Nedbank to offer credit cards to low-income people

Financial services group Nedbank said it had lowered the minimum income required to open a gold credit card account, with the bank actively targeting low-income customers.

Nedbank said clients will need to earn a minimum income of 5,000 Rand per month and expect to pay a monthly fee of R40, to qualify. Card delivery is free and minimum debit orders will help customers better manage their money, he said.

“Nedbank views financial inclusion as one of the most vital parts of our much needed economic recovery from the devastating pandemic,” said Mpho Sadiki, Head of Trading Products and Solutions at Nedbank.

“Although they earn a regular income, many people cannot access credit products offered by registered financial service providers, as most of these institutions still require a minimum income which remains out of reach.”

Credit, Sadiki said, is a crucial enabler for financial inclusion, and with its Gold credit card, Nedbank said it aims to reduce barriers to accessing credit for the majority of financially excluded consumers.

“Many of these people will now be able to get a credit card for the first time and will no longer be at the mercy of one of the more than 40,000 ‘mashonisas’ or informal lenders operating in the country. These lenders are unregulated and are known to charge interest rates of up to 50%, condemning many hard-working people into debt slavery.

The table below shows how the new Gold card compares to other Nedbank offers.

Reduced appetite

When economic shocks strain the consumer credit ecosystem, lenders struggle to identify resilient consumers, credit firm TransUnion noted.

Historically, macroeconomic conditions have been an important factor in the pace of credit growth, while consumer confidence also has a significant impact.

“The South African consumer credit market continues to experience significant turbulence, with a number of potential new trends emerging, particularly in the area of ​​delinquency. Broad economic and political news continue to impact consumer sentiment and outlook, and they will shape the recovery as it continues to emerge, ”he said.

TransUnion conducted its regular Consumer Pulse Study in August 2021, showing a number of important trends relating to potential future demand and market direction in South Africa. The number of respondents predicting in August that they would apply for new credit or refinance an existing one in the next year was just under a third (31%). Applications for personal loans (43%) and new credit cards (35%) continued to top the list, TransUnion said.

“Lenders must continuously monitor changes in consumer behavior and adapt to changing demand and future consumer preferences if they are to be successful. There is no doubt that the road to recovery will be bumpy, but by being informed, lenders will have the best possible chance to compete and succeed, ”said Carmen Williams, director of research and advisory at TransUnion South Africa.

Lenders remain focused on extending credit to existing customers rather than onboarding new borrowers. Average balances increased 17.6% and total credit limits increased significantly by 15.2%, while new loan amounts only increased by 2.2%, the group said.

Overdue credit card balances (up 10.6% year-on-year) were driven by consumers’ need to balance household budgets, maintain liquidity and finance subsistence purchases, particularly when revenues were negatively affected. However, the increases were not evenly distributed and a clear generational gap emerged.

Read: Capitec is pursuing Discovery with its own model of “behavioral banking” in South Africa.

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