The dangers of using a credit card

Nowadays, credit cards are nothing out of the ordinary: many people even have a few of them. This reality is, of course, with good reason. It is true that a credit card offers many advantages.
For example, it allows you to make large payments without the safety risk of carrying around cash. It’s convenient: you never have to search for an ATM or place yourself at risk in unsafe areas.
If you need a large sum of money urgently, you can get hold of low-cost loans via revolving credit. Probably the most important advantage is that you can build positive credit.

By using your credit card in a controlled manner, it can help you to establish credit for the first time, or rebuild credit if you had difficulties in the past.
Unfortunately, the ease of credit cards can be deceiving. Too many people do not realize just how dangerous credit card debt can become if not controlled.

Some of the biggest dangers of credit card use:

  • The high-interest rates and annual fees typically associated with credit cards often outweigh the benefits. It might end up becoming very expensive. If the amount you owe grows much faster than your ability to repay, which is the case more often than not, you will be left in serious financial trouble. To top it off, the savings offered by credit cards can be found elsewhere.
  • Your credit record is very vulnerable. Miss a few payments and the damage is done. Having a good credit record is crucial. For example, having a bad credit record will limit your ability to borrow money; it can impact your ability to rent an apartment, and even impact your insurance quotes.
  • Credit card debt sabotages nearly all your attempts to save any money. Credit card debt will ruin your best intentions to save up for retirement. It might even lead you to mistakenly believe you are saving up for retirement, but if you owe too many credit card companies, the money you think you’re saving isn’t really yours.
  • The credit card trap can deepen your debt. If you swipe your credit card without discipline, you may find yourself in big trouble before you even know what hit you. The more you swipe, the bigger your total balance becomes, and your monthly minimum payments will increase along with your balance.
  • One of the biggest dangers of credit card use might be the psychological trap: a credit card makes it possible to spend money that isn’t yours and live above your means. It is just too easy to swipe that credit card.

By all means, make use of this useful tool, but be aware of its pitfalls.

If you need a debt review speak to Zero Debt today for a free, confidential, no-obligation consultation.

The Power of Buying Second Hand

In today’s tough financial times, everyone is struggling to make ends meet. Many people dismiss second hand buying without a second thought, losing out on a powerful, untapped savings solution.
Second hand goods are often mistakenly associated with poor quality, which is not the case at reputable stores. In fact, the items sold at a respectable second hand store are often brand new (next time, look for the original price tag still attached).

It is not necessary to buy everything new. If you need to save a few rands, consider thrift shops, consignment stores, used book shops, etc.
Just be careful of falling into the trap of buying more than you need because the items are so cheap, or you might not be doing yourself a favour after all.

Apart from saving money, if you shop second hand, you can:

  • Help to reduce our carbon footprint: the environmental impact you leave behind in your lifetime. By buying second hand, you are re-using and therefore reducing the need for new products.
  • Give back to the community. The proceeds of many second hand mission stores go to community projects, e.g. homeless children, people with terminal illnesses or disabilities, animal shelters and more.
  • Spice up your Home Décor without emptying your pocket. Give used bedroom suites, tables and other furniture a second breath of life with a new coat of paint and some creative touches.Or become part of the popular vintage trend with and old lamp or clock.

Be sure to only shop at reputable stores that can guarantee the quality of their products. A good second hand store needs to have systems in place to ensure that the items you buy are not damaged,
otherwise your intended saving might end up being a waste of money.

There are some products that you should rather buy new, for example (see the full list at

  • Bike helmets
  • Cribs
  • Laptops
  • Blenders
  • Camera lenses
  • Child car seats

These you should definitely buy second hand, though:

  • Bicycles
  • Textbooks
  • Household appliances
  • Toys
  • Furniture
  • Wedding attire
  • Pets

Unleash the power of second hand buying and be on your way to becoming and staying debt free.

You may be wondering what is a debt review or what is the function of a Debt Counsellor? Well, here’s a brief explanation:

Recently a new Act was made into law called the National Credit Act (the NCA).

In the NCA (which talks all about credit and credit accounts) there is a section (Section 86) which deals with what to do if a consumer has too many debts, too many obligations and not enough money to pay for everything. This section specifically mentions something called debt counselling. Debt Counselling would be advice about your debt from a qualified debt counsellor. A Debt Counsellor would be registered with the National Credit regulator (who is an industry watch dog – of sorts.)

