Plan carefully for Black Friday

DEBTS PILE UP: THIS IS NOT A GOOD TIME TO USE YOUR CREDIT CARD

Take an honest look at finances and decide what you can afford.

Black Friday is here and there is still time to plan before hitting the shops, whether online or in person. Few consumers can afford impulsive buying and spending on things you will never use.

Like many marketing ploys, Black Friday has arrived in SA from the United States, where it is held on the last Friday of November to kick off the Christmas buying season.

However, even in the country where it originated, consumers have to watch their spending because consumers all over the world are struggling due to the coronavirus pandemic.

With economic growth already sluggish in South Africa before the pandemic and many consumers unable to pay their debts, this is not a good time to use your credit card.

Lee Naik, CEO of TransUnion Africa, said it was important consumers take careful stock of their finances before they start using credit for that “special” bargain on Black Friday and Cyber Monday.

TransUnion’s research into credit behaviour around Black Friday last year indicated that many people were caught up in the sales hype and – unsurprisingly – struggled to meet pay off this credit in the months after.

“Our research showed people were more likely to take out loans and increase their spending during the Black Friday period. There was a 13% increase in new accounts opened over this period compared to the previous month, as well as a 4.5% increase in credit card spending and a 5.2% increase in the use of retail revolving accounts,” said Naik.

“The majority of this growth came from higher-risk loans: there was a 35% increase in retail instalment accounts, normally used for furniture and electronics opened and a 23% increase in store accounts for clothing and smaller household items.”

Naik said six months later, more than half of those new accounts were in arrears by one month or more and cannot see that it will be any different this year.

TransUnion’s latest Financial Hardship Study, which measures the impact of the Covid-19 pandemic on South African consumers, found that 77% of consumers said the pandemic was still having an impact on their finances and said the bills they will probably not be able to pay will be for credit, including personal loans (36%), retail/clothing store accounts (35%) and credit cards (33%).

“This year, the effects of illjudged credit use on consumers, who are already battling to meet their monthly obligations, could be even more significant,” warned Naik. “Used responsibly, credit can help people afford items they might not otherwise be able to buy, but it is essential that consumers only spend what they can afford to repay.”

Naik warned before applying for credit today, ensure you have a full picture of your ability to repay any existing and new debts.

“Remember, Black Friday and Cyber Monday are just the start of the festive retail season. There will be plenty of sales coming up. It’s better to walk away with nothing than end up with a mountain of debt you can’t afford to repay.”

Take an honest look at your finances and decide what you can afford. –

Black Friday is just the start of the festive season