The impact of credit card incentive packages on consumer borrowing among bank customers in Pretoria North, South Africa

Abstract

The main purpose of this study was to investigate the impact of credit card incentives on consumer borrowing. The use of credit cards has been on the increase for the past few years. To date many people, do not clearly understand how credit cards operate. With credit cards people are able to buy certain goods and services without having money in their accounts, and in the process indulge in impulse buying which results in serious debt. This problem is further compounded by credit card incentives offered by banks to lure more customers who will end up overspending. However, if managed properly credit cards can be very beneficial as they offer safety and convenience to the purchasing process. Most consumers now prefer using credit card instead of cash and cheques as it is considered a better substitute. A quantitative research design has been followed in order to obtain conclusive results. It has been useful in generating new ideas about the research problem. Primary data was obtained by use of questionnaires. This enabled the researcher to get relevant and conclusive results. A convenience sampling technique was used. From a sample of 100 questionnaires sent out, only 94 were completed and returned back, thus the researcher was able to do an analysis. It was deduced that the greater number of respondents were knowledgeable about credit cards but did not have a full understanding as noted by how easily they got attracted to credit card incentives offered by banks. The research findings reveal that the majority of respondents are experiencing financial difficulties as they fail to keep up with repayments on their credit card debt. It has also been noted that a direct relationship exists between credit card incentives and consumer borrowing. For instance, if credit card incentives increase consumer spending rises, thereby increasing consumer debt. The research concluded with recommendations highlighting the need for efficient regulatory systems, the need for responsible lending and borrowing and the availability of a conducive and appropriate enabling monitoring and evaluation system that fosters the development of a vibrant credit market.