Middle-class South Africans spend a quarter of their earnings to pay off interest on debt

South Africa’s middle-income consumers spend an average of 25% of their take-home monthly income to pay interest accumulated on debt.

This was the major finding in a new analysis of FNB retail banking customers who earn between R7,000 and R60,000 per month.

FNB said that its data paints a picture of households that are heavily reliant on unsecured debt to get through each month.

“Consumers who have not defaulted on a credit repayment in the last 18 months show better money management practices in general,” said Raj Makanjee, FNB Retail chief executive.

“These consumers are typically saving more compared to those who are in arrears and hold more secured credit, such as a home loan or vehicle finance as opposed to unsecured credit.”

By comparison, the reliance on debt is higher among consumers who have defaulted on three or more credit obligations in the last 18 months, with nearly 80% of monthly interest paid going towards servicing unsecured credit.

Consumers are also taking on expensive forms of credit, from multiple providers and potentially at maximum interest rates.

“Access to credit remains a vital asset for a consumer and has been a gateway to financial inclusion for most people. Unsecured credit can be an important buffer when household budgets are not sufficient to cover unforeseen expenses,” said Makanjee.

“However, we caution consumers to avoid being heavily reliant on unsecured credit for day-to-day consumption as this limits their ability to employ good money management practices such as saving for financial goals or investing for the long term.”


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Middle-class South Africans spend a quarter of their earnings to pay off interest on debt