The NCR:

Their job is not to make the industry work (they regulate, not control) but rather to try stop naughty creditors (and recently some Debt Counsellors who do not play by the rules) from being too naughty.

They send a lot of sternly worded letters, visit and of course, keep stats about the industry.

They also register Creditors and Debt Counsellors who offer debt review services.

Debt Review:

A Debt Counsellor will, normally, meet with a troubled consumer and go through their financials with them. They like to get you to fill in a form called a Form 16 which sums up your debt situation. Most prefer to have you do this in advance.

(in some cases the consumer may not be able to go to the Debt Counsellor so they might work with one another via the internet, email or over the phone.)

The Debt Counsellor will want to get as much info from the consumer as possible about what debts they have etc. (so take your statements with you). Most Debt Counsellors will help give you advice for free (though by law they can charge you R50 for coming to visit them). They should (under the Consumer Protection Act) ask you to sign a contract which explains what they will and won’t do if you want to enter debt review. If they don’t feel free to ask for one. This is something different from the form 16 but some clever Debt counsellors are combining the two to save time.

So take that first step. Simply call us directly at 086 111 3749 or contact our supportive debt counsellors via our contact page. Dont have the time? Request a Free Call Back and one of our counsellors will contact you! Zero Debt is a certified Debt Counselling company.

It seems that over 2000 consumers feel they have been harassed by the banks while under debt review.

The number is undoubtedly higher however this petition did not receive support from the Debt Counsellors Association of South Africa ( DCASA) nor from the Alliance of Professional Debt Counsellors (AllProDC)

So the number (though high- representing about 1/3rd of all the people applying for debt review in a single month) may therefore only represent those DCs and some consumers who are not closely affiliated with these organizations.

DCASA stated that they did not want to support the petition and thus upset their good working relationship with the Banking Association of South Africa members (BASA). They feel that matters should be dealt with on a case by case basis not in bulk.

AllProDC were seemingly a bit preoccupied with their growth as an organization during the petition and could not give it too much attention. At present they are trying to get all their members to sign their Code of Conduct as a priority.Sadly many consumers who are under debt review are seemingly discriminated against. Often these consumers face a higher level of collection pressure than other consumers. They are litigated against faster and if you take the time to read the many comments by those who joined the petition you can feel their pain and frustration.

So take that first step. Simply call us directly at 086 111 3749 or contact our supportive debt counsellors via our contact page. Dont have the time? Request a Free Call Back and one of our counsellors will contact you! Zero Debt is a certified Debt Counselling company who offers free no-obligation debt reviews.

A New Budget:

The Debt Counsellor will also help the consumer set a new budget for household expenses since this is often totally overlooked by consumers.

It is very important that consumers then stick closely to this suggested budget amount if they want their debt review to succeed.

The Debt Counsellor will then use computer programs and phone calls, Faxes and emails to the various Creditors to try make a deal with them that they are willing to accept.

They don’t have to like it but if they do that’s good.

If they like it they will send letters to the Debt Counsellor saying they are happy with the plan.

If not they will send letters saying they would rather have…something else.

Either way (and let’s be honest it is going to be hard to make everyone happy) the matter get turned into a court application.

This is done under section 55 of the Magistrates Court Act since the NCA doesn’t cover the court application in detail or how is should be done.

The application is then heard in the Magistrates Court near where the consumer lives.

It is good to note that after 60 days of the review the Creditors can approach another court to try get a judgement against the consumer for the debt. However if they do so the consumer is then allowed to defend that new legal action and ask that they go to the court where the debt review is happening and that the creditor pay costs for trying this new legal action.

One reason why a Creditor might try this (other than greed or being nasty) is if they genuinely feel that the debt review will not work or if the consumer is not sticking to the debt review proposals

(if they are not paying the right amount or not paying each and every month).

Many Creditors have tried to take action against consumers who have assets to try get permission to sell these assets on auction rather than let the consumer pay over time.

This is a short term solution that some banks feel is worth it (since they can then claim insurance against the loss and even if there is a shortfall on what the consumer owes the judgement lasts for 30 years so they can take their time in trying to get the balance of the bond or vehicle finance back from the consumer over time).

