By Scelo Hlophe
Back in 2011 when I was at university doing my first year, I found myself being easily manipulated and under the pressure of requirements for class and the social pressure of needing to keep up with status, I applied for a credit card with a limit of R500. I was a student and there was absolutely no need for me to get the credit card nor did I need it.
My lesson in this was finally understanding the motivation for credit. Most of us get into debt and we do not even know what we used that credit for. To date, I still do not know what I did with that money. It a very long time for me to pay it off especially because I was a student. At the time, paying R500 back with interest was seemed impossible.
You would think that I might have learnt something after that experience. But it took the hard way! I was tricked by a friend to open a store account with a promise that he would pay for it monthly. He only made 1 payment…. I still did not see anything wrong there and I changed my numbers to avoid getting calls, little did I know that could affect my credit record and my ability to be granted credit in the future.
This may sound like a cruel statement but, I would strongly advise that you never help people open up accounts on the basis of good deeds in the name of friendship. Sadly, this includes family. I learnt this when I opened up a cell phone contract on behalf of a family member who would pay for it once in 3 months . You can only imagine how that further damaged my credit profile.
The cycle became worse. I moved out from the student commune when I started working. The income I earned was low, but I needed furniture. I went to a furniture and bought some things with the total cost R7000. At least that’s what I thought.
The debt on credit was a total of R23 000. The monthly instalment combined with my other debt left negative balance in my bank account. This was a really uncomfortable way to live. I learnt that buying furniture and clothing on credit were not my wisest choices.,
Credit provides have made it so easy for us to actually get into debt. Below are some tips on avoiding unnecessary debt:
- Before applying for that credit card or personal loan, try find other means to be able to cover the need for the loan. Rather save money in an emergency fund.
- Constantly monitor your spending and your bank statement. Notice where you are spending money and cut back on things you don’t need such as take out and entertainment.
- Live within your budget. Accept when you cannot afford to buy things and save toward it. That will avoid you going for temporary loans or borrowing money from people to get through the month
- Supplement your income when your income can’t carry you over. Look for part time or odd jobs that could help you earn some extra cash
- Learn to say NO. We tend to want to help people even when we can’t or when their trustworthiness comes into question.. Try not to help friends or family take up credit on your name
- By Law, as a consumer you are entitled to one credit report from all the credit bureaus. A credit report is what lenders use to see if you are a good payer when applying for credit. Checking your record can help you know the kind of interest you can get if you want to buy a car or a house, protects you from identity theft and allows you to mend incorrect information that is on your record. Monitor your profile and make sure that you always find ways to improve it.
- Avoiding paying your debt can makes things work. Rather make arrangements to pay.
- READ- we hate reading and we always rush for the part where we hear, “Your application was successful” and we do not read what we are getting ourselves into and the cost of the credit. Most credit packages come with many items that you pay for that which you do not really need to be paying for. Therefore reading and understanding what you are paying for can save you in the long term.