The Real Cost of Black Friday on Credit for the Average South African

It’s been an extremely tough financial year. And although many of us have seen prices climb this year for essentials such as fuel and food, despite salaries shrinking or staying stagnant, the lure of a “good deal” needs to be well thought out. 

So, before you indulge in the Black Friday madness, take careful stock of your finances before taking advantage of stock sales. 

Store credit cards make it convenient for us to purchase items and to get the things we need when we just don’t have the cash flow. But this type of credit often comes with extremely high-interest rates. And shockingly, most of us are unaware of how high the interest rate is on these store cards. 

Do you know the interest rate on your store cards? If not, you’re not alone

A study conducted by the National Credit Regulator found that 55% of store credit cardholders did not know what the interest rate was on their cards. That’s because these cards are sold by store assistants and not by financial advisors. So one can be forgiven for being oversold on the benefits that these cards carry instead of the long term cost…

Store cards are easy to get and easy to spend on. In 2020 approximately 49% of active credit accounts were held within the retail industry.

So when it comes to spending on credit, most people who are using their store cards are probably paying more than they can afford with the high-interest rates. 

Although many South Africans were affected financially due to the pandemic during 2020, consumers still participated in Black Friday. The pandemic resulted in a 30% decrease in in-store sales last year. But that certainly did stop shoppers from participating. Retailers made up for the loss of foot traffic through an increase of 60% in online sales. 

During 2020 many South Africans got caught up in the Black Friday hype despite struggling financially. And many struggled to pay back their credit card debt over the following months. 

And this year consumers may be in an even worse financial position. But like last year, that probably won’t stop us from taking part again either.

Thanks to the ever-increasing cost of living, there has been an increase in credit card and store card usage among South Africans during 2021. The National Credit Regulator found that South Africans are using credit cards and store cards to help pay their bills. But many were unable to keep up with this debt as creditors have seen a 16% increase in consumers being more than 3 months in arrears since last year. 

But what would the average interest on store cards be for those participating based on last year’s average spending in South Africa? 

Here is how much the average store cardholder is likely to pay in interest after a Black Friday splurge…

In 2020 the average amount spent on Black Friday was R1,735 per person for both online and in-store purchases. 

For those who plan to shop Black Friday deals using their store cards, it’s important to note just how much interest is charged on their balance.

With the average store card charging 24% in interest, we can predict what the interest on store cards would cost you if you decide to spend roughly the same amount as the average South African did last year.

Let’s do a quick calculation: 

Amount spend on Black Friday multiplied by the interest charged = average interest rate

R1735 x 24% = R416.40

To round up, for every R1,700 you spend this year taking part in Black Friday promotions, on average, expect to pay an extra R400. That leaves your total spend at over R2,100. 

And R400 can go a long way, as we all know…

And if you plan to spend more, expect to pay more in interest…

Black Friday and tricks of the trade

Online and brick and mortar stores will use the annual Black Friday sales to manipulate shoppers wherever they can, just to generate additional revenue. 

It’s not personal. It’s business. But that doesn’t mean we can’t educate ourselves around some of the tricks of the trade.

In the current economic climate and consumers’ spending habits, Black Friday sales are an expense that only a few can afford. Falling for the Black Friday bargains and buying on credit will probably only end up costing you more in the long run.

So if you’re a savvy shopper, keen on getting a real bargain, here are some tactics to take note of so retailers can boost their uptake on sale items.

Retailers build up bargains long before the sale

The psychological manipulation of Black Friday starts long before the sale kicks off. Stores will build up the hype of the sale or specific bargains wherever they can. 

This reinforces the idea that you’ll be saving money on Black Friday. Some stores may even offer limited availability, enforcing the idea that you should buy the product now before it’s too late. 

According to brand and consumer specialist Martin Lindstrom, our shopping behaviour is irrational and subconscious. He argues that the more rational we think we are, the more likely we’ll be manipulated. 

Black Fridays ticking clock 

Many online stores offer limited-time deals in the weeks leading up to Black Friday. To enforce the sense of urgency, these limited deals come with a ticking clock that limits our ability to think clearly before making the purchase. 

Although it may seem like the deal would disappear the next day, stores often just increase the price slightly or change the products on sale. 

Discounts may not be as good as you think

Stores love announcing how great their discounts are and how much you would be “saving”. These discounts often come with “before” prices so that you can see how much you’re saving. But many retailers inflate the prices of their products months or weeks before the big sale. That way it looks like you’re saving a lot of money. 

Make sure you’re getting a “deal”

Black Friday can be a great way to stock up on essential items and to get the festive season gifts out of the way early at a reasonable price. 

But make sure you’re getting a deal and saving money where you can. If you decide to purchase on credit, take note of the real financial cost to your wallet and ensure you can pay back your accounts promptly. That way Black Friday can be an awesome way to make your money go a lot further!

Debt Rescue is the #1 debt counsellor in South Africa. We have helped thousands of consumers take control of their finances through the debt review process. Debt review will help you reduce your monthly debt repayments and help make monthly household expenses more affordable. 

If you’re over-indebted, contact us today. We can help you.

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