Always know the hidden costs, always check your statement balance

When taking out credit accounts with retail stores, there can sometimes be hidden costs that can be opted out of, yet often go unnoticed. Adding more to your credit amount, pushing you further into debt, these are the reasons why you must always keep track of what you are paying for. If the amounts you have to pay don’t add up, ask why.

A troubling aspect of credit that came to light in a recent case study a Knysna based woman, Leticha Marinana, who has been on disability since 1996, got caught in a credit trap, creating a swirl of debt that lasted years. Even though payments were being made every month to cover her Edgars account, before ceasing use of it completely, she still racked up monthly debt that seemed to come from nowhere. Having settled her debt, she still owed and was being chased for over R4, 000, even though her account showed her debt and interest were paid off. What she didn’t know was that the Edgars magazines she had been receiving for months actually came at a cost, quite an expensive cost. Although she did not sign up for these extras, she had been charged for them time and time again, without ever seeing the amount added to her accounts until they investigated further to find the source of the expense.

While on a disability grant, a lot of the granted credit could be seen as reckless lending. Even though one of the provisions of the 2007 National Credit Act was to prevent such lending, the important affordability assessment and final criteria is determined by the credit providers themselves. Although the change to the act makes getting credit more difficult, Leticha had taken credit in 2006 before the changes were made, meaning the credit amendment was too late to save her from the trap. Relying on credit for necessities of life, this is a situation which puts her lively hood, and the lively hood of many other South African citizens, at risk. Not able to afford the hidden costs on top of her debt, a disability grant means she has little monthly income and barely enough to cover monthly payments.

With almost half the population of our country in debt, and a tally of around R1.7 trillion owed by debtors as of the first quarter of 2016, there are about 9.5 million records standing as impaired or in arrears. With such a huge debt problem, the addition of hidden costs by creditors is a dangerous game. With many unaware of what they are paying for, simply focusing on clearing their debt, often those without full knowledge end up paying a lot more than is needed- siphoning away money to hidden costs and added extras.

To ensure you get the most from your credit agreement, always make sure to know what you are paying for and in what amounts. If something doesn’t add up, chances are you are being sidelined by hidden costs and will end up paying a lot more interest at the end of the day.