I am someone who is known by banks as a “freeloader”.  That is somebody who has a credit card who pays off the full balance each month before they have to pay any interest.  Banks don’t enjoy that because then they don’t get the chance to make much money off you.  I don’t believe, as I am sure some people will reply to this blog article, in not having credit facilities at all.  If you don’t have credit facilities at all you cannot build a credit record and be given credit when you need it.   

I do like however what I have seen on bank statements in some overseas countries and that is how they are obligated to give you information on your statement as to how much interest you will pay if you only ever pay off the minimum amount.  So, for example, on an account of R3 321,06 you would get a warning that if you only pay the minimum amount on that account each month, with interest continually being added to it, it would take an unbelievable 16 years to pay it off and you would pay R8 308,00 in total over 16 years.  If you paid R119,00 a month it would take you three years to pay off R3 321,06 and you pay interest of R4 296,00.  I would like to see those types of warnings on credit card statements and revolving credit in South Africa because it will bring home to people the reality of what happens to you if you don’t use the card wisely.  Exact amounts and time frames on an account will spell out the true costs of unpaid credit.

Wise use of credit is paying off the entire balance each month or if you cannot afford it, at least paying more than the minimum payment. As you can see, if you only ever pay the minimum payment, even on a small balance, it will take you 16 years to pay it off!  I honestly think that legislation like that in South Africa would be of far more benefit to the average man in the street than the CCMA legislation and it would create far bigger savings for the public at large, in a country which already does not have a very good savings record.