If the consumer does not fight against this legal action though they will probably lose their assets even though they are under debt review. One factor in this is making sure that Creditors have your latest address so they can send any legal documents to the right address. This then allows the consumer to defend the matter. Consumers can either go to court by themselves (cheaper but nerve wracking) or they can get legal representation (an attorney or advocate) which is more costly.

SO back to the Court where the debt review application was made:

The Magistrates Court then will rule on the proposal as made by the debt counsellor . The creditors are also welcome to come to court and object or ask for more money etc (normally they just delay matters or ask for more money but can’t say where the money should come from.) This will delay the court ruling. The Courts are very busy these days so this can be a long procedure. Some matters have taken up to 3 years in the past. The good news is that these matters are now going faster and faster as the courts become more familiar with the applications. If the Magistrate understands and likes the proposal they will make it an Order of the court. Normally this is when the consumer needs to be present to say they understand how serious the matter is and to commit to the process and sign the Order.

The Court Order:

Once a Court Order is granted as per the proposal then this is sent to all the creditors and the consumer must make payments as per the Order each month with no deviations.

This is very important. Any deviation could invalidate all the work that has come before.

Then as time goes by the consumer should get monthly reports of how their accounts are doing.

So take that first step. Simply call us directly at 086 111 3749 or contact our supportive debt counsellors via our contact page. Dont have the time? Request a Free Call Back and one of our counsellors will contact you! Zero Debt is a certified Debt Counselling company.

If you are unhappy and need to complain then remember that you can complain to the Credit Ombud if you have a dispute with a credit bureau, a Debt Counsellor (DC) or a credit provider but not if the credit provider is a bank (unless you are under debt review with a Debt Counsellor in which case the Credit Ombud will hear your complaint). If you have a consumer complaint relating to credit extended to you by a bank this must be taken up with the Ombudsman for Banking Services not the Credit Ombud. An easy mistake to make.

In most cases regardless of whether you are under debt review or not and regardless of if you are complaining about a bank or another credit provider, it would be appropriate to take your complaint to the other party in writing and wait a few days before escalating the matter. The ombud will not consider your matter unless you have taken these steps.

So take that first step. Simply call us directly at 086 111 3749 or contact our supportive debt counsellors via our contact page. Dont have the time? Request a Free Call Back and one of our counsellors will contact you! Zero Debt is a certified Debt Counselling company.

Debt Vader Talks Virtual Arrears

As the Debt Counselling industry evolves, it becomes more and more evident that credit providers treat Debt Re-arrangement Court Orders as inconsequential, even going so far as to ignore the court orders by refusing to update their internal computer systems to reflect the restructured debt as per the Debt Re-arrangement Court Order, and placing themselves intentionally in contempt of a valid and enforceable court order.

Thus the emergence of the “virtual arrears” which are arrears accumulated before the application for Debt Review and during the debt re-arrangement process. It is accepted that when a consumer enters the Debt Review process, any arrears that may have existed on their accounts is capitalised. The consumers are then expected to pay in respect of the Debt Re-arrangement Court Order, a specific amount of money to their Credit Providers, over a specific time and at a specific interest rate, all of which is documented and confirmed in the court order itself.

The unwillingness of the Credit Providers to change their internal computer systems to accommodate the new arrangement reflected on the Court Order, results in a deficit between the original contractual installment and the debt review installment (virtual arrears). This deficit expresses itself as an arrears amount which accumulates during the existence of the Debt Review and upon which the bank charges interest (which they are not entitled to), thus creating debt out of “thin air”.

In the instance where a consumer wishes to withdraw from the Debt Review process, the Credit Providers request a withdrawal form (17.4) issued by a Debt CounsellorD before they will entertain any request by the consumer. Once the withdrawal form has been issued, the consumer no longer enjoys the protection of the NCA and this places them in an unenviable bargaining position.

Some of the banks make ludicrous demands on consumers, they will demand that 50% of this “virtual arrears” be paid upfront, and that the other 50% is to be paid over 6 – 9 months, while the consumer continues to pay the normal contractual installment, thus making it impossible for a consumer to comply with the arrangement or to successfully exit Debt Review. The result being that the consumer could lose their property.

These “virtual arrears” seems to be how the banks calculate which consumer they are going to be harassing into higher installments (paid outside of the Debt Re-arrangement Court Order) or withdrawing from the Debt Review process. This harassment takes the form of constant sms’s, letters threatening the consumer with enforcement action and even premature terminations, or attempts to rescind the Debt Re-arrangement Court Orders. The higher the “virtual arrears” become the more high risk that consumer becomes and the more pressure the banks will place on the consumer, in some instances going so far as to summons consumers.

