Barclays Bank Zambia has a new Kwacha Credit Card: Hello eCommerce (and debt?)!

Credit cards are big in other developed countries like the USA to carry out payments from the convenience of your own home, and now we have access to that very same facility right here in Zambia, thanks to Barclays Bank Zambia.

The advantage of the first Kwacha credit card is that you can buy goods and services and pay later. So you don’t have to carry cash notes while you move around. This will definitely increase the spending by customers and boost the economy across all sectors.

Even if you make a payment abroad your transactions will still be shown to you in Kwacha on the device that you receive notifications on, as Mr. Saviour Chibiya, Barclays Bank Zambia Managing Director said at the launch event last week, “Barclays was focused on introducing products that not only helped bridge the big gap between Zambia and sophisticated financial markets in developing countries but also ensuring banking became easier. Once a customer made a transaction with the credit card, whether in Zambia or abroad, the information on the transaction would be Kwacha-based transmitted via SMS.”

Why we’re worried

There a few disadvantages for the use of credit cards:

• Debt levels increase:  People’s debt increases due to impulse buying of things they may not need. You may think you’ll be able to pay for a particular good or service in instalments but what if you can’t? Every payment period that passes you by accrues interest or a fine. In the end the total cost of what you originally planned to spend increases, increasing your debt level too. Last week when the card was officially launched, Dr Michael Gondwe, who is the  Bank of Zambia governor, said “One of the many challenges of credit is that they encourage holders to spend money they don’t have. If the credit card does not require paying off the balance each month, this balance will accumulate. The longer it takes to settle, the more money will be owed since interest will be charged each month on unsettled balance. Card holders, therefore, need to be prudent and avoid using the card liberally. May I caution citizens to therefore avoid falling into a debt-trap. The responsibility of avoiding falling into a debt-trap lies primarily with the card holder.”  
• Interest rates may be too high: The card comes with a 50 day interest free ‘grace period’, so after that any post payment made will gain interest on your card. That will lead to an expense on the consumer’s side. There really is no “free lunch”.

 

Why we’re OK with it

It’s not all bad, there are some advantages too:

• Save on sales: When you come across a sale and don’t have cash, you can still get the item. Consider it a sort of low cost loan. You save because you have a discount on the item you buy.
• Convenience: Most bank cards will not allow you to make payments, especially for foreign goods/services but the Kwacha credit card will let you. You can even still use it at an ATM if you wish to get cash in bank notes.
• Keep track of expenses: There are statements that you can get that will help you keep track of how you’re spending your money, including how much you owe. It’s perfect for taxing purposes because the statements acts as a financial record. Plus you can also track if there’s been an over/under charge for something.
• Positive Credit Ratings: If you frequently use your card but still manage to pay back your bills in time, your credit score goes up. Therefore when applying for a loan, it will be easier for you to be favored if you seem like a faithful client.
• Miles: If you pay for flights using the Kwacha credit card you accumulate frequent flier Worldmiles that you can redeem free tickets with for flights depending on how many miles you have on the card.

In the end, with greatness comes responsibility. An opportunity to spend has been given to us but what we actually spend on is our responsibility. As Barclays seeks to grow, let Zambians also be aware of their spending habits and avoid over-abusing these cards.

Check out the video interview with MTN’s YelloZed here. Let us know your comments if you have signed up for the card or intend to use it. How will it change the way you make payments, shop or manage your money and life (online)?

Image Credit: UK Zambians, WorldMiles Africa, BarclaysBankZambia Facebook Page