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What Is a Credit Card?



Credit cards are one of the most convenient payment methods around. You can pay back your balance over time, which can come in handy if you want to finance a big purchase or cover an unforeseen emergency. Credit cards also come with excellent fraud protection. Most offer zero-liability policies, meaning you won’t be liable for any fraudulent charges you report. Credit cards can also be good for everyday purchases. Using them regularly and responsibly will help you build credit and some cards offer rewards that become more lucrative the more you spend. And as long as you pay off your balance in full every month, you won’t ever have to pay interest.

However, this temptation to spend can easily lead to overspending. That’s why credit cards are notorious for landing people in unmanageable debt. Unfortunately, most credit cards come with relatively high interest rates, which may make it hard to pay down debt if you rack up a large balance. In addition to costing cardholders a lot of money in fees, high balances and missed payments can also wreck your credit.

Types of credit cards

Credit cards come with a variety of different features, and there’s no such thing as a one-size-fits-all card. It’s important to know what you’re looking for and understand the different types of credit cards so you can choose one that best meets your needs. Note that some credit cards come with annual membership fees, (typically the cards that offer more generous rewards and benefits), while others are no-annual-fee credit cards.

Travel credit cards: With a travel credit card, you’ll typically earn bonus rewards on travel-related spending, and the rewards you earn can be redeemed for travel such as towards airline tickets or hotel stays. The best travel credit cards come with additional travel-related perks, such as trip insurance, airport lounge access, travel statement credits, and more.

Cash back credit cards: A cash back credit card will earn you cash back on every purchase. You’ll earn it as a percentage of the total purchase price. Some cash back credit cards offer a flat rate on all purchases while others offer bonus cash back in certain categories.

Low-APR credit cards: These cards come in two forms: low-interest credit cards, which offer a relatively low ongoing APR, and 0% intro APR credit cards, which offer a 0% APR on new purchases, or sometimes on new purchases and balance transfers, for an introductory period — usually 12 to 20 billing cycles — after which the higher standard APR is applied.

Balance transfer credit cards: Balance transfer credit cards come with a 0% APR on balance transfers for an introductory period of as much as 21 months. A balance transfer credit card can be used to avoid interest fees and so pay down debt more quickly as long as you’re able to pay off the card’s balance before the introductory period ends.

Business credit cards: These credit cards are meant to be used for business-related expenses, and activity is sometimes recorded on your business credit report rather than your personal credit report. Business credit cards often come with relevant features like employee credit cards and bonus rewards on business purchases, and they’re a great tool for small business owners to easily separate business and personal finances.

Credit cards for bad or no credit: There are a variety of credit cards for bad credit. Cards for rebuilding credit include secured credit cards, which require a security deposit that then acts as the card’s credit limit. Other credit cards, like student credit cards, are designed for people with no credit or a thin credit file who want to start building credit from scratch.

Difference between credit and debit cards

Credit cards and debit cards are both card payment methods — the key difference lies in the way your purchases are funded. When you pay with a debit card, the money comes from a linked checking account, so you can only spend money that you have in your bank account. When you pay with a credit card, the purchase is paid for by the credit card issuer, and you then pay it back.

There are some differences in features as well. Debit cards rarely come with a rewards system or extensive benefits like many credit cards do. Your debit card activity doesn’t show up on your credit report or impact your credit score. Debit cards also offer less fraud protection than credit cards. Your liability for fraudulent purchases made on a debit card can range from $50 to $500 depending on when it’s reported, whereas most credit cards come with a $0-liability policy.

Credit card terminology

Here are terms you should understand before applying for or using a credit card.

Credit score: Your credit score is a number rating that’s calculated based on the way you’ve used credit in the past. Lenders and credit card companies use it to calculate the likelihood you will repay your debt.

Credit limit: Your credit limit is the maximum amount of credit that your credit card issuer will extend to you. If you try to charge more than your credit limit to your credit card, the transaction either won’t process or your credit card issuer will charge you an over-limit fee.

Available credit: Your available credit is your credit limit minus your current balance. It’s the amount of credit you have left on your card that can be spent.

Annual percentage rate: Also known as your card’s APR, the annual percentage rate is essentially the cost of carrying a balance on your credit card. A credit card’s APR is simply its interest rate.

