Opening new store accounts may seem easy and attractive, however, according to the Credit Ombud entering into contracts is a long term decision and consumers have to think carefully before signing on the dotted line.
Consumers are urged to take note of monthly accounts that need to be paid on time since failing to do so will lead to consequences such as negative listings on the credit bureau or debt collections steps being initiated.
Aspects such as affordability will increasingly become an issue for most consumers when matters like cost of living, the debt burden and the recent amendment to the National Credit Act which came into effect earlier this month comes into play.
Deputy Credit Ombud Reana Steyn says tighter restrictions will be placed on consumers who will buying on credit.
"What we are saying to consumers is that they just need to be cautious of opening new accounts, especially clothing accounts which most people open this time of the year. I think generally people are impatient and they want to open the account right there and then. But the new amendment to the Act will not make that possible because it places a requirement on the credit provider to require all sorts of documents and to do checks," she says.
According to the Credit Ombud, consumers should consider the following when applying for credit:
- Consumers should obtain a copy of their credit profiles before applying for credit to ensure that they are credit savvy prior to application.
- If the credit provider decides that you qualify for more credit, it does not mean that in actual fact you can afford it.
- It is better to assess your own finances very critically. In this way, you can save yourself from more financial or even legal trouble in the future.
- Consumers should also remember to always leave a bit of ‘fat’ in their budget for increases in interest rates and other unforeseen expenses which may place additional pressure on their finances.