Publications
Partners
Although budgets continue to be tight for South Africans, the majority of consumers appear to be attempting to take their debt in hand, with a slight improvement in credit health. According to the latest TransUnion SA Consumer Credit Index, which focuses on the third quarter of this year, the repayment behaviour of consumers improved to some degree but, overall, households remain under financial strain.
TransUnion SA CEO Geoff Miller says that one of the likely reasons for the slight improvement in consumer health is that lenders have become more cautious in recent years, showing more prudence with a greater degree of built-in market checks and balances than existed during the last major credit cycle from 2004 to 2012.
The number of new accounts in default or three months in arrears fell by 2.4% year on year, which means that fewer consumers are falling behind on their debt repayments. However, despite this encouraging sign, household cash flow weakened further, decreasing by 0.6% year on year.
Miller says that the use of credit cards has now been hovering at around 51% since early 2014.
“This stabilisation doesn’t imply zero growth in revolving credit, only that households are not [on average] using more of their credit limits,” he says, and adds that household cash flow is at its weakest level since 2009.
Weak household cash flow could be expected to cause accelerating defaults and distressed borrowing. However, Miller says this is mainly the case when borrowing has been rapid and then cash flow deteriorates quickly, as happened in 2007/08. He says that, in the current cycle, there would need to be a deeper decline in household cash flows before consumers start defaulting on debt repayments to a greater extent.
10 ways to tighten up your household budget
1. Take a packed lunch to work instead of buying sandwiches from the canteen or from a takeaway shop around the corner.
2. If you are contemplating a purchase that is not an absolutely necessary item, give yourself a week to think about whether you really need it before you hand over your hard-earned money.
3. Use your own bank’s ATMs wherever possible and avoid making several withdrawals over a short period of time. Work out how much cash you need and then make one withdrawal.
4. It can be less costly to repair items rather than simply replacing them at the first sign of trouble. Take the time to find out repair costs before you rush out to the shops for a new appliance.
5. Cancel your satellite television subscription. Do you really need to spend almost R900 a month for more than 300 TV channels? How many channels do you actually watch and how often do you watch TV?
6. Check your car insurance premium annually. Your insurance should be adjusted annually to account for the fact that your car depreciates in value each year. However, not all insurers make this adjustment automatically. You snooze, you lose!
7. If you are on chronic medication, shop around for the best price. Although we have a single exit price for medicines in South Africa, the dispensing fee differs between pharmacies and this can add up to a hefty annual saving. Check which pharmacies are approved by your medical aid scheme, and also look out for national chain pharmacies that can offer you lower prices.
8. Instead of shelling out for new uniforms, check out the school’s second-hand shop. You can often pick up good-quality clothing that is priced reasonably.
9. If you belong to loyalty schemes, save up all the discounts or points you accumulate over the year and use them in December.
10. Be aware of where you shop and keep an eye out for specials. Sometimes the extra trip to a different shop is worth the effort. Avoid “convenience stores” because they are usually about 30% more expensive.
