As the cost of living continues to rise in South Africa, many households across the country are struggling to make ends meet.
The situation is expected to worsen after Minister of Finance Enoch Godongwana proposed raising the VAT rate by 0.5 percentage points in both 2025 and 2026 during his budget speech two weeks ago.
Godongwana proposed the VAT increase despite widespread opposition from various political parties, including the Democratic Alliance (DA), the largest partner in the African National Congress (ANC)-led Government of National Unity (GNU).
As South Africans prepare for a potential VAT increase and the impact of bracket creep — where salaries rise but tax brackets remain unchanged — workers are experiencing lower take-home pay and as a result many are turning to “alternative payment options like credit and pay-later providers to manage their spending”.
According to recent data, household debt stood at 40.7% of the country’s nominal GDP by the end of September 2024.
While these solutions provide flexibility, it’s essential to know how to use them responsibly to steer clear of debt and ensure financial stability. Dean Hyde, the Chief Operating Officer at PayJustNow, provides five effective budgeting tools that can assist consumers in managing rising costs efficiently.
Credit cards: Quick and flexible, but watch the interest
Credit cards are often used for both big-ticket items and daily purchases. While they offer convenience, the high interest rates (up to 22.25%) on outstanding balances can quickly make them an expensive option if payments aren’t managed correctly or paid off in a reasonable timeframe.
Best for: Short-term spending that can be paid off quickly.
Tip: Avoid using a credit card if you can’t settle the balance within the interest-free period.
BNPL: A flexible alternative to credit cards
Buy Now, Pay Later (BNPL) solutions offer a zero-interest way to split payments over time, making purchases more manageable.
Best for: Purchases that fall just outside your monthly budget and bigger purchases like home improvements and decor, tyres, and beauty and fashion. These can be paid off in smaller, interest-free instalments. BNPL is an alternative to credit and still allows you to build your credit profile safely.
Tip: Choose an appropriate BNPL provider that aligns with your salary cycle.
Revolving credit: Reserved for essential purchases
Revolving credit allows access to funds repeatedly, but variable interest rates mean costs can add up if balances are not cleared quickly.
Best for: Emergency expenses or essential big-ticket purchases.
Tip: Always monitor interest rates and repayment terms carefully.
Personal loans: Best for planned, large purchases
Personal loans offer fixed repayment terms and may have lower interest rates than credit cards. However, they should be reserved for well-thought-out expenses, such as large-scale home improvements or education.
Best for: Large purchases requiring structured, long-term repayment.
Tip: Don’t take a personal loan for impulse spending — stick to planned, necessary expenses.
Smart budgeting with deals
One of the best ways to manage rising costs is to plan purchases strategically, utilising deals and promotions where possible.
Best for: Finding deals that align with your budget.
Tip: Try to take advantage of discounts on essential purchases where possible, while ensuring affordability within your monthly budget for discretionary purchases.
Planning ahead is key
Smart financial planning is more important than ever. By choosing the right budgeting tools and using them responsibly, you can maintain financial stability and a good credit score while keeping up the lifestyle you want.
