John Vaughan (Financial Advisor) @ Lucid Living
Consumers must remember there is “life after Christmas” when making spending decisions, concluded representatives from the National Credit Regulator (NCR) and the South African Savings Institute (SASI) – speaking at the launch of its ‘Spend Wisely’ campaign this festive season. Resist spending holiday bonuses on short-term wants, they urged.
The NCR is focusing on educating consumers about using credit responsibly during and after the festive season and spending within their means.
Darrell Beghin, from the NCR, urged people not to get sucked into the “hype” of holiday spending.
“If you spend too much at Christmas, it means falling behind on your debt repayments in the new year,” says Beghin. “Not planning ahead for festive season expenses is one of the main reasons people slip further into debt.”
“While it’s easy to get drawn in by the marketing and advertising hype and to over-spend during the festive season, the most important thing is to avoid borrowing to fund expensive gifts and holidays. Putting gifts under the Christmas tree is a good idea if you’ve budgeted for them, but if not and they are bought on credit, come 2012, you’ll be left with high bills with interest repayments.”
Interest rates can be as high as 22.1% on credit cards and store cards and as much as 32.1% on personal loans. This is interest only and does not include other fees such as service fees, initiation fees etc.
Christmas often involves entertaining as well as buying presents, so it is important to make sure you make provision for all unseen expenses. Compare this to your income and see if you really can afford it.
Almost half of active credit users in South Africa are more than three months in arrears. Consumers don’t need to avoid credit, Beghin said, just use it wisely.
She also encouraged consumers to check their own credit reports. Less than 10% of active credit users checked their credit reports last year, she said.
If money available, after the payment of essential expenses is not enough to pay debt, consumers are advised to cut or adjust their spending. Cutting or adjusting items such as entertainment, alcohol, gambling or Pay TV can help. “If you find that you still cannot make ends meet, you need to speak to your credit providers about your situation. Consumers should not wait until they receive final demand letters from credit providers,” says Beghin.
At that point your options are limited. If negotiations with your creditors fail, contact a debt counsellor to represent you. Lowering your monthly instalments, can bring the much needed relief to get back on track.