Picture: 123RF/ ANTON GVOZDIKOV
Picture: 123RF/ ANTON GVOZDIKOV

Almost 30% of South Africans use their credit cards primarily to buy food and groceries, the latest Old Mutual Savings and Investment Monitor shows. 

Credit should generally be used to pay for big-ticket items and emergencies and not to fund daily expenses. The use of credit for daily essentials can easily lead you into a debt trap. 

The annual survey, which tracks changes in the financial attitudes and behaviour of SA’s working metropolitan population, is conducted through face-to-face interviews with consumers in more than 1,000 households in metro areas.

When asked what their credit cards are “mainly” used for, 29% of respondents in this year’s survey said their cards are used primarily to buy food and groceries, while 28% said they use their credit cards mainly for emergencies. Sixteen percent reportedly use their credit cards mainly for big purchases, while 10% use theirs mainly to pay for travel. Only 8% use their credit cards mainly for online purchases. 

Lynette Nicholson, a research manager at Old Mutual, says there is a strong correlation between people buying food and paying off just the minimum on their credit cards. “These consumers are probably the ones in the worst [financial] situation,” she says. 

“Only 18% of those who use their credit card mainly for everyday purchases like groceries pay their card off in full at the end of the month,” the survey shows.

To avoid paying interest, a credit card should be paid off in full every month. 

The survey found that 56% of people with credit cards pay the minimum instalment only. This applies also to the majority of respondents in the highest income category (of R40,000 and more a month). 

For every R100 earned, the average person is spending R100.10, meaning that most consumers are not only failing to save any money at all, but in fact are continuing to live beyond their means and falling into debt
Yanga Nozibele, investment associate at Cannon Asset Managers

On a positive note, at a total sample level, the incidence of both credit cards and store cards is down on 2018, the survey shows. Last year, 32% of respondents had credit cards and this year only 28% reported having a credit card. In 2018, 66% reported having shop accounts or store cards; this year the percentage of respondents with these accounts dropped to 60%.

Nicholson stresses that these numbers reflect the incidence of consumers’ “holding” these accounts as opposed to the use of them.

She says it is not known whether the decline in the incidence of these accounts is due to consumers paying off and closing accounts and credit cards, or due to lenders finding that consumers are increasingly unworthy of such credit. 

The survey, which was released in Johannesburg on Monday, also shows that there has been an overall increase in personal loans from financial institutions (especially in households with an income of between R14,000 and R39,999 a month) and family members (especially in households with a lower monthly income). 

Consistent with previous years, this year’s survey shows that money issues are a source of stress in households in every income bracket, with lower-income respondents experiencing the highest levels of stress.

In households with an income of less than R6,000 a month, 45% describe their money stress levels as “high” while 18% say it is “overwhelming”. 

The survey found that debt levels and financial stress continue to be closely linked, and the link is stronger this year, with 70% (vs 67% in 2018, 64% in 2017 and 52% in 2016) of those who describe their stress levels as “overwhelming” admitting to having too much debt and having trouble managing it, the report says. 

According to a media release issued by Cannon Asset Managers the three expenses that constitute more than 60% of most of our income are housing and utilities (32%), transport (16%) and food (13%). Together, these three categories of expenses account for 61.8% of all household expenditure. 

By contrast, our household savings rate, or the percentage of disposable income that is put towards savings, reached -0.1% in January this year, Yanga Nozibele, an investment associate at Cannon Asset Managers, said. 

“In other words, for every R100 earned, the average person is spending R100.10, meaning that most consumers are not only failing to save any money at all, but in fact are continuing to live beyond their means and falling into debt,” said Nozibele.