South African consumers are bracing for increased financial pressure following Finance Minister Enoch Godongwana’s recent budget announcement, which included proposals to raise the VAT rate by 0.5 percentage points in both 2025 and 2026.
The suggested VAT hikes, revealed during his budget speech, have drawn criticism from across the political spectrum.
As South Africans anticipate the dual impact of rising VAT and the effects of “bracket creep” — where income increases are eroded by static tax thresholds — many workers are already seeing a reduction in take-home pay. This has driven a growing number of individuals to turn to alternative payment methods such as credit cards and Buy Now, Pay Later (BNPL) schemes to help manage their monthly spending.
By the end of September 2024, household debt had reached 40.7% of the country’s nominal GDP, according to recent figures — a worrying indication of the financial strain faced by many.
Although flexible payment solutions can offer short-term relief, it is crucial for consumers to use them wisely to avoid falling into debt. Dean Hyde, Chief Operating Officer at PayJustNow, outlines key budgeting tools to help households manage rising costs more effectively:
Credit Cards: Convenient but Caution is Crucial
Credit cards offer flexibility for both everyday and larger purchases. However, with interest rates of up to 22.25%, they can quickly become a costly option if balances aren’t repaid promptly.
- Best suited for: Short-term purchases you can repay quickly.
- Top tip: Only use a credit card if you can clear the balance within the interest-free period to avoid high interest charges.
Buy Now, Pay Later (BNPL): Spreading Costs Without the Interest
BNPL platforms enable consumers to split payments into interest-free instalments, making unaffordable purchases more accessible — especially when facing tight monthly budgets.
- Best suited for: Larger or non-essential purchases, such as home upgrades, fashion, tyres, and beauty services.
- Top tip: Choose a BNPL provider whose repayment schedule aligns with your salary cycle to avoid late fees.
Revolving Credit: For Emergencies Only
Revolving credit facilities give access to ongoing funds, but interest rates can fluctuate and become burdensome if balances remain unpaid.
- Best suited for: Unexpected or emergency expenses.
- Top tip: Closely monitor both interest rates and repayment terms to avoid spiralling debt.
Personal Loans: Structured Support for Major Outlays
Personal loans come with fixed terms and potentially lower interest than credit cards, making them a sound option for planned, substantial purchases like education or home renovations.
- Best suited for: Large, deliberate investments requiring long-term repayment.
- Top tip: Avoid using personal loans for spontaneous or non-essential spending.
Budgeting with Deals and Discounts
Taking advantage of promotions and seasonal sales can be a smart way to manage essential purchases without straining your budget.
- Best suited for: Routine purchases and planned expenses.
- Top tip: Prioritise value and affordability over impulse when shopping for both essentials and luxuries.
With economic pressures mounting, careful financial planning is more important than ever. By selecting the right budgeting tools and using them responsibly, South Africans can protect their financial wellbeing, maintain good credit health, and continue living within their means.
Read the full article here: “5 essential budgeting tools to survive South Africa’s rising Cost of Living”
