Black Friday madness can take you dangerously into the red
What consumers fail to realise is that you can’t spend to save; you have to save to spend
Black Friday is potentially a black hole of debt from which there is no escape, unless you have a Black Friday budget.
South Africans went on a Black Friday binge in 2018, spending R3bn on this single shopping day, according to BankservAfrica. That was 15.92% more than the previous year.
In addition, recent research by TransUnion shows that consumers are more likely to take out loans and increase their spending limits during the Black Friday period. Looking at new accounts opened during Black Friday week in 2018 (November 19 to 26) compared to the same week a month before, TransUnion saw an increase of 37% in new accounts and a 21% spike in total credit limits for new credit cards, clothing and retail revolving accounts.
Most of this growth came from higher-risk loans, says Lee Naik, CEO of TransUNion Africa, with a 49% increase in retail instalment accounts, normally used for furniture and electronics; and a 30% increase in retail revolving accounts, normally used for electronics, homeware and general appliances.
A shock finding of the TransUnion study is that six months down the line, just more than half of the new retail revolving accounts taken out during Black Friday 2018 were more than one month in arrears.
People need to see the Black Friday hype for what it is: an attempt to ... make you act on impulse and buy without giving you a chance to stop and thinkMica Townsend of 10X Investments
What consumers fail to realise is that you can’t spend to save. You have to save to spend. Just because something is on special, doesn’t mean you will make a saving by buying it now. It’s only a saving if you fund the purchase from your savings.
And just because something is being sold on Black Friday doesn’t make it a good deal, says Yanga Nozibele, investment associate at Cannon Asset Managers.
Mica Townsend, business development manager at 10X Investments, says Black Friday is not designed to save you money, but to get you to spend money that you otherwise wouldn’t. “People need to see the hype for what it is: an attempt to get you caught up in all the bright colours, the advertisements and the excitement to make you act on impulse to buy without giving you a chance to stop and think.”
Nozibele says to make sure you get the best out of Black Friday and not the other way around, you must thoroughly plan for the specials you are going for and determine how much you can actually afford.
Susan Steward from Budget Insurance says you need to manage your and your family’s expectations well before Black Friday and be realistic about what deals you can and cannot afford.
Naik suggests you start with an honest, financial health-check where you’re clear on what you have, owe and can afford as steps to protect your finances during the Black Friday frenzy. Steward adds that preparing weeks ahead of Black Friday and Cyber Monday, the first Monday after Black Friday where you can find more discounted deals online, will go a long way in helping you stay within your budget.
In your planning you can use platforms such as pricecheck.co.za or retailers’ online platforms to compare prices so that you don’t go in blind when you start shopping.
Naik advises you pay cash where possible instead of signing up for a new account or charging your purchase(s) to your credit card.
Rita Cool, certified financial planner at Alexander Forbes, says rather than blowing your hard-earned cash on Black Friday “specials”, you should seriously consider investing your spare cash or using it to pay off debt— instead of creating more. “If your debt is under control, save towards an emergency fund or invest in your future.”
The experts agree that Black Friday and Cyber Monday can offer you some financial relief through the discounts offered, but only if you are financially prepared or participate for the right reasons.
Look out for scams in among the ‘specials’
Leading up to Black Friday and the days following it, expect your inbox — both on your phone and e-mail — to be flooded with “special offers” that don’t exist, leading you to fake websites where you will be prompted to part with your banking details to fraudsters.
Days such as Black Friday present the perfect opportunity for cyber-criminals, says Doros Hadjizenonos, the regional sales director at US-based cyber-security software provider Fortinet. If you fall for these phishing attacks you will not receive the goods you ordered — and could also become a victim of identity theft and have your bank accounts cleaned out by criminals, he says.
Phishing attacks can also be carried out through rogue mobile apps, which can also be used to mine for data or install ransomware. Be wary of unexpected invitations to install new apps on your mobile device, Hadjizenonos says.
Chris Wood, the executive for card issuing and payments at Nedbank, says big shopping days such as Black Friday are “fraught with dangers” as consumers caught up in scoring a good deal can so easily let their guard down. “Many Black Friday deals require quick decisions if you don’t want to miss out, and this sense of urgency is exactly what gets cardholders into trouble, whether through overspending, neglecting basic card safety principles, or falling for scams,” he says.
It’s not just fake retailers who will try to scam you this Black Friday. “If you receive a call from someone claiming to be from your bank, treat the call with suspicion. While it may legitimately be your bank, if the caller asks you for any of your personal or card details, it's almost certainly a scam,” says Wood. “No bank will ever ask for you for these details in an e-mail or over the phone.”
10 tips to maximise the security of your debit and credit cards
- Protect yourself online. If an online offer seems too good to be true, it probably is. Before you hand over your banking details, do some research into the store and read customer reviews.
- Don’t click on links to shopping sites, rather type in the web address. That way you know you haven’t been redirected to a fake site.
- Before you enter your card or other personal information on any site, look for the lock image in the toolbar and “https” (the “s” stands for secure) in the web address.
- Make sure you have the latest, updated anti-virus software on your phone and PC.
- Don’t ever do your online shopping or banking on a public or unsecured Wi-Fi network. They’re easy for fraudsters to hack.
- Never give anyone your card. Modern card technology means there should be no reason to give anyone your card when paying. Rather ask for the point-of-sale terminal and insert, swipe or tap your card yourself. If your card allows it, try and stick to contactless (tap-and-go) payments, which reduces the chances of your card being cloned. On the other hand, however, if your card falls into the wrong hands, it can be used until you block the card.
- Never write down your PIN code, or share it with anyone. The most secure place to store your PIN is in your head. If you’re worried you may forget it, put a clue or reminder on your phone that only you will understand.
- Before shopping online, check the merchant’s payment mode. Avoid sites that require direct payments from your bank, wire transfers, or untraceable forms of payment.
- Use your credit and not your debit card to make a purchase, as most credit cards have built-in fraud protection and are not directly connected to your savings account. Even better — use a credit card that has limited credit available, that way, there are limited funds available to potentially be stolen.
- Subscribe to your bank’s SMS notification service to be alerted about every transaction. That way you can stop you card after the first fraudulent transaction.