National Debt Advisors has warned consumers to be careful in engaging the new Pick n’ Pay offer that allows purchasing of groceries for credit.
“We would advise and warn consumers against buying food on credit, as it will have a negative impact on overall debt,” said National Debt Advisors in a statement posted on their website.
This is after Pick n’ Pay issued a statement saying it has launched a new Store account, with 55 days’ interest free credit for all qualifying Smart Shoppers and other customers who sign up to be a Smart Shopper.
Pick n’ Pay said its Store Account offers customers up to 55 days’ interest free credit if the balance on their account is paid in full each month.
Pick n’ Pay has emphasised that its offering is cheap and in line with the National Credit Act (NCA) prescriptions.
National Debt Advisors is not convinced.
In its statement it disputes the the Pick n’ Pay statements.
“Pick n’ Pay markets its credit agreement as not carrying any interest, as long as consumers pay up in full by the end of the month. However, the actions taken when consumers fail to pay are hidden in terms and conditions,” the National Debt Advisors’ statement.
It adds “Pick n Pay’s credit product is underwritten by RCS, and the group’s terms and conditions for Pick n Pay credit, when customers fail to pay their dues at the end of the month. A custom interest rate kicks in, which is charged on a daily basis and compounded at the end of the month.
“Your interest rate will be shown to you on your initial sign-up, based on your own credit assessment, however the RCS says it cannot be higher than the maximum allowed by the Credit Act. With the repo rate at 6.75%, this is around 28% per year, for unsecured credit.
“However, the terms and conditions also state: “If you are in arrears, additional interest will be charged on overdue amounts at the same rate as the interest rate applicable.”
“If your account goes further into arrears, the credit provider can also do the following:
- You will be charged default administration costs and any other costs and fees relating to debt collection activities;
- Default information will be submitted to the credit bureaus, which may affect your ability to obtain further credit;
- The company suspends your credit facility and give you 10 days’ notice before closing your account, in which event you must immediately pay your account in full;
- Your account may be handed over to debt collection agencies for the recovery of arrear amount, the costs of which you will be responsible for; and
- If it has to institute legal action against you in court, you will be liable for all costs incurred, including but not limited to legal costs, as well as collection charges, tracing fees and taxes.
“Obviously these terms and conditions are standard, and reflect most credit agreements – however, one must take note that it’s these same charges that often lead to consumers becoming over-indebted.
“Debt counsellors have warned consumers against going this route, saying that if you are at a point of having to purchase food on credit, you’re already in major financial trouble and you should seek debt review assistance. Debt review companies offer debt solutions that caters to your financial needs.”