May 2, 2007

NEWS: South African Banks Hike Rates

It’s made news lately that many South African financial institutions are being accused of preying on their customers by hiking credit card interest rates without sufficient notice. New laws regulating industry standards on adequate notice of expected changes to credit card terms and conditions are to come into effect June 1 – and many critics see these nearly overnight hikes as banks’ way to make some extra money off their card holders before the new laws force them to play fairly.

Media reports state that many lenders across the nation have raised their interest rates a full 2 – 3% in the last month alone, with more jumping on the bandwagon daily. Standard Bank, the largest credit card issuer in S.A., confirmed that interest rates on debit balances had gone up from 17 percent to 19 percent, and from 20 percent to 22 percent, depending on the card held. Rival First National Bank’ fees leapt from 17 percent to 20 percent. Another, Nedbank, posted debit interest rates that range from 16.5 percent on its platinum card to 19.9 percent on its classic and gold cards. Yet one more, Absa also chimed in with a rate hike, conveniently effective as of the first of April. Holders of Absa’s silver cards are now paying 21 percent interest if they carry a debit of under R10,000, and 17 percent if they go above that amount. Absa’s platinum cards carriers will now be charged 19.5 percent on debit balances of less than R10,000 and 16.5 percent on higher amounts. The financial institutions have collectively defended the increases on interest rates by claiming that they did not pass on an increase in interest rates imposed on them by the Reserve Bank last year.

Overall, the people of South Africa owe nearly R40 billion on their credit card accounts.


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