Bank warns against ‘foolish’ credit spending as festive season draws near

Bank warns against ‘foolish’ credit spending as festive season draws near

In less than three months, the world will be caught once again in the fever of the festive season, which includes Christmas, New Year’s Eve and New Year’s Day.

In South Africa, Africa’s biggest economy, the festive season is time to show some financial muscles, with families and individuals borrowing here and there and embarking on a spending spree as if tomorrow will never come.

However, First National Bank (FNB), one of the country’s bigges banks, has warned against engaging in such ‘madness’, urging the country’s consumers to manage their credit-based spending more sensibly.

“Some borrowers like to think that credit is patient. This, together with forgetfulness about number of loans, is the main reason why many borrowers fall in to a debt trap,” CEO of FNB Credit Card Johan Maree said on Thursday.

Figures (to June 2013) issued on Wednesday by the country’s National Credit Regulator showed a modest increase of 0.6% in the number of South African customers who were not meeting their monthly loan repayments, and a small decline in credit advanced for unsecured loans and credit card facilities.

“Consumer spending is bound to increase with the festive and holiday season approaching and it is crucial that consumers monitor their credit expenditure and realistically assess what they can afford to spend after adding their existing loan payments,” Maree said.

Retail accounts and credit cards are effective transactional tools if used within boundaries, the Johannesburg-based bank said.

However when used to fund a lifestyle that is not realistically within your means of living, the risk of being caught up in a debt spiral increases significantly, the bank said.

FNB said it has noticed that accounts tend to go into arrears during the month of January resulting in customers starting the New Year off with bad credit ratings and a growing inability to make minimum payments.

Maree advises that debt consolidation is a good option to consider when making monthly minimum repayments become difficult.

Debt consolidation allows you to merge retails store debt, short term loans, personal loans and other credit card debt into an account, making the administration thereof manageable, he said.

Related Posts Plugin for WordPress, Blogger...

, ,

Comments are closed.