Buying on credit? Not so fast…

Saturday 17th August, 2013 on Citizen

A quick glance at South Africa’s credit statistics is enough to see that the country’s consumers are struggling – of South Africa’s 20m-odd credit active consumers, almost half, or just over 9.5m have impaired credit records. What’s more, many of those records include multiple impaired accounts – that is, people who are struggling to pay back more than one lender. That’s a lot of people dealing with the stress of over-indebtedness, and a lot of human misery.

We’re going to consider the temptations of buying on credit and why it is almost never a good idea. To kick off, I’m going to say something you might not like or agree with: unless you’re buying a house, buying on credit makes no financial sense.

Other than that, borrowing to buy something is just nutty. Why do I say this? Because when you borrow to buy something, whether it’s a luxury car or a latte (if you put a latte on your credit card and don’t pay your credit card in full every month, you are borrowing to buy lattes), you pay much more than you would if you had just paid cash.

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