Standard Bank has revised the way that the straight and budget credit limits on its credit cards work, with effect from the beginning of this year.
Your Standard Bank credit card has two limits: a straight (or revolving) facility and a budget credit facility.
A straight facility is for day-to-day purchases which you intend to repay at the end of the month.
You are not obliged to repay your credit card in full each month, but if you do not, you pay interest. If your account is in debit, you will be charged interest on the full outstanding closing balance on your monthly statement from the date of each transaction, irrespective of any part payment. Even if you pay one cent less than the full outstanding balance, you will be charged interest, which is why it is vital that you pay your card in full each month before the due date.
The minimum repayment that Standard Bank requires from you each month is the greater of 7.5 percent of your credit card bill or R25.
A budget credit facility allows you to pay for larger purchases over an extended period. If you want to buy goods on your budget facility, you have to tell this to the shop assistant when you make your payment.
Standard Bank's budget facility is for purchases of R200 or more and you can choose a repayment period of between six and 60 months. Repayments on your budget facility are made in monthly instalments that include interest. Repayments are added to the amount due on your straight facility.
Mike Olsen, a director at Standard Bank's card division, says up until the end of last year, Standard Bank had one credit limit for the straight facility and another for the budget facility. From January 1 this year, the two limits have been combined to create one limit called your account credit limit. This gives you the freedom to choose to pay for your purchases in any combination of revolving and budget purchases to your total limit.
For example, if you had a straight limit of R4 000 and a budget limit of R3 000, you now have an account credit limit of R7 000.
If you spend R2 000 on straight purchases and R4 000 on budget purchases, you will have R1 000 to use for either straight or budget purchases.
Previously, if you paid more than the full balance outstanding on your straight credit account, the extra amount was credited to your straight account and earned interest.
But since January 1, any extra money (over the straight balance) will be used to settle the balance on your budget facility. Only after both your straight and budget balances are settled will you earn interest on your credit balance.
Olsen says that in this way you budget account is settled quicker so you are charged less interest.