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Don't overspend, says credit body

By unknown | Nov 29, 2006 | COMMENTS [ 0 ]

Thomas McLachlan

Thomas McLachlan

Confidence in the economy and more available credit means consumers are yearning for the chance to spend as much as they can this Christmas, but the National Credit Regulator warns that this could cause problems next year.

"The temptations of the Christmas season can lead to a financial headache in the new year," warned Peter Setou, senior manager at the National Credit Regulator (NCR).

"We strongly encourage people to stop, consider and plan their expenses carefully, especially over this period."

A Deloitte survey found that consumers would be spending 18,5 percent more during this season compared with last year, the highest increase globally.

Deloitte said this was driven by the belief that they had more money this year. According to Setou, the "silly season" is aptly named because of a spending frenzy that appears to afflict people over this period.

In the wake of three interest rate hikes since June, it is worrying that consumers might accumulate more debt over the festive period. This could be especially damaging to some consumers should the reserve bank add another 50 basis points rise in December, bringing the key repo rate to 9 percent.

"Be careful how you use your credit card, it can tempt you to spend money you do not have," Setou said, adding that consumers should attend to their current debts before incurring more.

"Be wary of 'buy now, no deposit needed' deals, which will finally cost you more . because they are loans and can attract high interest and other charges," he said.

To avoid the debt trap this festive season, Setou recommended that consumers plan their budget to know exactly how much they had available.


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