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Thursday 17 January 2019
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Yay or Nay for Credit Accounts

buyIt is often not easy to step out of a store without that floral off shoulder dress or the navy slim suit that you wanted to have for so long especially when your finances are tied at the moment. However, most stores have made it easier for customers to have instant access to items even when they do not have the cash to pay for it. But as with anything that seems too good to be true, there is a massive catch. One has to pay more than the actual price.

Some credit accounts come with rewarding programs that may feature other special benefits, such as bonus coupons, free gift wrapping, discounts or exclusive financing offers. Some stores usually have invitation only shopping events or exclusive sales for their account holders.

A credit account is normally when a customer gets certain credit on an account of which they buy within a certain limit and then pay when month ends, says Jacques September a credit associate at Edgars. Jacques explained that when a customer gets N$10,000 credit, for instance, they divide it into installments of twelve months of which they have to pay a certain amount every month. “Once a customer applies for a card it is loaded with credit for them to purchase,” says Jacques.

A hire purchase is also one form of buying on account although it mostly applies to cars and furniture stores. It is a credit agreement whereby one hires the goods with the option to buy them. Until you make all the payments to the retailer and pay off the final fee, you do not actually own the goods. Hire purchase agreements are different from ordinary credit agreements as you cannot sell the goods until you own them outright and the creditor can ask you to return them if you do not keep up your repayments. However, if you have paid more than a third of the total amount the hire purchase company would have to go to court before it could seize the goods.

For one to qualify for a credit account at Edgars, Jacques explains that they have to provide a three months bank statement to ensure that the customer earns every month, a latest pay slip and identification documents.

Interest rates
The interest rates of Edgars are about 15 percent per annum. “We used to have an interest free period but no more because we had two types of accounts previously, the six months and twelve months but now we only have one option which is the twelve month,” says Jacques.

When clients fail to pay
Jacques says that some customers apply for debit order deductions and they pay cash. “So when a customer fails to pay for up to three to four months the accounts are handed over to debt collector’s department at the head office and that is where they take it from,” he says.

It could harm your finances
Francois Brand, the manager at the Financial Literacy Initiative says that credit accounts could lead to people over indebted . It could lead to people losing track of all their debts to different institutions, it could also mean that people are paying more for goods that they could have paid for cash or use savings,”

Coming to think of it; credit accounts are always about getting the customer back into the store to spend more money. So, undisciplined shoppers could easily rake up a bill they can’t afford to pay off at the end of the month which, in turn, would negate any of the rewards or discounts they’ve earned on the purchases.

The retailers and merchants are also not offering these options because they like you but to make more money from you and have you visit the shop at a regular basis. They have armies of sales and financial specialists who all know about your human nature far better than you do and they know a number of things.

First, it is obvious that when a consumer is presented with a pay in twenty four (24) months option, they will tend to buy more. How? Firstly since there is no limit to buying with the dollars on your account it makes it physically possible to buy more. Instead of buying the cheap items that one can pay cash they opt to buy the expensive items as they can pay for it later. As such you buy more, more than you intended or more than you needed.

As much as you might be thinking that you are missing out on great deals you might just be risking your financial life. Therefore, it is advisable to be really wise when you purchase on account. Also before you sign up, make sure you can afford the repayments.

Francois advises that people make a list of all their accounts and start repaying  accounts in full one by one and then only use those accounts in cases of emergency.  “It’s better to start saving and use the saving when you need to buy clothes or food or furniture,” he says. Francois continued to remind people that buying on credit costs more than when you buy cash and this being a tough year for Namibians it’s very important that Namibians to face the music and be extremely prudent with their finances.

After all, purchasing on credit account is not a bad option if one keeps very good track of their accounts.




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