TransUnion’s latest report on credit has shows that more Gen Z South Africans are taking out credit. Picture: Tima Miroshnichenko/Pexels
The latest data from TransUnion’s South Africa Industry Insights Report for 2024 has shown that young people, Generation Z in particular, are taking up more credit.
The second quarter of the year saw the number of overall credit originations (new credit accounts) increase by 15.2%.
The data showed that South Africans are increasing their use of credit facilities as they try to keep up with the rising cost of living.
“South Africans increasingly used new and existing credit products to meet their rising consumption needs via credit cards, personal loans, and retail revolving loans,” the report said.
Overall, the number of credit-active consumers grew by 4.7% year-on-year to 18.5 million people, of which 28.1% hold credit cards.
TransUnion said that this data demonstrated that more South Africans have access to financial products and services to facilitate lifestyle essentials.
The research found that credit products that South Africans pay for their day-to-day expenses, accounted for 83% of all new credit opened.
This has grown by 16.8% year-on-year in Q2 of 2024.
The country’s credit market stood at a balance of R2.37 trillion, this was up by 3.7% year-on-year, with total balances within consumption-led products up 5.1% year-on-year.
TransUnion found that younger consumers, Gen Z (born 1995–2010) and Millennials (born 1980–1994), accounted for 62% of new accounts opened during Q2 and this reiterated the importance of younger generations in credit inclusion.
The research said that consumption-led products grew by 16.8% year-on-year, and this was primarily led by clothing which constituted 83% of overall originations in Q2.
“Credit card originations for the Q2 period were up 9.3% year-on-year, primarily due to the continued growth within the Gen Z (up 22.7% year-on-year,) and Millennials (up 7.5% year-on-year) consumer base,” the report said.
Gen Z’s share of credit card originations had increased 2.3% from 19% to 21.3%.
The report said that as Gen Z reached working age, they have a preference towards e-commerce platforms and on-demand services and tend to use their credit cards for these consumption needs.
IOL spoke to two Gen Z in an effort to learn how this generation approaches their relationship with credit.
We spoke to two people in this age bracket and discussed their mindset when it came to taking credit.
Roman Daniel, 24, is a law student in Cape Town, who said that he did not want to take out credit but was forced to sign up for a store account after his phone was stolen.
“I got mugged and this was the third time I had lost my phone in 24 months and I knew that my mom was not going to buy me another phone.
“I needed a phone desperately for school and work and despite not wanting to take out credit I was forced to do so,” he explained.
He explained that he also worked part-time as an intern at a law firm so having a phone was vital.
“I explored various plans and tried to get a phone contract through all the networks but I was unsuccessful for the phone that I wanted. I just did not have enough of a salary to get a great affordability rating and had to either take a cheaper phone or wait till I saved up,” Daniel said.
The law student said that after about two days of research, he decided to take out credit with Sport Scene, a TFG owned store.
“Based on the phone I could afford and the monthly payments I came to the realisation that this company would be the best option for me.“
“Like I said I never really wanted credit so I only have this credit facility to my name,” he said.
Asked if he had any issues with having credit, he said that he hated paying the monthly fee and knowing that he was paying more than what the actual phone was worth. The student explained that is the price of using a credit facility.
“You have to pay for the ability of immediacy, and that is what credit provides. I understand that, and I am sometimes tempted to get a new pair of shoes or a shirt from the store on credit but I have decided to pay this account off and only use it for emergencies ”
IOL also spoke to Nadia Doe** about her relationship with credit.
Doe is also a student and she also admitted to having a complicated relationship with credit.
“I got access to credit early and I think I should have done more research on what interest I would be paying and also how long it would take to pay back the money,” she explained.
Doe said that she took out a credit facility when she first got to university. She had a part-time job and therefore was given credit as she was able to provide TFG with a payslip and three months' bank statements.
“To be honest, I never looked at the interest rate I just focused on the monthly minimum payments that I thought I could afford,“ she said.
“I also did not realise that emergencies happen and one should never live pay-check to pay-check. I had some minor medical issues for one month and fell behind on payments.
“The situation has now escalated to the point that I have had to make payment arrangements in order to get back on track”.
She said that in retrospect she should have never taken out credit for something as “frivolous” as clothing and would encourage other Gen Zers to “think before you place yourself in debt”.
** Not her/his real name.
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