Store Branded Credit Card
A large SA supermarket is about to launch a Store Branded Credit Card.
Existing loyalty card holders are contacted by telephone, and after a short telephone call are invited to apply for a Credit Card. Sounds like a good deal! So why am I nervous?
The monthly fee does not appear on the document you have to sign (actually it is only R10 pm, but this is not shared upfront). The card will allow you three possible payment options:
- Revolving – traditionally this is up to 50 days interest free credit
- 24 month repayment period
- 36 month repayment period.
It does not clarify the monthly cost with the second or third option.
Should you buy using the Revolving option the store reserves the right to charge you interest anyway.
Who in their right mind will buy groceries to repay over 24 or 36 months?
Partial payments are not clarified at all. Let’s say you owe R25 000 on the Revolving option and pay them R21 000. Some credit companies will charge you interest on the full R25 000 for the next month even though you only owe R4 000. This store is not clarifying their position. I am nervous when so much information is not readily available.
Pre-Approved Car Loan
My second story involves a young man who was excited to receive an sms telling him he had been pre-approved for a R100 000 car loan. He is a working student. The dealer was able to tell him that the repayments on the R100 000 car would be R2000 per month. So why were my toes not curling with delight?
- The car is question is already 4 years old.
- Motor plan no longer in force. Servicing is going to be expensive.
- The loan is repayable over 7 years. By then the car will be 11 years old and unlikely to have any significant resale value.
- Payments on the loan increase annually.
- He will pay well over R160 000 for this car.
- Insurance, repairs, maintenance is going to be a considerable dent in his finances.
He simply did not read the fine print.