As Black Friday approaches, consumers in South Africa are being warned about the dangers of getting into debt unnecessarily. The National Financial Ombud's office is urging shoppers to assess their existing financial commitments before signing up for additional credit. This is especially important when buying on credit, as the total cost of a product can be far greater than the advertised price.
According to Nerosha Maseti, the banking and credit lead at the National Financial Ombud's office, consumers must be cautious when buying on credit. She uses an example of a product advertised at R6,000 that will be financed over 24 months at R350 a month. By the time the final instalment is paid, the consumer would have parted with R8,400 — which is R2,400, or 40%, more than the advertised price.
Maseti advises consumers to set a realistic spending limit and make sure purchases won’t compromise essential household expenses. Shoppers should add up all repayment commitments, including existing credit agreements, store accounts, and buy now, pay later instalments when assessing affordability. It's also essential to resist promotional pressure and not let a limited-time discount determine a long-term financial decision.
To make informed decisions, consumers should understand their credit agreement and review repayment terms, charges, cancellation provisions, and the consequences of default. They should also keep proof of purchases and returns, retain agreements, receipts, repayment schedules, and refund confirmations. Acting promptly when disputes arise is also crucial, and shoppers should contact the relevant retailer and credit provider to verify that agreed refunds or adjustments are correctly reflected.
The National Financial Ombud's office encourages consumers to compare the total cost of what they want to buy, not just the discount, when buying on credit. This includes establishing the full amount repayable, including any interest, fees, and insurance payable. By doing so, shoppers can avoid taking on multiple repayment commitments that steadily squeeze household budgets long after the Black Friday excitement has faded.
Borrowing is not inherently irresponsible, particularly in an economy where many households depend on credit to cover essential needs. However, the key is to borrow with a clear understanding of the full cost, the repayment terms, and whether the additional commitment can be sustained without compromising other financial responsibilities. Maseti emphasizes that consumers must be aware of the potential risks and make informed decisions.
As Black Friday approaches, South Africans are advised to be mindful of their spending habits and make informed decisions when buying on credit. Shoppers can track prices of the goods they want to buy over a few months to help decide whether to buy now or wait a bit longer. By being cautious and doing their research, consumers can avoid unnecessary debt and make the most of their Black Friday shopping experience.
Key points
- The National Financial Ombud's office is urging consumers to assess their existing financial commitments before signing up for additional credit this Black Friday.
- Shoppers are advised to compare the total cost of what they want to buy, not just the discount, when buying on credit.
- Consumers should understand their credit agreement and review repayment terms, charges, cancellation provisions, and the consequences of default.
