It’s no secret that South African consumers love shopping. Spending time in the mall has become an outing for families and individuals to kill some time. With this, families and individuals are drawn into stores by sales and credit options from small to large retailers. This presents a large issue for those consumers who are currently facing financial difficulties. Many will opt to use credit cards, store accounts and personal loans in order to maintain their lifestyle and carry on spending. Using credit is easy and allows consumers to spend more than they have.
SA Consumer Credit Levels Are Rising
As consumer salaries remain stagnant, increasing costs of living and high interest rates are buckling South Africans consumers and are turning to credit in order to cope. In an article by BusinessTech, economists and finance experts noted that credit growth will remain on an accelerating trend from 2022 far into 2023. South African consumers are currently experiencing extreme financial pressure which is leading to more credit being utilised.
With reference to BusinessTech,
“The risk of credit defaults due to slower income growth and the accumulation of more expensive lines of credit, resulting in strained household financial positions.”
Additionally, they noted that the credit market will remain active with consumers accumulating credit at a rapid pace.
The Largest Issue With High Consumer Spending
The baseline issue with consumer spending is small to large retailers offering consumers store accounts. In many cases, these store accounts have high interest rates attached to them. Many South African consumers are battling through high inflation and interest rates, and are still being drawn into stores with credit options and loans. Many see it as a temporary solution in order to purchase their necessities, and others see it as an opportunity to keep up with the Jones’s.
How Easily You Can Become Over-Indebted
Becoming over-indebted can happen quite quickly. Once you apply for store accounts, credit cards, loans and payday loans, your accounts will all require a repayment with interest attached to it. Many consumers seem to forget or simply choose to ignore the obligation they have made to repay the creditor. As interest rates and inflation rates increase, your salary has less value. Therefore, many will choose to take out a loan or a credit card to cover their expenses each month. However, a simple method to avoid using credit facilities would be to set up a monthly budget and savings plan, where you should try to reduce any unnecessary spending. If you are struggling to stick to your monthly repayments, currently using debt and are unable to save money each month, you are most likely over-indebted and should seek assistance.
What You Can Do To Pay These Accounts
Budgeting, one of the most overlooked aspects of an individual’s financial life. Setting up a budget can help you categorise expenses in order to help you focus on repaying debt. If you are looking to start budgeting, we recommend using the 50/30/20 budget split.
If you have any debt, focus on repaying your more expensive debts, such as payday loans. Payday loans are high interest yielding accounts that can become more expensive if payments are missed. As you pay these off, you are more likely to have some extra funds to contribute towards other debts.
Debt counselling was created by the National Credit Regulator in order to assist South African consumers with their debt. As a registered Debt Counsellor with the National Credit Regulator, we are able to formally and legally reduce your monthly instalments to an affordable repayment.
Contact us today for a free financial assessment and let us assist you in starting your journey to being debt free!