It’s that time of year again – where we’ve just spent the whole month YOLO-ing. There’s been parties, gift-buying, and just all-round pretty wreckless spending, ‘cos that’s what Dezemba is all about. But now we have a whole January to make it through. And to make matters even worse, there’s all those crazy Jan sales that we’re missing out on, ‘cos funds are looow. But hey, we could just buy it on credit and pay it back later, right? Well, maybe. But if that’s what you’re planning on doing, make sure you know exactly what you’re in for. Buying things now and paying later seems like the only option sometimes, but it’s generally not a great idea.

Here are some things to consider when deciding whether to use credit and pay something off over a few months instead of saving up and paying cash.

The interest is wild!

Interest rates charged on debt are usually more than 22%. That’s really high considering that the interest you earn on your savings account may only be around 5%. For example, if your debt is R8 000, the interest you pay on it every month could be a massive R150! This means that if you’re paying the debt off over 12 months, you’ll end up paying R1 800 more than the product actually costs. Madness!

Sneaky hidden costs

Banks and stores usually charge monthly admin fees, membership fees, contract costs and other charges. Make sure you understand these extra costs before you agree to take out a credit card or use in-store credit. You will be surprised at how much the item will really cost at the end of it all. Don’t be shy to ask lots of questions! 

It’s a trap!

You know how in school you’d have those LO classes where they warned you about the horrors of taking drugs, and how once you get a taste there’s no going back? Well, they should have the same type of classes about credit. Because once you get a taste of how easy it is to get your hands on that brand-new iPhone even though you don’t have the cash, it’s really hard to go back. So if you are going to buy on credit, ask yourself these 3 questions:

•      Do I really need this?
•      Is it going to improve my life so much that it’s worth the debt?
•      And, most importantly, can I actually afford these repayments every month?

At the end of the day it’s that last question that matters most. If you can afford it, and you really, really must have it, do it. But don’t find yourselves in the debt trap, kids. It’s really difficult to get out of! Even more difficult than saving …