Buy-aid schemes: an alternative to bank rewards programmes

buy-aid schemeI have to confess that the concept of a buy-aid scheme is new to me, yet it is an industry with a turnover of well over R1 billion and annually pays out in the region of R130 million in bonuses to members. Cape Consumers, which recently re-branded as Bsmart, is the largest buy-aid scheme and has been in existence since 1947 with around 40 000 cardholders and more than 10 000 retailers who accept the card. Other schemes include Samba with 22 000 members, Pretorium Trust with 24 000 members and Koopkrag with 10 000 members.

Started in the 1930s and 1940s, buy-aid organisations use the joint purchasing power of the collective to obtain cash discounts on goods. A retailer who joined the organisation as a supplier would offer a discount to its members for their loyalty. These discounts would be used to pay annual bonuses to the members, usually at the end of the year – making it a combination of a reward card and stokvel.

Today, members of the buy-aid scheme use a buy-aid card to purchase their groceries and other items through associated retailers and pay the balance off at the end of each month. Through a combination of discounts from retailers and surcharges paid on the transactions, money is collected as a pool from all the members and paid out each year as a bonus. This bonus is paid into the card to purchase goods, usually at a time that most people need a bit of extra cash such as the December holidays.

Smaller retailers like a pharmacy or florist, may offer a discount when you use your card and this discount is paid to the scheme. For example, if you spend R500 at a store and they offer a 5% discount to members, then R25 would be paid to the buy-aid scheme’s bonus pool.

In the case of larger retailers such as PicknPay and Woolworths, who have their own reward programmes and do not offer discounts to buy-aid members, a surcharge is charged on your card and this fee goes towards the bonus pool, creating an almost invisible savings mechanism. You can still use the store’s own reward card (such as the PicknPay Smart Shopper card) in conjunction with the purchase card.

The real competitors to the buy-aid card are the bank’s rewards programmes, because using your buy-aid card means that you are no longer using your bank’s debit or credit card to make the purchase. So you would need to decide which rewards programme is giving you the best return.  Unlike several bank rewards programmes, a consumer card earns exactly the same reward percentage of spend irrespective of where the items are purchased, and there are no levels that you have to reach in order to get your rewards.

Your cashback depends on the bonus pool

However, it is not as simple as knowing that for every R100 you spend you get R1 back. It depends on the bonus pool at the end of the year. However, the scheme usually provides a calculator to give you an estimation of what your bonus would be should you spend in certain categories. Once signed up, members have access to an interactive statement where they can see what bonus they have earned so far.

For example, Bsmart’s calculator shows that a household spend of R10 000 across groceries, short-term insurance, clothes, restaurants etc would receive around R3 700 per annum as a bonus – assuming you use their affiliated retailers. Last year Bsmart paid out R33.7 million to its members, with some members receiving as much as R8 000 in cash. Pretorium Trust paid out R51.2 million in bonuses which equated to a bonus of 4.2% of spend for each member.

What you need to know:

  • If you join, find out which retailers are part of the scheme and if they are in your area. For example Bsmart has over 10 000 retailers nationwide although there’s a higher concentration in the Western Cape; Samba has 1 600 mostly focused in the Free State, Eastern and Northern Cape; Pretorium Trust has 7 000 retailers nationally, mostly concentrated in the Pretoria area.
  • You pay a monthly or annual fee to be a member as well as a transaction fee. This is in addition to any surcharge you pay at a large retailer. The transaction fee does not go into the bonus pool but is used to cover transaction costs. Bsmart charges R60 per month, but has no transaction fees. Samba and Pretorium Trust charge lower annual fees but have transaction fees. You need to ensure you are using the card frequently enough at the registered suppliers to justify the membership fees.
  • You only receive a bonus if you pay your card off in full at the end of each month.
  • If you don’t pay your card in full at the end of the month an interest rate will apply.

This article first appeared in City Press.

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