‘Tis the season of clothing accounts
|Published
There are so many reasonably priced clothing stores available to us now, there is no need to spend R1 500 on a pair of jeans, for instance. There are so many reasonably priced clothing stores available to us now, there is no need to spend R1 500 on a pair of jeans, for instance.
Durban - It’s predicted that more than 400 000 new clothing and furniture accounts will be opened over the next two months as consumers prepare to live large this holiday season.
Statistics show that, over the past three years, almost 1.5 million such accounts were opened in December and January, with new clothing accounts being the most popular.
While credit bureau Compuscan said the total number of new clothing and furniture accounts had decreased year-on-year since the 2011/12 season, more than 400 000 would be opened in the next two months.
Compuscan director Frank Lenisa said it was “extremely tempting” for consumers to turn a blind eye to their financial standing and get caught up in festive spending.
According to its statistics, 555 584 accounts were opened in 2011/12, 514 416 in 2012/13, and 422 160 in 2013/14.
“Regardless of the financial bracket consumers are in, they need to be wise with their spending on credit, especially at this time of year when November or December salaries need to stretch well into the new year,” Lenisa said.
A recent survey – the Acentric Christmas Shopping Intentions Survey 2014 – revealed that 34% of middle- and upper-income consumers had already planned to spend more money this festive season than they had done last year while 36% were going to spend the same. Only 26% had planned to cut back.
“For consumers to maintain joyful spirits during the festive season and avoid the stresses of overextending themselves, a number of practical steps can be followed,” Lenisa said.
These included:
* Distinguishing between needs and wants.
* Staying up to date with existing account repayments by paying with a debit order.
* Keeping track of daily spending by writing it down.
* Putting aside 10% of their income for emergencies.
* Buying food in bulk and cooking meals at home instead of going out for lunch or dinner regularly.
If consumers found themselves in a “really tight financial spot” they should speak to their creditors to establish payment alternatives, Lenisa said.
The recent Econometrix report said households had incurred high levels of debt. At the end of the first quarter of of this year, household debt as a percentage of disposable income was recorded at just under 75%.
Lenisa said a healthy debt-to-income ratio was anything below 36.99%, as long as a steady income was being earned.
“What this high level of household debt means for consumers is that they need to focus on decreasing their debt and making a greater effort to put aside savings.”
He said it was important to realise the long-term impact of a brief period of overextending.
“It is so easy to slip into a debt spiral and, even if consumers only miss a few payments, this reflects negatively on their credit records and will influence their ability to obtain credit in future.”
The Mercury