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South Africans warned to stop trying to 'keep up with Joneses'

Experts have raised concern about consumer credit spending in South Africa.

South African's visiting shopping mall's over the festive season. Picture: Vumani Mkhize/EWN.

JOHANNESBURG - A debt recovery agency has raised concerns about consumer spending habits, following research by Absa's card analytics team that suggests South Africans are borrowing more money instead of cutting back on luxury items.

While the country's tough economic climate has become overwhelmingly difficult for some, the bank says it noticed unhealthy consumer habits from its clients between April 2015 and March this year.

It says people are spending more money on electronics, jewellery, hotels and recreational activities all on credit.

Debt Rescue's Neil Roets says he has noticed a spike in the number of unsecured loans taken up by consumers.

"What is worrying is the fact that they buy food on credit and that is a big concern for us."

He says more than 75 percent of consumers' income goes to paying off this debt.

"People are not educated enough to know that they should only take on this credit if they are in a position to pay it back and they can afford it."

South Africans who find it difficult to stay financially afloat have been advised to seek help as soon as possible.

Absa's Jan Moganwa has also warned customers to avoid buying items they cannot afford.

"South Africans have a history of unhealthy spending habits, with many living beyond their means, driven by the notion of 'keeping up appearances'. The irony is that most of us are struggling with the rising costs of living, and it's our competitive nature of maintaining, and in some instances even inflating our current lifestyles that often gets us into hot water."

Absa suggests ways to tackle your credit card debt:

  • Take stock of all your debt. Be brutally honest with yourself and know exactly where you stand.

  • Create a budget. The key is to be realistic when you create a budget. You'll have to make some sacrifices but be sure to give yourself a bit of breathing space in case an unexpected expense pops up.

  • Track your costs. Write down all your regular, committed expenses and track other variable expenses such as restaurant meals, entertainment and travel. This will serve as the foundation to your budget.

  • Choose your payoff strategy. There are two common credit card payoff strategies.

The first is to plough all your extra cash into the highest-interest card while paying the minimums on the others, which is the fastest way, overall, to lower your debt. Once the first card is paid off, you have even more extra cash, and should apply it to the card with the next-highest rate, and so on, creating a debt payoff snowball effect.

A second strategy is to pay off your card with the lowest balance first, while continuing to pay the minimums on the others. While this is not the most cost-effective way to banish your debt, it's the fastest way to eliminate debt on a single card.

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