So take that first step. Simply call us directly at 086 111 3749 or contact our supportive debt counsellors via our contact page. Dont have the time? Request a Free Call Back and one of our counsellors will contact you! Zero Debt is a certified Debt Counselling company.

Well, if you are under debt review a diet (if that’s what you call just eating less) is a great way to cut down on the crazy raising food costs and exercise is a great form of entertainment that can be achieved for minimal costs. Prices are shooting up left, right and center; with fuel costs being a big factor and add to that issues in other parts of the world to do with wheat costs and it is a recipe for a very skinny December after all.

If however we put all that aside for a moment and think about what has been happening in SA with regard to debt review and the debt counselling industry there have been some interesting developments. The NCR have shown their teeth over the Voluntary Debt Mediation Solution (VDMS) which they decided was seemingly an unregulated form of debt review which undermines the statutory process that hundreds of thousands of South Africans are making use of. This issue you can read more about the rise and fall of the VDMS system. More than that you can read about how the NCR have now withheld the carrot they were offering to the NDMA in the form of taking over the job of registering consumers under debt review with the various credit bureaus. It has not been a great month for the NDMA!

We feature articles from the Dark Sith Lord of debt review Debt Vader and legal opinions that will have you giggling but thinking about new ways of looking at things. It is great to see the regulator pushing credit providers to put their money where their mouth is and show increased support for the debt review process. Lets hope they take the advice to heart and that consumers under review will see increased co operation from their creditors. This would be a great weight off their backs …now if only we could get the weight off our bellies we could actually hit the beach.

So keep up the good work and don’t lose momentum now. Start to plan for the end of the year right now and keep taking another step towards being debt free.

So take that first step. Simply call us directly at 086 111 3749 or contact our supportive debt counsellors via our contact page. Dont have the time? Request a Free Call Back and one of our counsellors will contact you! Zero Debt is a certified Debt Counselling company.

Know and Understand Your Rights, Urges the NCR

As part of Consumer Rights Month, the National Credit Regulator (NCR) has urged consumers to be aware of their rights when it comes to credit agreements.

“It is your money and therefore, it is your right as a consumer to have full knowledge of all credit agreements you enter into,” says Education and Communications Manager at the NCR, Cornie Tema.

Internationally, the 15th of March is celebrated as World Consumer Rights Day. In South Africa, March is dubbed the Consumer Rights Month. The National Credit Regulator in conjunction with the Consumer Protection Forum (CPF) is embarking on programmes aimed at educating South African consumers about their rights and obligations.

The CPF comprises of the National Credit Regulator, nine Provincial Consumer Affairs Directorates, the Council for Medical Schemes (CMS), Financial Services Board (FSB), Independent Communications Authority of South Africa (ICASA) to mention a few. The international theme which has been adopted is “our money, our rights: campaigning for real choice in financial services”.

The National Credit Act (NCA) came into effect to level the playing field. Consumers have rights; however, they also have obligations when entering into credit agreements. Obligations such as honouring the terms and conditions of credit agreements they enter into.

“Drawing up a budget to assess whether you will be able to afford the credit you intend taking, comparing deals between credit providers and understanding the terms and conditions of credit agreements are important steps before signing a credit agreement”, says Tema.

He says when taking out credit, consumers should always ask for a pre-agreement statement and quotation which clearly shows the borrowed amount, deposit payable if any is needed, interest charged, period of repayment, date of first installment, date of last installment etc.

“Additional charges such as initiation fees, monthly service fees and credit life insurance should also be stated in the pre-agreement statement and quotation, he adds”.

Under the National Credit Act, consumers have the right to receive information and documents in plain, simple language. “This means that the content, meaning and importance of the documents must be easy to understand.

Consumers also have the right to receive any documents required in terms of the NCA in an official language of the consumer’s choice to the extent that it is reasonable having regard to usage, practicality, expense, regional circumstances and the balance of the needs and preferences of the population ordinarily served by the person required to deliver that document”, adds Tema.

“Do not sign unless you fully understand the content including the terms and conditions of the credit agreement”, adds Tema. “While the National Credit Act provides that every person has the right to apply for credit from any credit provider, it does not prevent credit providers from turning down your application.

