers.
Its research looked at annual card fees,
required minimum annual income, interest
earned on a positive balance, and
interest paid on a negative balance.
The results show that the average annual
fee for an entry-level credit card is
R137,28, and for a gold credit card is
R189,44. This is a R52,16 difference
and, with an estimated two million gold
credit cards in circulation in South
Africa, equates to over R104 million of
a ‘gold card rip-off’.
And while the banks’ glossy marketing
materials try to convince consumers that
gold credit cards offer better interest
rates on both debit and credit balances,
the research illustrates that the
differences for both rates are
negligible.
On a positive balance, the average rate
for entry-level cards is 2,58% and on
gold cards it is 2,63% - an
indiscernible difference of 0,05%. The
average rate for a negative balance on
an entry-level card is 20,32% and on a
gold card it is 19,94% - a difference of
0,38%.
To put this into perspective - a gold
card holder with R5000 owing on his or
her credit card ends up paying R1,58
less in interest a month than an
entry-level card holder, and would earn
21 cents more in interest a month if
they had a R5000 positive balance!
Some credit card providers would argue
that cardholders are able to access
higher amounts of credit with a gold
card. However, the research also found
that most banks were willing to give the
same (or higher) credit limits to
someone applying for an entry-level
credit card as they would have obtained
on a gold credit card. The credit limit
was solely based on consumers’ income
and their creditworthiness.
Most banks in South Africa tend to
assign status to credit cards by naming
them after precious metals like silver,
gold, platinum and even titanium. They
have marketed these cards in clever ways
that create the perception that the
cards are something to aspire to, that
they will afford the cardholder a higher
status and better benefits than
entry-level card holders.
Using phrases like "…your hard work has
paid off and we recognise this by
providing you with all the benefits of
having a gold credit card…" and
"…carrying superior benefits that your
financial standing demands…" or "…full
credit facilities for the status you’ve
earned…", banks have nurtured the
perception that ‘coloured’ credit cards
are a fashionable status symbol.
"At the end of the day, they’re still
made of plastic and the ‘benefits’ of
owning these multi-coloured cards don’t
seem to glitter as brightly as their
cards do. And, trust us, putting a gold
coat of paint on your credit card
doesn’t cost the banks R52,16 more than
blue or silver," says Gavin Muller,
credit product director at Virgin Money.
Additional research that Virgin Money
carried out for this purpose involved
calling the various credit card
providers’ call centres and asking the
agents for the tangible differences
between gold and entry-level credit
cards.
The results ‘from the horse’s mouth’
confirmed that gold cards are nothing
more than a status symbol and that there
are very few differences between gold
cards and entry-level cards, despite
annual card fees on gold cards being 38%
higher.
The fact is that annual credit card fees
are no longer justifiable. It is
ridiculous that credit card providers
are still charging customers just to
carry around their particular brand of
credit card, and even more so if it is a
gold card.
|
|
