We thought it would be useful to talk through some simple steps to getting out of credit card debt in South Africa. Or better yet, help you to never dip a toe in that murky water at all.
When we start our first real job after university, we’re told to get a credit card to build up a credit record for the future when you need to finance a house or car. It’s for “Emergency purposes only” or at least that’s what I was told when I stepped out of university and into the working world. We all know that having a credit card can be the antithesis of getting out of credit card debt.
A Spiral Effect
What happens when one of those emergencies turns into drinks at the bar or a pair of shoes you simply cannot live without? You’ll turn to your credit card. A few minor purchases here and there won’t hurt anyone right?
This is where the proverbial excrement hits the fan. Those few minor purchases have now turned into thousands of rand in unpaid debt. The result is that you’ve worn a hole into the sole of those irresistible shoes by pacing up and down wondering how you got yourself into this mess.
Being Honest with Yourself is the first step to getting out of credit card debt in South Africa
It’s time to face the truth and look Goliath in the eye, young David. If you don’t know how much you owe because you’re terrified of the real amount, this is problematic. You can’t do damage control without assessing the damage first. Use this revelation to set some credit busting goals and the pace of the marathon you are about to run.
Budgeting – It’s a real thing, that needs to be done consistently
I can’t stress how important it is to budget. This not only helps you track where your money is going but also how much of it you’re spending. There are tons of free apps that will help keep up to date with how much you’re spending. 22seven by Old Mutual is one of our personal favourites.
Sit down and calculate your monthly expenses, this would be along the lines of rent, car repayments, medical aid, petrol or transport costs and groceries. After your overall expenses are tallied, you’ll know how much you can afford to pay back the money!
Expenses: Use them or lose them
Once you have examined what your monthly expenses are, you need to look at what you can cut down or cut out. Some expenses can be altered to make them more affordable. For example:
- Packing lunches for work is cheaper than ordering in every day. This just requires a little more effort that will pay off in the long run, for your wallet and your waistline.
- Get competitive quotes on your car and home insurance, negotiating hard from the get-go could end up saving you more money in the long run.
- Going out for dinners most nights of the week and every weekend? You need to reign it in! Spending more time at home doesn’t have to be boring, you’ll figure it out.
- Do you have a Netflix, Showmax and DSTV account? Well, then one needs to go. You could even share an account with a friend if you can’t imagine a world without binge-worthy television. It’s ok, neither can I.
Manage your Repayments like a Grown Up
Never skip a payment! I repeat. Never. Pay the minimum amount required but always try to pay extra. This will help you get out of debt quicker. Don’t ever take out a loan to repay the debt because this will only lead one way. MORE DEBT!
Don’t Perpetuate the Cycle
You’ve worked really hard to get yourself in the clear so work hard at avoiding debt at all cost in the future. Save money for those rainy days and maybe even some retail therapy and use your credit card wisely by fastidiously checking the interest rates on repayments. An even better option would be using payment solutions that provide interest-free payment solutions when you shop, like Payflex.
South Africa’s credit crisis isn’t going to be fixed overnight, but with a bit of perseverance, habit-changing and responsible choices, you can stay clear of it.