Tips for youth in managing credit

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13 Jun 2013

Every year thousands of students join tertiary institutions and take the first step to shaping their future. With this, also come their first steps into the credit world, enabled by a student card and proof of registration at a tertiary institution. 

"It is reasonable and responsible for students to have banking accounts as these accounts can be used for saving. What our youth need to be wary of is accessing credit which they may not be in a position to handle responsibly," cautions Manie van Schalkwyk, Credit Ombud.

Students are able to open a student cheque account and even get their first credit card by using their student cards and proof of registration, along with other documents as required by legislation.  The credit cards are generally issued based on proof of income, which comes in the form of regular allowance deposits into their bank accounts.

"It is reasonable and responsible for students to have banking accounts as these accounts can be used for saving.  What our youth need to be wary of is accessing credit which they may not be in a position to handle responsibly," cautions Manie van Schalkwyk, Credit Ombud.

According to the National Credit Regulator’s statistics, there are currently 69.53 million consumer accounts. A student card also enables its holder to open accounts. All that is required is for the student’s parent to confirm that the student gets an allowance and they could be eligible for an account and some limits range from about R500 to R1 500. Juggling accounts often becomes too much for students and they land up having bad credit records at credit bureaus.

"Herein lays a bigger danger. Prospective employers check credit profiles as part of their security checks and young, newly qualified professionals may lose out on jobs because they acquired a bad credit record as students as a result of mismanaging their accounts," says van Schalkwyk.

Acquiring negative listings as a student not only places youth at a disadvantage when it comes to employment, but will limit, if not prohibit access to credit in the future.

The office of the Credit Ombud dealt with a case of a consumer who was newly graduated.  She was declined when she tried to open an account, based on negative credit information on her credit profile while she was a student. "In this instance, our decision went against the consumer as she was listed correctly and fairly," says van Schalkwyk.

"When dealing with such cases, we have observed that students have a false perception that credit providers will not hold them fully accountable when they do not honour their payments as they are still students."

June is traditionally Youth Month in South Africa and is used to highlight issues facing the youth in this country. In commemorating and celebrating Youth Month, Parliament hosts Youth Parliament where young people from all nine provinces meet to debate issues affecting them.

"This year, the Youth Parliament’s theme is ‘youth at the centre of economic opportunities’.  Access to opportunities and gaining economic freedom starts with managing your finances responsibly," he says.

Van Schalkwyk advises youth on credit:

  • Do not rush into credit just because you have a part-time job.
  • Try and avoid entering into credit agreements and rather save for your purchases.
  • Always remember how you conduct your credit matters now can affect your whole future.
  • Avoid taking more credit than you can handle because you rely on your parents to help pay for your bills - they may not always be in a position to assist you.
  • If you do have accounts conduct them well as this could help you get better interest rates when you purchase big assets such as your first car or home.
  • Keep a clean credit record so that your future job applications are not declined based on a bad credit history.
  • Check your credit profile regularly so that you can deal with any issues timeously - you are entitled to one free credit profile each year.

The Credit Ombud assists consumers free of charge with matters relating to incorrect or unfair listings.  Contact the office on 0861 66 28 37 for assistance or visit www.creditombud.org.za

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