Credit not a big bad wolf

07 April 2008 PIC Solutions

Credit has been around since humans walked the earth. We use it daily without worrying when we use electricity, wear clothes and even take showers before paying for them. Yet even though we live in a world of credit, it is still considered bad financial practice by some. PIC Solutions, specialists in credit risk solutions for companies who issue credit, outlines how you can make credit work for you.

"Credit can give you freedom where you may otherwise have been unable to do things. It is a convenient part of modern day life and is a way of improving our lives in a fast-paced world," says Nick Geimer, spokesperson for PIC Solutions. "By working smartly with credit, you can actually save money. For example, being able to take advantage of a retail sale when you may have otherwise not been able to take advantage of good prices because you have no cash, or when your car needs emergency maintenance which you may not have been able to afford it at that moment."

South Africans are slowly bettering their lot in life. In an All Media Products Survey (AMPS) conducted this year, it is becoming apparent that South Africans are able to afford better lives. According to the Living Standards Measure (LSM), more and more people are seeing that when managed correctly, credit can act as a safety net. "The trick is to plan how you are going to pay back the money you have used. Using credit as a way to maintain a cash flow where they would otherwise have struggled is important, but managing that debt is a mature and important thing to take into account," advises Geimer.

Credit used in place of cash flow needs to be carefully monitored as this is where many people can end up neck-deep in debt. "You should carefully consider whether you can afford to pay back the debt you rack up each month, otherwise, it can spiral out of control." Repayment of the credit you use is important to maintain as this will ensure that you are not disadvantaged through high interest rates. The less debt you have, the less your repayment will be, since this works on a percentage of the debt you accumulate. Consistent debt payment is essential to a healthy relationship with credit.

Geimer advises, "When applying for credit, you need to check that the credit issuers are credible. They should comply with the National Credit Act which has been put in place to protect you as a credit-user. Do some research on what your rights are, because keeping informed about your rights and obligations before you enter into an agreement is absolutely essential."

PIC Solutions aids their customers, which include most of South Africa's major banks and other large retail companies, to manage the way they issue credit. South Africa's growing economy needs its credit issuance to be monitored carefully to ensure that healthy and positive growth occurs across its industries. PIC Solutions offers an optimistic point of view, "We hear it in the news every day that South Africans rely too much on credit, but with careful management, individuals with credit problems can improve their financial status."

Quick Polls


Financial behaviour experts suggest that today’s risk modelling methodologies ignore your client’s emotional ability / behavioural capacity. What are your thoughts on spicing up risk profiling tools to make allowance for your client’s financial behaviours


[a] Bring it on; my client’s make too many irrational financial decisions
[b] Existing risk profiling tools are adequate
[c] Risk profiling tools should be based on the model / rational client
[d] The perfect risk profiling tool is science fiction
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