“However, if your application is declined, you have the right to be provided with reasons on why it was declined. “Please note that the National Credit Act does not decline credit applications, it is merely an Act of Parliament enforced by the National Credit Regulator”, explains Tema. “The credit provider should provide you with reasons on why they are declining”.

You also have a right to have information held about you treated confidentially. Therefore credit providers may only use information for the purpose which it was given for.

Tema further explains that consumers have the right to access and challenge information held by a credit bureau. “Consumers are entitled to a free copy of their credit report from any of the eleven registered credit bureaux when they request for it. Additional credit reports can be accessed at a nominal fee of R20 excluding VAT.”

“You also have the right to be informed if a credit provider intends to report negative information about you to a credit bureau before the credit provider actually does so. Therefore, it would be of benefit to all consumers to check their credit reports regularly to know what it entails.

By checking your credit reports, you will be able to pick up if there’s any incorrect information on your credit report”, adds Tema. He says one of the most important aspects of the National Credit Act is that it gives consumers the right to get assistance when they are over-indebted.

“If you are experiencing difficulty in servicing your debts, act as soon as possible,” he says. “Don’t wait until you start receiving final demand letters. Speak to your credit providers soonest, preferably before defaulting”, says Tema.

He says the first step is to contact your credit provider to discuss your situation and negotiate an affordable repayment plan. “If you cannot reach an agreement with your credit provider, contact a registered debt counsellor in your area for assistance soonest.”

“Remember, you will not get any further credit whilst under debt counselling. Never skip your payments, even when you are under debt counselling. You should continue making payments, because if you do not pay, you could lose your house or your car”, concludes Tema.

So take that first step. Simply call us directly at 086 111 3749 or contact our supportive debt counsellors via our contact page. Dont have the time? Request a Free Call Back and one of our counsellors will contact you! Zero Debt is a certified Debt Counselling company.

Debt Review – How it works – Part 3

The Payment Distribution Agencies (PDA’s)

The payment distribution agencies are companies that distribute consumers funds for them. You won’t find them mentioned in the NCA at all but the National Credit Regulator thought it would be a good idea. They have encouraged Debt Counsellors to use the services of one of these few companies. They also encourage consumers to do the same.

The PDA’s normally collect one debt review payment from the consumer (who maybe has set up a debit order for this) each month and split the payments up to each of his creditors. They get instructions from the Debt Counsellor on how to split the money up but they don’t let the Debt Counsellor or anyone else touch the money. They then make the payments to the creditors. They send proof of the payments to the creditors. It is important to note that many creditors still cant seem to track when money comes in for some reason. Many of the biggest banks struggle with this simple procedure. So be warned the creditors may call you about payment even if they have received funds.

Many Debt Counsellors spend much of each day trying to help the PDA’s prove to the creditors that payments were made.

Any interest that is earned on money in the bank at the PDA’s is paid over to the National Credit Regulator rather than to the consumers or creditor’s accounts. The Payment Distribution Agencies are then required by the NCR to send consumers a statement of the payments. Not all PDA’s are getting this right. If you are not getting a regular statement monthly from yourPayment Distribution Agency then you can complain to the NDMA about it or to the NCR or the Banking Ombud.

Paying up your debts:

Once one debt is paid off the amount you pay each month will not change (reduce). It stays the same but the amount each creditor that is still left, gets increases a little bit. This happens each time a debt is paid up and soon all or most of your debts will be gone. Most plans for debt review are around 5 years long. % years might seem like a long time but most creditors collect smaller debt over 2 years anyway and the amount you pay over 5 years (or however long your plan will be) will be manageable if you stick to your budget each month.

Once all your debts are gone the Debt Counsellor will issue a thing called a Clearance Certificate. This is sent to the credit bureaus and they will then clear your record of the debt. Therevare still some teething issues with these but the idea is this is a piece of paper that says your debt is paid up. Beware that many Creditors can’t even track regular monthly payments so don’t be surprised if they give you a hard time as to whether your debt with them is paid up.

And that’s a rough idea of what debt review is all about.

So take that first step. Simply call us directly at 086 111 3749 or contact our supportive debt counsellors via our contact page. Dont have the time? Request a Free Call Back and one of our counsellors will contact you! Zero Debt is a certified Debt Counselling company.