7 Tips to survive this festive season's debt trap!

NOVEMBER 5, 2014

The South African Savings Institute (SASI) is hoping that you wont be in debt after this Festive Season has passed and, through its annual Savings Campaign, has provided the tips below to help you and your family avoid unnecessary credit - and a heart attack, come January. 

Tips to survive the festive season

  1. Resist SALE, think SAVE! Clearly distinguish between needs and wants.
  2. Make your own Christmas gifts and only take holidays you can afford.
  3. Have a clear budget for your requirements in the New Year. Create a budget using the SASI budget tool.
  4. Use free online tools to track your spending and debt and know where every cent of your income goes.
  5. Pay cash for all purposes and don’t be trapped by easy credit – in fact, cut up those store credit cards!
  6. Visualise what you want to save for and start saving more. Save your bonus and make it multiply.
  7. Service your debt and stick to the payment terms. If you cannot service your monthly debts discuss your situation with your credit providers before it is too late. Consumers can seek  assistance from  a  registered  debt  counsellor  by  contacting  the  NCR  on  0860   627 627.

Avoiding the credit trap

The cost of buying on credit, even for a short period such as two years, can result in a consumer paying the effective interest of double the quoted price. The maximum interest rate allowed by the National Credit Act is 21% a year.

Once initiation fees, monthly premiums for compulsory credit life insurance, service fees and VAT have been added, R5000 spent on credit today at a large retail store may cost between R6 200 and R9 000 by the time the debt is repaid over 24 months.  It’s better to pay cash, or even consider that if the instalments were paid into a saving vehicle, you can end up multiplying your cash.

Credit also needs to be carefully managed. According to the National Credit Regulator, almost half of all credit-active consumers have impaired credit records and 9.53 million consumers are in arrears by three more months or more, or have judgement or administration orders against their names.