Annual fee: The annual fee on your credit card is a membership fee that’s charged once each year. Cards that charge an annual fee usually do so because they offer additional rewards and benefits that save you money.

Authorized user: An authorized user is a secondary user you can add to your credit card that allows them to make purchases on your account. If you do so, any activity on that account impacts their credit score. But you’ll still be on the hook for the entire balance, including any charges they’ve made.

Billing cycle: A credit card’s billing cycle, usually 28 to 31 days, is the length of time between the closing dates on your monthly statements.

Statement balance: Your credit card statement will always include a statement balance, which is the amount you owed when your most recent billing cycle closed. This is the number you need to pay off if you want to avoid interest charges.

Current balance: Your credit card statement will also include a current balance. This number reflects all unpaid charges to the account, including those made after your most recent billing cycle closed.

Minimum payment: The minimum payment will also be displayed on your credit card statement, and it’s the minimum amount you have to pay before your payment due date. If you fail to pay this amount, you’ll likely be charged a late fee, which can drag down your credit score.

Grace period: The grace period is the number of days between the closing of your billing cycle and your payment due date. If your credit card company offers one, it has to be at least 21 days. This grace period only applies to new purchases, not to balance transfers or cash advances.

Cash advance: A cash advance is when you use your credit card to withdraw cash, usually through an ATM or at your bank. These transactions don’t have a grace period and often have a higher APR applied to them as well as cash advance fees.

Balance transfer: A balance transfer is when you transfer existing debt from one account to another. This is typically done to secure a lower interest rate or more favorable terms, like when a balance is transferred from a credit card with a high APR to a credit card with a low or 0% intro APR on balance transfers.

Secured credit card: A secured credit card is backed by a security deposit that’s charged to the cardholder upon card opening and used to mitigate the risk of lending to someone with bad credit. Typically, that security deposit then acts as the card’s credit limit.

History of credit

The concept of credit, in one form or another, has been around for thousands of years, but modern consumer credit only became widely available in the 20th century. By the 1950s, many Americans had access to revolving credit accounts with specific stores, and in 1958, Bank of America launched the BankAmericard (now Visa) — the first general-purpose credit card. American Express and Mastercard soon followed.

Credit reporting and scoring evolved over the second half of the 20th century, making credit accessible nationwide. While there are still populations commonly left out of today’s credit industry — including young adults, immigrants, and the formerly incarcerated — new credit scoring models and credit products are working to continue broadening access to credit.

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Loans Bad Credit Online – Taranaki rental woes to get worse, say property managers | Fintech Zoom



Loans Bad Credit Online – Taranaki rental woes to get worse, say property managers

With the country’s new tenancy laws in effect, Taranaki property managers are predicting the region’s rental crisis is set to go from bad to worse.

Pam Hight, McDonald Real Estate Rental division manager, described the situation in Taranaki as – much like the rest of the country – desperate.

“It’s bad, it’s really bad,” she said. “I don’t see it getting any better… I can only see it as getting worse.”

On Friday, there were 42 rentals across the region listed on Trade Me for $450 and under.

* Tenancy law changes: What do they really mean?
* Landlords won’t let their rentals sit empty, but tenant selection will be tougher
* Law to protect renters may see landlords reluctant to take risk on tenants with bad credit

The latest Ministry of Social Development figures show there were 642 applicants waiting for public housing across Taranaki in December 2020, up on 523 applicants in the previous quarter.

Put off by some aspects of the new tenancy laws, landlords were now selling their rental properties, Hight, who has been in the sector for 20 years, said.

Other landlords have been prompted by the skyrocketing house prices to cash in their rentals.

“Our rental portfolios are getting smaller but the number of tenants are growing.

“How are we going to house them?”

The latest changes to the Residential Tenancies Act came into effect last month and are aimed at providing more security and power for tenants.

Rental properties often don’t even make it to market before being rented out again.

Andy Jackson/Stuff

Rental properties often don’t even make it to market before being rented out again.

Included in the changes is that landlords will no longer be allowed to end a periodic tenancy without cause simply by providing 90 days’ notice.

