The relationship between fluctuating interest rates and the nature of credit card spending in a leading South African food retailer with specific reference to Cape Town consumers

Abstract

This research study assesses the impact of fluctuating interest rates on the credit card spending habits within a leading South African food retailer by determining whether a relationship exists between interest rates and credit card spending and whether this relationship is significant. Although there are many factors that influence consumer use of credit cards such as fuel prices, cost of food and affordability, interest rates play a role in the decision making process whether to purchase on credit or not. To assess the effect of interest rates on credit card spending within the food retailer, turnover data by tender type were obtained from the retailer and were compared to interest rate changes as announced by the Governor of the South African Reserve Bank. By using non-parametric Spearman Rank Order Correlations the nature and significance of the relationship between interest rate data and tender data was determined by using a confidence level of 95 %. Customer surveys were conducted within the Cape Town area to understand the effect interest rates have on credit card usage, what the preferred methods of payments are, retailer preference, shopping frequency, average grocery spend and the perception of interest rate fairness of respondents. A total of 213 completed questionnaires were analysed and significant correlations between various variables were determined and discussed. The result of the data analysis revealed that a significant adverse relationship exists between interest rates and credit card spending within the selected food retailer. Key Words: Credit Card, Turnover, Interest Rates, Food Retailer, Retail Food Sector, Average Transaction Value, Transaction Volume, Tender Type, Consumers, Customers, ShopriteCheckers, Spar, Pick n Pay, Woolworths, South African Reserve Bank, SARB