Themba tells Sophie about the Banking Act, Micro-Finance Act and the Consumer Contracts Act Credit providers ask the credit bureau for your credit report and then they will offer you credit based on your report. The Act is in place to stop them from offering you a loan or credit when they can see you cannot afford it. It also makes sure that they give you fair terms with any loan or credit agreement. This means that they cannot charge whatever interest rate they want; the Act has limits in place to protect you from being taken advantage of.

Sophie asks if the NCA is the same as FAIS and FICA. These are all laws but
they regulate various things.

Sophie says that although it is clearer now, she thinks there are too many Acts out there to remember them all. Themba agrees but says they are all important as they regulate financial services.

Beware of enticing tactics!
Some stores and banks want you to spend as much money as possible with them. They will offer you credit and encourage you to spend money you don’t have. Themba reminds Sophie to ask herself if she really needs what they are advertising before she buys anything. Here are some methods that stores use to get you to buy on credit and why you should be wary of them.

Buy now, pay later
This encourages you to spend money you don’t have and makes impulse buying easier. If you don’t settle the debt in full by the agreed date you will usually be charged a very high interest rate.

Six months interest free
This catches many people who plan to pay their debt before it starts earning interest. In reality most people don’t pay everything off by the six-month mark and end up paying high interest every month thereafter.

Free vouchers
Often stores will give you free vouchers if you open an account and spend a certain amount. This might give you a bit off your first purchase but the interest you pay on future purchases and the compulsory extras like “club membership” make it very expensive.

Club membership and competitions
Some stores add extra benefits if you open an account. These can be competitions, discounts, funeral benefits, invitations to special events and more. These are all there to encourage you to spend more money. You often have to pay extra each month for these benefits. These costs are often added automatically to your account each month and you are charged interest on them if they are not paid on time.