Rent bidding has been outlawed, rent increases have been limited to once a year, and landlords are required to allow tenants to make minor alterations to a rental property such as baby-proofing, hanging pictures, and earthquake-proofing.

Provisions to improve compliance have also been introduced and both landlords and tenants can now apply for name suppression if they are successful in a Tenancy Tribunal decision.

Stacey Kemp, of Taranaki Property Managers, said she was receiving up to 70 applications per property.

Sometimes the rentals don’t even get listed before they’re filled.

“It’s pretty rough,” she said.

“I use the term crisis to describe it every day.”

Property managers have described Taranaki's rental housing situation as desperate.


Property managers have described Taranaki’s rental housing situation as desperate.

With landlords selling and the new lending restrictions for property investors soon to come into effect, the rental property supply would further decline, Kemp said.

Rents had also increased by around $100 per week in the past year and more families were being pushed into emergency housing, she said.

Kemp, who manages properties across the region, knows of people who were already sleeping in cars and bunking with family and friends.

“It’s only going to get harder.”

Loans Bad Credit Online – Taranaki rental woes to get worse, say property managers

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Loans Bad Credit Online – 7 Top Online Car Buying Sites | Fintech Zoom



Top online car buying sites



  • Choose delivery or pickup
  • Seven-day return policy with up to three swaps
  • 100-day limited warranty


  • Must purchase extended warranty before delivery or pickup
  • Financing terms are nonnegotiable

Carvana is an online vehicle retailer with more than 25,000 used cars for sale at the time of publishing. Each car goes through a 150-point inspection and comes with a free CARFAX report. In-house financing is available, but you can also pay cash or finance with a third party, such as your bank or credit union. Carvana also accepts trade-ins, and it can pick up your trade-in at a location of your choice if you opt for delivery.

Carvana offers a seven-day test drive and return policy, and its cars come with a 100-day, 4,189-mile limited warranty. Available options include an extended warranty plan and gap coverage.




  • Pricing insights help ensure you’re getting a good deal
  • Supports AutoCheck vehicle history reports


  • Doesn’t sell cars directly

Edmunds doesn’t sell cars directly, but it hosts listings for new and used cars from local dealers. You can shop based on a number of factors, including Edmunds’ own pricing insights, to help you identify a good deal.

Edmunds also offers a variety of car buying resources, including rankings, reviews, a price checker and an online car appraisal service. Its appraisal service is particularly useful if you’re trying to sell your existing car or wondering what you can get for it as a trade-in.




  • Finances people with most credit profiles
  • 30-day return policy


  • No cars more than four years old

CarMax sells used cars online, letting you shop by budget, car type or monthly payment. Curbside pickup and delivery options are available. CarMax also offers 24-hour test drives and 30-day, money-back returns (if you’ve driven less than 1,500 miles). All major systems are covered for 90 days or 4,000 miles.

CarMax provides financing through several lenders, including Ally, Capital One, Chase and Exeter Finance. However, you can handle your own financing through your bank or credit union if you prefer. If you find better financing after you complete your purchase, CarMax has a three-day pay-off program that lets you take advantage of a better deal.




  • Broad search coverage
  • Trade-in option available for online purchases


  • Doesn’t sell directly
  • Possible delivery fees for online purchases

Autotrader lists used and new cars for sale online from local dealers and private sellers. In some cases, the dealer will bring you the car for a test drive and deliver the paperwork and car to your home when you’re ready to buy. Autotrader also provides instant cash offers for your current vehicle.

Autotrader has an accelerated online process that lets you expedite the sale, secure financing, value your trade-in, apply for financing and schedule a test drive before visiting a dealership.




  • Can file DMV paperwork for you
  • Seven-day test-drive


  • Some purchases require paper documents
  • Delivery could take 10 to 14 days

Vroom offers a completely online car buying and delivery experience, specializing in low-mileage used cars. It also lets you test-drive vehicles for seven days. Cars on Vroom must pass multiple inspections, and every car comes with a free CARFAX report. Vroom provides a limited warranty with most purchases, covering the car for 90 days or up to 6,000 miles.

You can supply your own financing, but Vroom also provides its own lending options by partnering with banks and lending institutions, including Chase, Santander Bank and Ally. Vroom accepts trade-ins too.




