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Why Say Yes to Debt
After the 2008 global economic meltdown, many young adults remain wary about using credit. Of the 55-million people living in South Africa today, a minimum of 20-million are young adults. This is 20-million young and impulsive potential consumerism victims that are repetitively bombarded with dazzling commercials that offer a gateway into debt.
Either through offering ‘free’ R1000 vouchers when you open an instore account or influencing their consumers to blow R1000 or more – that they do not have – just to get R300 off purchases accumulated, retailers are out to make a profit by landing you into debt you do not need. Advertisements lure you into needing something that you want. Due to the blurring line between needs and wants, the NCR (National Credit Regulation) found that ten million people in the republic find themselves in severe debt.
But Millennials seem to be struggling to avoid credit as best they can. A recent Bankrate survey conducted in the United States of America reveals that fewer than one third of people between ages 18 and 35 have a credit card. And as it stands, this is a record low percentage. In South Africa, however, people are financing their lives through credit. Whether it be buying necessities such as clothing and food, consumers are trapped in the vicious buy-now-pay-later cycle. Consumers conveniently forget that paying back the money later will come with interest attached. This ultimately means that consumers find themselves in a worse off situation when the next payday arrives.
Another factor keeping consumers trapped in debt is the process of building a credit record. Young people are especially at risk as it is a rite of passage to sail uncharted credit waters. To build a strong credit, financial institutions need to see that they are a responsible payer. To be able to buy that dream house or that car you have been eyeing since its release into the market, it is required to have been in debt at one point in the past and be on top of said debt’s repayments during the time in which you apply for a home loan at the bank.
Understanding the repercussions of getting into debt is a crucial skill for consumers to hone. This skill will allow for the x-ray vision needed to see the inner trappings of debt when it is offered in extravagant packaging known as advertising. So, spending that R1000 to get R300 vouchers leaving you in R700 debt will be a not so bright idea after all.