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Not such a ‘fantastic benefit’

Banking

Banks often have a novel sense of what it means to treat customers fairly – one that often parallels that of airlines. Combine the two and you have a marriage made in heaven – or hell – depending on whether you are part of the airline/bank alliance or a misled, exploited and unhappy customer.

On today’s front page, we compare the merits of a Standard Bank/British Airways (Mastercard) credit card and a Nedbank/South African Airways (American Express and Visa) credit card.

The Standard Bank/BA/Mastercard combo wins the contest on straight value but not by a significant number of air miles.

Many people benefit from frequent flyer programmes, which reward them for flying often and/or using a credit card to make other purchases.

However, the scales are tipped in favour of the banks and airlines, particularly where credit card spend is involved.

Credit card costs are far too high, particularly once you consider that vendors pay a percentage of each sale. I do not think there should be any cardholder charges or fees.

The programmes do not offer anywhere near enough value for the many consumers who are enticed to sign up. The exceptions are people who fly business class regularly and/or have a high credit card spend.

There is not sufficient disclosure of the downsides, particularly by Nedbank/SAA.

Recently, Nedbank and SAA sent out a no-reply email (it is amazing how banks use a no-reply email address – quite clearly, they are not interested in your views) telling customers “we had to make a few changes to the qualifying spend thresholds”.

But the annual fee of R1 650 on the Premium option has been left at the level at which it has been for the past four years. This fee is one of the highest among credit cards in South Africa.

Nedbank/SAA boasts that you are provided with both an American Express (Amex) and a Visa card, so you always have one card you can use.

The reason is that Amex cards are not popular with many vendors, because they must pay a much higher percentage of the sale than on other credit cards. In fact, Amex is so unpopular among vendors (both locally and abroad) that many reject the card.

Nedbank and SAA, from their side, reward you with additional Voyager miles for foisting your Amex card on vendors rather than using your Visa card.

One of the selling points of the Nedbank/SAA offering is that once you reach a spend of R60 000 within a year on your credit card(s) you are entitled to a companion ticket. Initially, this was for a ticket to any destination to which SAA or its airline partners flew. As of the beginning of this year, the companion ticket you receive for spending R60 000 is limited to destinations in Africa. To travel beyond Africa, on what Nedbank and SAA call the global companion ticket, you now have to spend R160 000 a year on your credit cards.

In their no-reply email, Graeme Holmes, Nedbank’s head of consumer cards, and Suretha Cruse, the head of SAA Voyager, say: “The companion ticket is a fantastic benefit and, although there are fare class conditions, maximum value can be leveraged, especially by a corporate traveller utilising this benefit to travel with a companion.”

Well, well. They quite clearly have no sense of language.

Let’s have a closer look at this “fantastic benefit”.

Let’s start with the fare distinctions between classes.

You are limited to the full-price tickets of economy classes Y, B, M, K and H, first and business class.

If you attempt to book your flight online, you are provided with virtually no information on what are the different economy classes. If you think you can simply ask for the cheapest economy class ticket, you are very much mistaken.

When I did the research, the cheapest economy class Cape Town/London return ticket was R6 120 (all taxes and extras included). But that was not a qualifying ticket. The cheapest qualifying tickets cost R11 620.

Remember that if you apply for a companion ticket, you still have to pay the airport taxes, fuel levies and whatever else they tag on. These add-ons totalled R1 982 for the Cape Town/London companion ticket, so the total cost for the cheapest qualifying ticket plus the companion ticket was R14 502. The cost of the two cheapest SAA economy class tickets was R12 240.

And remember that you receive nothing extra for the additional R2 362 you pay. Remember, too, that you have been loyally using the credit cards to spend the R60 000 (now R160 000). Also, take account of the fact that the more you spend, the more Nedbank/SAA/Amex/Visa are making from vendors.

I cannot see much benefit, let alone a “fantastic benefit”.

The only people who would benefit are those who fly business class, because the add-on costs of the companion ticket are the same for all classes.

Incidentally, the cheapest BA economy ticket to London at the time was R5 546. So by flying BA, I could have saved R3 410 on the cost of the two tickets, compared with the cost of booking a companion ticket through Nedbank and SAA.

When I raised the issue with Holmes, he conceded that the complimentary SAA companion ticket works better for some people than for others.

But he also argued: “It is true that if one shops around, one will often find two economy fares that are cheaper than the single ticket required to take advantage of the companion ticket. However, these tickets will be the cheapest class tickets, are subject to availability and do not offer benefits such as the ability to change the flight booking time.”

And, in a later missive, Holmes added: “The SAA Voyager Premium credit card is aimed at higher-income consumers who enjoy flying on SAA. The complimentary companion ticket is one of many benefits of the product and is specifically aimed at high-spending business class travellers. This feature is not aimed at budget travellers looking for bargain flights.”

“Wow!” is all I can say, if this is Holmes’s understanding of a “fantastic benefit”.

But Holmes’s disingenuousness did not stop at his justification.

Holmes continued in his response: “I have received other emails from cardholders and have had conversations with cardholders on this matter. One cardholder in particular expressed surprise at the new spend thresholds, but by and large the change has been well received.”

Well, when you don’t tell the full truth and you send out a no-reply email, it is hardly likely that you will find out what your customers really think, Mr Holmes.

And if you want to find out what your customers really think about your credit card, also find out what they think about dealing with SAA Voyager.

SAA has never had a high reputation for the manner in which it treats passengers, from when they check in to the service they receive in the air. This sub-quality service is also reflected at SAA Voyager.

Last year, I witnessed SAA Voyager put down the telephone on an SAA inquiries staff member at Cape Town International Airport – not once but three times over a two-hour period, when she bravely battled to sort out an SAA Voyager mess-up. If Voyager does that to colleagues, it is unlikely to treat its members much better.

I have kept the best of Holmes for last.

In his response to my queries, Holmes said: “We have changed the product construct for commercial reasons. Obviously, providing the complimentary SAA companion ticket comes at a cost to SAA and Nedbank. The objective is always to balance the cost and benefits (or value) to the cardholder, SAA and Nedbank.”

Well, Mr Holmes, the scales seem to be very unbalanced in favour of SAA and Nedbank. I would suggest that the companion ticket is not restricted to any particular class.

I would also suggest that, because of the money made from merchants, South African banks should follow the overseas trend and stop charging any fees on credit cards to cardholders.

Hopefully, Capitec Bank, which has led the way in low bank charges, will enter the credit card market, bringing some real competition.

A last word: when the National Treasury finalises the proposed financial services legislation for “treating customers fairly”, it must not grant the banks an exemption as it did with the Financial Advisory and Intermediary Services (FAIS) Act. Bank brokers who sell investments and insurance products are subject to the FAIS Act, but those who sell bank products, such as savings accounts, credit cards and home loans, are exempt.

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