  • Search millions of car listings on one site
  • Helps you sell or trade in your current vehicle

AutoTempest brings together listings from other used car sites, including eBay,, TrueCar, Carvana and CarsDirect. You can find millions of used car listings and shop by budget, make, model, year, mileage and other factors. AutoTempest also offers three advanced keyword search options to help narrow your search by negative keywords, optional words or phrases.

If you’re looking for a new car, AutoTempest can help you compare quotes from multiple dealers. Other buying tools include insurance and shipping quotes. Financing is available through Carvana.

You can also sell your car on AutoTempest. You get a real offer in two minutes, and Auto Tempest picks up your car when you decide to sell. Payment is available upfront or as part of a trade-in agreement.




  • Search thousands of local listings
  • Find updated pricing insights

CarsDirect helps buyers find deals on new and used cars for sale from local dealers. You can compare cars side by side and check deals in your area. You can also browse by price, style, make, model, region and monthly payment. CarsDirect also has a section for top deals on new cars and leases.

CarsDirect helps find financing options for buyers with bad credit, no credit and bankruptcy. Most cars come with a free CARFAX report.

How we found the best online car buying companies

To find companies for this guide, we looked at 15 brands and pared them down to these seven top online car buying sites. We considered available vehicle options, financing offerings and return policies. We also looked at reviews from online sources, including ConsumerAffairs and Google, and we only included companies with a rating of 3 stars or higher.

Compare online car buying websites

ProviderOffers financingAvailabilityReturn policy
CarvanaYesFree delivery to 31 states; paid delivery elsewhere7 days
EdmundsNoExclusively onlineVaries by seller
CarMaxYes41 states30 days
AutotraderNoExclusively onlineVaries by seller
VroomYesDelivers to 48 states7 days or 250 miles
AutoTempestNoExclusively onlineVaries by seller
CarsDirectYesExclusively onlineVaries by seller

Online car buying vs. traditional car buying

The main difference between buying a car online and in person is that you may not be able to see the car with your own eyes or take a test drive before making the purchase. To make up for this, many online car purchases come with a return policy, typically five to seven days (with limited mileage).

Like cars from a dealership, new cars purchased online should come with a mechanical inspection and warranty. However, dealerships might offer certified pre-owned vehicles with a manufacturer’s warranty — these cars might not be available from online car buying sites or private sellers. Some online car sellers also accept trade-ins, and many offer common dealer features, including financing options and add-ons like extended warranties and gap insurance.

How to buy a car online

Buying a car online is a new experience for a lot of people, but the process usually isn’t too different from buying at a dealership. Here’s a step-by-step guide to buying a car online:

  1. Find out your credit score: If you plan to finance the vehicle, look up your credit score so you won’t be surprised when the lender performs a credit check. This also helps you know what kind of interest rate to expect.
  2. Determine your budget: Setting a budget helps narrow your search by identifying which cars you can afford and giving you an estimate of what your monthly payment should be.
  3. Find the right vehicle: Figure out which model years fit your budget and your needs. Compare your options, then search a variety of online car buying sites to find a vehicle matching your criteria.
  4. Look for deals or incentives: Check for deals from the seller or search the internet for financing incentives or manufacturer promotions, such as 0% financing or trade-in deals.
  5. Get preapproved: Once you have a car in mind, you can get preapproved for financing through a lender or, in some cases, the car buying site itself. Some online sellers will put a hold on a car while you work out the details of your financing. While getting financing through the seller or dealership is an option, preapproval has multiple benefits, like letting you shop around for a better rate.
  6. Talk with a sales manager: Having a conversation with a sales manager helps you answer any questions you might have. It should also give you an explanation of the online buying process from that company. Let the sales manager tell you about any deals or incentives available, but don’t commit if you’re not sure yet.
  7. Take the car for a test drive: If a test drive option is available, schedule one. It might be at a dealership, or the seller may bring the car to you. With a new car, you shouldn’t have to carefully check for damage or malfunctions, but it’s still important to get a feel for the car and see how you like it. If the test drive goes well and you have your finances together, it’s time to buy.
  8. Read and sign the paperwork: When you’re ready to make a purchase, be sure to read all the paperwork before signing. Make sure you’re only paying for what you want and getting everything that you’re paying for. If you don’t understand anything in your contract, ask about it. Some online sellers accommodate e-signatures, while others will overnight paper documents for your signature.
  9. Head to the dealer or get your car delivered: Once you sign the contract, the dealer should deliver the car or arrange for you to pick it up locally. If you’re buying from a private party, you may have to arrange your own auto transport.

