Consumers are increasingly relying on their credit cards and personal loans for daily survival, the latest statistics from one of the major credit bureaus reveal.

Rising unemployment, increased fuel and electricity costs and salaries that are falling substantially behind inflation are factors putting pressure on South Africans, according to the latest TransUnion SA Industry Insights Report.

Carmen Williams, director of research and consulting of TransUnion SA, says the tough economy is reflected in high levels of credit and the increasing number of consumers in serious arrears with their credit repayments.

Of concern is the fact that serious delinquency rates — where consumers are in arrears of three months or more on their credit accounts — have been on the increase over the past two quarters for most credit products, she says.

Bank lenders experienced a significant increase in new personal loans advanced in the first quarter, with 11.3% more accounts being opened by consumers compared with the first quarter of the previous year. 

However, loans from nonbanking lenders dropped 16.1% over that period, which Williams attributes to more conservative lending practices in response to rapidly rising delinquency rates, which surged to 24.4% in the first quarter of 2019 for this category of credit.

The number of credit cards and nonbank personal loan accounts increased substantially in the first quarter of 2019 compared with the corresponding quarter a year earlier.

The total number of personal loan accounts opened at lenders outside the banking sector increased 15.8%, and 8.4% more credit card accounts were granted compared to 2018 this time. There was a slight drop in the total volume of bank-issued personal loans, which fell 2.2% in the first quarter of 2019.

The steady rise in delinquencies for home loans and vehicle finance  indicates that even consumers in the lower-risk credit tiers are not immune to the current economic challenges

Carmen Williams, director of research and consulting of TransUnion SA

Not only are more consumers seeking out more credit but existing consumers increased their outstanding balances across all credit types: credit cards, personal loans and to a lesser extent home loans and vehicle finance loans. 

Outstanding balances on nonbank personal loans surged 11.4%, bank personal loans jumped 7.2% and outstanding credit card balances were up 6.6%.

 “These growth trends indicate that consumers are actively seeking new credit as a means to supplement their incomes and meet their obligations,” Williams says.

On the other hand, consumers were less inclined to buy homes and vehicles. Only 0.5% more home loan accounts were opened in the first quarter of 2019 while 2.5% fewer vehicle loans were opened in the period compared with the same quarter in 2018.

Williams says that these numbers may indicate that consumers are deferring large-ticket purchases such as cars and homes because of economic uncertainty.

She says of particular concern is the increasing trend in delinquencies for home loans and vehicle finance, which has gone up for the third consecutive quarter.

Delinquencies on home loans were up from 3.4% in the first quarter of 2018 to 4% in the first quarter of 2019, and vehicle finance delinquency rates were up from 4.6% to 5.2% in the same period

“The steady rise in delinquencies for home loans and vehicle finance over the past year indicates that even consumers in the lower-risk credit tiers are not immune to the current economic challenges,” Williams says.

The exception to the trend of rising delinquencies is credit cards, which saw serious nonpayment rates improve 1.3% year on year to 12.6% in the first quarter.

Consumers may be protecting their credit cards to a greater extent to maintain access to this most liquid form of credit for future use, she says.

Consumers have been finding themselves under pressure for some time as their salary increases have not been keeping up with the cost of living, which has seen them increasingly using credit to finance their day-to-day living costs, she says.