South Africans have increasingly relied on credit cards in the past year. Images- Canva
Economic crisis:citizens turn to credit cards for financial lifeline
Despite a slight dip from 9.2% to 9.0% in July, credit card usage remains notably higher than the 6.4% recorded last September.
South Africans have increasingly relied on credit cards in the past year. Images- Canva
In the face of an economic crisis, South Africans have increasingly relied on credit cards in the past year, according to Business Tech.
According to the most recent evaluation of money circulation and credit expansion in South Africa, the growth rate of household financial extensions dropped from 6.5% year-on-year in June to 6.1% in July.
ALSO READ: Reana Steyn warns about tapping cards
Credit card usage is higher than last year
While credit card usage decreased slightly from 9.2% in June to 9.0% in July, it’s important to highlight that this is still significantly higher than the 6.4% recorded in September 2022.
This decrease will result from reduced demand from both households and companies.
For households, the ongoing effect of interest rate increases since November 2021 will persist, leading to high debt servicing costs and making households cautious about taking on more debt.
ALSO READ:[WATCH]Bail Hearing: Defence to argue Dr. Magudumana’s rights vs. justice
Credit troubles in South Africa
Numerous financial institutions have observed a significant surge in credit problems, with Woolworths Financial Services being the latest to express concern.
Woolworths stated, “The impairment rate for the 12 months ending June 30, 2023, was 7.3%, compared to 4.7% in the previous year, reflecting increased pressure on consumers in the current economic climate.”
ALSO READ:South African rand strengthened and credit rating is unchanged
Nedbank also reported a 57% increase in credit impairments in the first half of 2023, attributing it to higher interest rates, increased inflation, and extensive power outages affecting clients, particularly retail customers.
Standard Bank likewise noted elevated credit impairment charges across all its portfolios, causing its overall credit loss ratio to rise to 97 basis points, nearing the upper limit of its typical range of 70 to 100 basis points.
ALSO READ:Gift of the Givers aid firefighters as CBD fire death toll hits 76