Tips for buying a new car

If you are planning to purchase a new vehicle, here are some tips worth considering:

  • Get insurance quotes: Think about the cost of insurance as well as your monthly payment. Insuring a new car is typically more expensive than insuring a used car. Shop around for rates on the make and model you’re considering to find out what you should expect to spend.
  • Plan for fuel costs: If you’re looking at a new car online, the gas mileage should be listed with the specs on the vehicle. If not, check the manufacturer’s website. Calculate your weekly gas costs to make sure the vehicle is right for you.
  • Check the warranty: Online car sellers should offer the same warranties as physical dealerships. Find out what the manufacturer’s warranty covers. Powertrain or drivetrain coverage is standard, but most new car warranties should also have bumper-to-bumper protection. Roadside assistance is sometimes included too.
  • Plan ahead: Some car dealers offer maintenance packages with the purchase of a new car, such as free basic service up to a certain number of years or miles. Dealerships may also try to sell you an extended warranty that covers your vehicle against malfunctions and breakdowns. These can be worth the cost, but you should also consider working with third-party warranty providers.

Tips for buying a used car

While buying a used car has much in common with buying a new car, there are several notable differences to keep in mind. Here are a few tips if you’re purchasing a used car online.

  • Get a vehicle history report: Many online car sellers offer free vehicle history reports. If not, these reports are readily available for a low cost from such sites as CARFAX or AutoCheck. Enter the VIN to find out about any accidents, recalls or maintenance gaps that may affect the car’s value. Some reports will also show how many previous owners a car has.
  • Make sure the car is in good shape: Online sellers should be able to verify that a vehicle’s maintenance is up to date, whether it’s through a vehicle history report or physical records from a previous owner. Many sellers also have a certification process that includes maintenance and a multipoint inspection. If the seller is willing, you can also get a pre-purchase inspection from a third-party mechanic.
  • Take a test drive: If a test drive is available, don’t pass it up. Look for any dings, paint damage, glass cracks and imperfections that might not have been in the listing photos. Inspect the engine bay, check the tire tread and try all the power features to make sure they work. Check for strange smells, leaks or sounds as well.
  • Consider the gas mileage: Information about the gas mileage of used cars is more difficult to find. As a rule of thumb, gas mileage gets worse as a car ages, so expect to spend more on fuel than you would for a new version of the same vehicle. You can get an estimate of a car’s actual gas mileage from the U.S. Department of Energy. Think about how much gas will cost for the vehicle now and in the future as its efficiency decreases.
  • Verify the title is clear: A clean title is good, but a salvage title means the car was declared a total loss by an insurance company and repaired. Though the car was repaired and it’s possibly in drivable condition, it could still have problems. Its value should also be significantly lower if it doesn’t have a clear title. This information is usually available via a vehicle history report.
  • Talk to the seller: When purchasing a car online from a dealership, it helps to talk with the sales manager or customer service. Ask questions about the inspection process, test drive, financing and return policy.

Bottom line

Online car buying is convenient and lets you search thousands of listings, compare prices and arrange financing without leaving home. If you decide to purchase a used car online, do the research and make sure the car’s title is clear. If a test drive is not available before you buy, make sure you have some recourse, like a return policy. Finally, understand all the fees and costs associated with the vehicle before signing on the dotted line, just as you would for any car purchase.

Frequently Asked Questions about online car buying

It depends on your situation and preferences. There are many websites that can help you buy a car, and some offer more functionalities than others. To get started, look for a site with a lot of listings that lets you filter by the features that are most important to you.

Yes, it is possible to buy a car completely online. With online car buying sites, you can go from finding the right vehicle to purchasing entirely online. However, it’s still a good idea to see the car in person and ensure everything is correct if you can.

