Whether you are looking at completing an online store card application right now, or simply investigating the option, understanding the details of your store card interest rates is important. The RCS store card offers a flexible way to make purchases, but it’s important to understand how interest rates are determined. Unlike some credit options, RCS doesn’t have a set interest rate – it varies depending on individual circumstances. Let’s break this down in a way that’s digestible.
What is an Interest Rate?
An interest rate is the cost of borrowing money, usually expressed as a percentage of the amount you borrow. When you use a store card to make a purchase, you’re essentially borrowing money from the card issuer. The interest rate determines how much extra you’ll pay back in addition to the amount you spent. For example, if you have an interest rate of 20% and you borrow R1,000, you’ll pay back R1,200 over time, if you don’t pay off the balance within a stated period.
How RCS Store Card Interest Rates are Calculated
The Role of the National Credit Act
RCS calculates interest rates based on provisions from the National Credit Act. This means the amount of any interest, fees, and other costs will be clearly shown on your statement. The National Credit Act ensures transparency and fairness in how credit is provided and managed.
Personalised Interest Rates
The specific interest rate applied to your account is personalised and will be detailed in your pre-agreement statement. However, it’s essential to note that the interest rate will never exceed the maximum annual rate allowed by the National Credit Act, which (at the time of this publication) is at 29.25%. This ensures that you are protected from unfairly high-interest rates.
Connection to the Repo Rate
RCS interest rates are linked to the repo rate, which is set by the South African Reserve Bank. This means that any changes to the repo rate will directly affect your RCS store card interest rate. If the repo rate increases or decreases, your interest rate will adjust accordingly. RCS commits to informing you of any interest rate changes within 30 days of such adjustments.
Types of Repayment Plans and Their Interest Rates
Budget Repayment Plan
If you have a budget repayment plan, the interest rate calculation remains the same for the duration of the repayment period, even if there is a change in the repo rate. This means that once your interest rate is set for your budget plan, it won’t change until you’ve paid off that specific amount.
Revolving Repayment Plan
For revolving repayment plans and any new budget repayment plans, the interest rate will be adjusted according to the new rate if there is a change. This flexibility allows you to manage your repayments effectively, knowing that your rate is responsive to the economic environment.
Daily Interest Calculation and Compounding
Interest on your RCS store card is calculated daily and compounded monthly. This means that every day, interest is calculated on the outstanding balance, and at the end of the month, this interest is added to your principal debt. Compounding can impact the total amount of interest you pay over time, so it’s crucial to keep track of your balances and not default on installments.
Arrear Interest
If you fall behind on your payments, additional interest can be charged on the overdue amounts at the same rate as your standard interest rate. This arrear interest will be collected with your next debit order, so it’s vital to stay current with your payments to avoid extra charges.
Interest-Free Repayment Options
RCS offers an interest-free repayment plan option for certain purchases. If you choose this plan and keep your account current (meaning no missed payments), you won’t be charged interest on that purchase. However, if your account falls into arrears, the interest-free plan will convert to an interest-bearing plan without notification. Staying up to date with payments ensures you can take full advantage of interest-free offers.
Full Payment by Due Date
If you use your RCS store card and pay off the full amount before the due date on your next statement, RCS may choose not to charge you interest for that transaction. However, this is at its discretion and does not guarantee that interest won’t be charged in the future. Paying off your balance in full and on time is a good habit that can save you money on interest.
Service and Initiation Fees
RCS charges a service fee for administering your credit facility. This fee is ongoing as long as your account is open and totals are detailed in your pre-agreement. Additionally, a one-time initiation fee is charged when you first open your account, which will be included in your first statement. Understanding these fees helps you get a complete picture of the costs associated with your store card.
Store card interest rates can seem daunting initially, but understanding how RCS determines these rates can help you save a lot of money. Remember, your interest rate is influenced by the National Credit Act, the repo rate, and your specific payment behaviour. By staying informed and making timely payments, you can make the most of your RCS store card while keeping interest costs as low as zero. If you have any questions, reviewing your pre-agreement statement and staying in touch with RCS customer service can provide additional clarity.
