Indebted South Africans turn to store cards
Durban - South Africans, buckling under the strain of rising fuel costs and increases linked to the one per cent VAT hike are turning to store cards which could lead to even more household debt.
This is according to Neil Roets, CEO of debt counselling firm, Debt Rescue who said the number of store cards had increased by some five percent from 15.2% to 20.8% as a category of credit agreement.
The age groups most enamoured with store cards were the groups below 21 and above 66 years of age of whom 30.3% owned store cards.
In the over 66-year-old category credit card debt remained the most prevalent with 36.8% of debt review applicants declaring significant credit card debt. This percentage, however is down by almost 10% from last year – 46.3% in the first quarter of 2017 to 36.8% in the first quarter of this year.
“The bottom line is that most consumers are waiting far too long before they seek debt counselling – to the point where they are literally on the verge of losing all their belongings to debt collectors or to the point where we are actually unable to help them because their debt burden is simply too great to pay off in instalments and their only alternative becomes bankruptcy”, said Roets.
The outlook for consumers remains dire with the possibility of further increases in the price of fuel on the horizon and fears of an inflation after tax was increased.
“An unaudited mid-month fuel data released by the Central Energy Fund (CEF) suggest that petrol may increase by as much as 32 cents a litre while diesel is poised for 30 cents a litre price hike taking the petrol price to an all-time historic high record price of over R16 a litre”, says Roets, and with more than half of all consumers three months or more behind in debt repayments and consumers as a whole owning some R1.37-trillion in outstanding debt , we are a nation in deep trouble,” he said.
According to Roets the International Monetary Fund had decreased their forecast for South Africa’s growth rate and the massive contraction in the economy notching up close to 2% decline in May which was last seen in 2013.
“We might even be heading for a technical recession with further downgrades by the ratings agencies if this trend continues,” Roets said.