Yes, it is generally safe to purchase a vehicle online. However, you want to ensure you’re on a legitimate website. Be sure to read terms and conditions, privacy policies and other “fine print” materials before handing over your information online. Also, be careful with wiring funds or handing over your credit card details to someone you do not know online.

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Loans Bad Credit Online – Sasfin profit drops on increased y/y credit impairment provisions | Fintech Zoom



Loans Bad Credit Online – Sasfin profit drops on increased y/y credit impairment provisions

NOMPU SIZIBA: Specialist financial services player Sasfin Bank released half-year results. For the six months ended December 2020, the company reported a decline in total income of 1.5% at R633 million, while headline earnings were down 65.8% at R26.9 million – and the board will not be giving shareholders an interim dividend this time around. The company attributes the decline in profit to an increase in year-on-year impairment provisions, and the generally adverse economic effects brought about by the pandemic.


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Well, to discuss the results further, I’m joined on the line by Michael Sassoon. He’s the CEO at Sasfin. Thanks very much, Michael, for joining us. You saw a decline in your profits; has the Covid experience proved quite adverse for the group?

MICHAEL SASSOON: Yes, very much so. You know, we have two businesses. The wealth-management business has actually done very well under Covid owing to markets being strong. But our banking business, where we really lend to businesses in South Africa, has taken some increased credit provisions, and this has resulted in the huge drop in  profits.

NOMPU SIZIBA: I do see that your loans and advances, for example, contracted quite a lot –  by over 13%. I suppose it just speaks to the lack of activity and the lack of risk-taking among businesses.

MICHAEL SASSOON: I think that’s right. I think that when business confidence is low, people who are business entrepreneurs buy less stock, they invest less in their businesses, which means that the demand for credit has dropped to some degree. We also have to be a bit more conservative just to understand the full Covid impact on business clients.

In the last month or two we have seen some green shoots. There has been a bit of an uptick in demand for credit, and hopefully that is a sign for the future. But we remain cautious, given the potential of a third wave or a fourth wave, and the end of May’s vaccine rollouts, and how effective the vaccine rollout will be.

So, while there are some positive signs, we remain cautious.

NOMPU SIZIBA: I don’t suppose you ask when your clients withdraw money – but you do indicate having seen a decline in deposits. To what extent do you think this was influenced by perhaps businesses having to withdraw money to tide themselves over during a period when they were not receiving any revenue?

MICHAEL SASSOON: There was quite a small drop in deposits – about 3%. It was really one or two depositors who may be invested in the markets, rather than anything which I think suggests that businesses were drawing down on their money and all other deposits. It’s more like high-net-worth individuals, who invest in markets versus being invested in cash, and that might have an impact on the deposits more than businesses relying on their own cash at this point.

NOMPU SIZIBA: So, but for the wealth business, do  you think that the numbers would have been far worse?

MICHAEL SASSOON: They would be worse – the wealth business of the group’s growth in earnings. But in the banking business income did drop about a percent or so across the group. That’s not too concerning. Given the drop in loans, we may have expected there to be more, but we have enhanced our margins somewhat and are growing some of our non-interest revenue lines – in particular in our digital business-banking area. The costs were well controlled, and that’s something. Where we had a drop in cost, our cost-to-income ratio improved.

So I think that the real question will be what happens to the credit environment in the future? Had we had a through-the-cycle credit-loss ratio, the banking performance would have been pretty good.

NOMPU SIZIBA: You talk about investment in digital. To what extent did you see that area increase in activity, obviously given the Covid situation?

MICHAEL SASSOON: Our digital banking income grew by about 14%, which we were quite happy with, even though some of the income in that is dependent on interest rates, and interest rates have come down. That has caused a little bit of lower income. Had it not been for that, income would have been even higher. And fortunately the big investment in digital we’ve made over the last couple of years enabled us to remove to remote-working capability pretty seamlessly, and be able to onboard services and engage with our clients throughout this period without there being any disruption at all, really.

NOMPU SIZIBA: I see that you’ve got an asset-finance business. You refer to your specialised equipment-finance business, which now accounts for 22% of your total asset-finance book. That’s up from 19% in the year prior. What does that segment cover?

