Can we all take a moment to be grateful that we made it through another Black Friday together?

Sheesh, those deals come at you from all angles.

Ahead of the big day(s), South Africa’s National Credit Regulator (NCR) issued a warning about getting a little carried away, advising that consumers show a degree of caution before swiping that credit card.

We’ll have to wait for the stats to come out from the major retailers before we know if anybody listened, but history tells us that South Africans aren’t that skilled at managing their debt.

BusinessLIVE reports:

Research by Old Mutual shows that 56% of South African credit card holders pay the minimum instalment, and only 16% pay their balance in full at month-end.

If you’re paying the minimum instalment only and continually spending on your card, you’re probably slipping deeper and deeper into debt.

“While there’s a lot to be said about credit card benefits, the reality is this is a formal commitment to borrow money from a bank and repay it with interest within a certain period,” says Neil Thompson, the head of product and customer value proposition at African Bank. Such a financial commitment needs careful consideration, he says.

Clearly, we’re not really looking ahead at the financial commitment that using a credit card entails, and there also seems to be a lack of awareness around the terms that come with the cards we use.

Do you have any idea what rate you’re being charged on your card? Many don’t, and it makes a massive difference:

Before you enter into a credit agreement, the deciding factor for you should be the interest rate the bank is going to charge you. The maximum interest that you can be charged on a credit card is 20.5% a year (the formula, as per regulations, is the repo rate plus 14%).

But some banks offer their best customers less than the prime rate, which is currently 10%. If you have a good credit score, you should negotiate with potential creditors for a good rate.

Even if you manage to wangle your terms below prime (let’s call it 9%, as some banks may offer), that’s still going to add up over the course of a few months.

I guess this is why zero-interest payment solutions like PayJustNow are proving very popular, offering South African consumers an alternative to credit in the form of a dynamic tech-enabled payment solution, based on a widely used and internationally validated ‘buy now, pay later’ business model.

What does that mean in simple talk? This payment option allows shoppers to split their purchase over three equal instalments, spread over three months, with zero interest.

Interest – zero. Hidden fees – zero.

That option is all the more attractive when you run some basic numbers:

Assuming you owe your bank R15,000 on your credit card, and you’re being charged interest at 20.5%, if you pay 10% of the outstanding balance every month for 12 consecutive months, you will pay the bank R2,008 in interest over the year. But if you’re paying interest at 10%, you’ll pay the bank R943 in interest over the year. This is before fees, such as monthly admin fee, credit life insurance and other fees.

In short, if an option exists where you don’t have to start paying interest within the first few months, and there are no hidden costs, it’s worth a serious look.

For more on PayJustNow, including how it works and a look at the simple sign-up process, head here.

Spend your money wisely – December is going to be a long, long month.

[source:businesslive]