Updated 28 July 2014

SA women suffering financial meltdown

More and more women are finding themselves in a financial pickle due to their love of spending on credit.

South African women are passionate about plastic – the sleek, rectangle-shaped kind that is shoved into the pockets of their purses.  And, when it comes to wielding their plastic, they aren’t shy.

According to Robyn Farrell, Executive Head of 1st for Women Insurance, “Many women are finding themselves in financial trouble because of their love of plastic. Statistics from the Credit Bureau show that 48.4% of South Africa’s credit active women have negative information, such as defaults, on their records.

“A default means you have failed to make payments as per your agreement. A default is held on the system at the Credit Bureau for two years and can jeopardise your chances of accessing credit elsewhere, such as when you want to get finance for a house or a car. 

“Ideally, you don’t want to land up in this position. Or worse still, with a judgement against you. Unfortunately too many consumers are not aware of the consequences of abusing credit.

“With summer almost here, and with the festive season quickly approaching, it’s time for the ladies to shape-up and get their ‘houses’ in order,” says Farrell.

Money has to be paid back

Farrell stresses that women need to think with their heads and not their hearts when they are shopping. 

“Creditors’ willingness to provide you with credit is no indication of your ability to honour it. You will have to pay that money back. So, you should never buy more than you can afford. Remembering this simple truth can save you from lots of heartache and distress down the line.”

Using and abusing credit is a vicious circle for many South Africans. The quarterly Synoptic Report by Compuscan highlights the increase in credit utilisation and shows an increase in the number of revolving credit facilities in the higher balance categories. 

The number of revolving loans with a value of R100 000 and over increased by 50% in the fourth quarter of 2012. There has also been a consistent increase in the number of credit cards and store cards with a limit of between R25 000 and R40 000 and of R40 000 and over.

The number of credit cards with a limit of R5 000 and under has decreased which supports the trend that consumers are applying for higher credit limits due to financial distress.
Farrell says it is easy to lose track of what is spent on credit, and when revolving credit to stay afloat, it becomes a precarious cycle. 

“Take charge now. You must keep an honest account of what you spend, and be realistic about what you can afford to pay back if you dip into your credit,” she says.

She concludes with this advice:   
- Reduce the number of credit cards you carry around to one. If you can, pay extra into one card until the debt is paid off, then start paying that extra amount into another card until it is also paid off.
- Don’t use your credit card unless you are able to pay the minimum amount due each month.
- Always pay the minimum amount due on your credit cards each month.
- Choose to pay with your debit card or cash rather than using a credit card.
- Never use one credit card to pay your debt on another one.
- If you are offered a higher credit limit on your credit card by your bank, do not accept it. Having extra credit available is a temptation to spend money that you might not be able to afford to pay back.
- Set a monthly budget and do not spend more than that. Your expenses should never be more than your income.
- Keep track of purchases by retaining invoice slips and tallying up your expenditure.
- Never buy food or other necessities on credit.
- Do not open retail store cards or accounts. If you have retail store cards, always pay the minimum amount due and work out a payment plan for yourself whereby you pay in extra each month with the aim to pay these off within six months.
- Instead of dipping into your credit or using retail store card facilities to purchase bigger ticket items, put money away each month until you have saved enough for what you want to buy. 

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