MICHAEL SASSOON: There are various elements. We do some yellow-metal mining-related equipment. We also finance software, not equipment per se, but assets. We are growing some capabilities into the solar sector. So our traditional or historical business is very much office automation and kind of your more traditional ICT equipment. We are now moving into a slightly wider asset range that we finance.

NOMPU SIZIBA: Tell us about BYOND business banking. You do talk about having improved your operating loss there to R15 million. Just tell us about that business and how it’s different from the basic business.

MICHAEL SASSOON: This is our digital business-banking area, in which we’ve invested quite a bit. Off the back of our digital-banking platform clients can obtain banking, foreign exchange and credit. You can onboard yourself as a small business or medium business, yourself, and some ancillary services like payroll accounting integrated into Xero. So it’s quite a comprehensive integrated business-banking model which we’ve been investing in for some time. Those losses that you refer to are very much part of the investment that we make into the business, because we don’t capitalise that investment. And with the reduction in the losses to some degree now that we integrate our foreign exchange in there, we are seeing some synergies, given some of that growth in the digital banking revenue. But we are at the early stages of this journey to some degree.

Last year you may recall we obtained a loan guarantee from the ECB, European Central Bank, courtesy of the Dutch Development Bank FMO, which we are busy rolling out to smaller businesses that we would normally finance. We are building some capabilities, some automation in credit-score carding, to ensure that we can get to those clients and approve credit appropriately. That we think will further enhance our digital business-banking offering, which is so important for this country to really try and enable these small businesses to access financial services – which we know has been such a struggle in the past.

NOMPU SIZIBA: But how do you strike the balance? On the one hand it’s a great service to be able to extend financial assistance and more to SMEs, but we’re also in a very tricky time where the future is uncertain, and you also have to take care of shareholders and all the rest of it. So how do you get that balance right in terms of the risk mitigation and obviously fuelling SMEs that can help to grow the economy?

MICHAEL SASSOON: If there was an easy answer it would be great for the country, be great for business lenders. I think that a greater use of data and various data points to understand the credit risk beyond just the quarter historically of a bank, looking at management accounts or financial statements. I think there are other data points which can be understood better in granting credit. Historically we’ve always been very well secured by stock or debtors or equipment, and for these smaller businesses you might not be able to rely on that same level of security if they haven’t built up any meaningful assets. So understanding the individuals, understanding the various data points, I think will be important. And if we do that well I think there will be an opportunity to extend credit to segments of the economy which have struggled to obtain credit. And this is very much the concept of Naseera.

The FMO and the European Central Bank understand this challenge, and that’s why they’ve provided this loan guarantee, which means that we are able to kind of grow a little bit faster than we would have done without it, and understand and learn some of the credit elements of this market, while protecting shareholder value because of the nature of the guarantee.

But for it to be a sustainable long-term business for ourselves and for our clients, we need to make sure that we can recover the credit that we grant by and large.

NOMPU SIZIBA: Yes. Look, this is separate from anything to do with Sasfin, but you must have a view, given your experience. Why do you think the credit-guarantee scheme that was offered by the government through the banks just hasn’t worked? Why is it that only R18 billion of the R200 billion that’s been made available has been tapped by SMEs?

MICHAEL SASSOON: That’s a very good question. … the large banks, to their credit, did give a lot of payment relief and a lot of support, restructured loans, at the height of Covid and the lockdown. The experience I think was that there wasn’t significant demand. That being said, why wasn’t there such a large demand?

My sense is that if you were a business client of a bank, and you were a good credit risk, the bank would have lent you money in its ordinary course. If you were a very bad credit risk, I think that a bank would have been irresponsible to lend taxpayer money if it didn’t believe that it was recoverable. And therefore it actually only really catered towards the smallish segment of the business sector.

We also have participated in terms of the government’s loan-guarantee scheme, and to a small degree we’ve almost lent out our allocations, as it stands. But I think that in part there were many SMEs who aren’t really in the banking system, or don’t have credits on the banking system, who maybe could have benefited from the loan-guarantee scheme – which didn’t really apply because they weren’t already entrenched inside a banking system.

NOMPU SIZIBA: That was Michael Sassoon. He’s the CEO at Sasfin.

Loans Bad Credit Online – Sasfin profit drops on increased y/y credit impairment provisions

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