South Africa\u2019s middle-income consumers spend an average of 25% of their take-home monthly income to pay interest accumulated on debt.<\/p>\n
This was the major finding in a new analysis of FNB retail banking customers who earn between R7,000 and R60,000 per month.<\/p>\n
FNB said that its data paints a picture of households that are heavily reliant on unsecured debt to get through each month.<\/p>\n
“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.<\/p>\n
“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.”<\/p>\n
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.<\/p>\n
Consumers are also taking on expensive forms of credit, from multiple providers and potentially at maximum interest rates.<\/p>\n
“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.<\/p>\n
“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.”<\/p>\n