How Interest Actually Works on Credit Cards and Store Accounts

Credit cards and store cards fall into a category the National Credit Act calls a "credit facility" — revolving credit with no fixed end date, where you can keep drawing on it as you pay it down. The NCA caps how much interest a credit provider can charge on this type of credit, but that cap isn't a single fixed number.

The rate moves with the repo rate

The maximum interest rate on a credit facility is calculated as the SARB repo rate plus 14 percentage points per annum. Because the repo rate changes when the Reserve Bank's Monetary Policy Committee meets, the legal maximum moves with it — there's no fixed "the max is X%" that stays true over time. Any figure you see quoted is only accurate at the repo rate that was current when it was written.

This matters because a lot of older material online still describes the NCA maximum using a different formula. Always check the current repo rate against the SARB or NCR directly rather than trusting a remembered number.

Why this rate is so much higher than a bond

A bond is secured — if you stop paying, the lender can repossess the property and recover most of its money. A credit card has nothing behind it except your promise to pay. Lenders price that extra risk into the rate, which is a large part of why revolving credit costs so much more per rand borrowed than a mortgage.

Why the minimum payment is a trap, not a plan

Store and credit cards typically only require a small minimum payment each month. Paying only the minimum means most of your payment goes toward interest rather than the balance itself, especially early on — the debt can take years to clear and cost far more than the original purchase, even without ever missing a payment.

What actually reduces what you pay

• Pay more than the minimum whenever you can — even a modest extra amount above the minimum meaningfully shortens how long interest keeps accruing.
• Pay off the highest-interest balance first if you're carrying more than one — this is usually the fastest way to reduce total interest paid across everything you owe.
• Understand the in duplum rule (covered in lesson 5) — a real legal protection that limits how much total interest can ever be charged on a single debt.