January is known for being the worst month financially for South African consumers as they struggle to make it to month-end, all thanks to the earlier payday in December as well as festive season splurging.

This, coupled with the second consecutive fuel price increase, means that consumers must dig even deeper to cover their costs.

By the end of 2024, SA’s Credit Stress Report revealed an increasing reliance on credit.

Credit-active consumers grew by 1.4% year-on-year, with credit card and retail credit balances driving 40% of this growth while total loan balances increased to R2.47 trillion (up 2%) and overdue balances grew by R4.7 billion.

Salem Nyati, Consumer Financial Education Specialist, Momentum Group has highlighted the number of SA consumers who turn to informal and unregulated sources of credit in January like loan sharks or mashonisas.

"This is dangerous territory, as these providers do not adhere to the National Credit Act, which was established to protect consumers from illicit lending practices. They set their own, often exorbitant fees and interest rates – as well as debt collection tactics, which can involve intimidation, threats and even violence," Nyati said.

Here are options that are available to you if your bank account is empty, and payday is still on the distant horizon.

Cut costs where you can

Consumers need to get up close and personal with their day-to-day expenses to decide what is essential, what is not and where they can cut.

Generally, essentials could include expenses like food, rent, electricity and transport. After you have a clear financial picture, you can assess the variable expenses to see where you can adjust.

"Perhaps this might entail shopping at a grocery store that offers better prices, forgoing some of your usual pricier food ‘luxuries’ for a bit, or pooling resources with others in your community, such as a lift club," Nyati said.

Take a (payment) break

Nyati said that consumers should look at their existing credit obligations and request a payment break or holiday, an option that many credit providers offer upon request.

With a payment holiday or break, your normal payments will continue after the agreed upon period and your repayment period will adjust accordingly.

Certain insurers have a premium skip function that is built into their policies, where consumers can miss a payment while still keeping a certain level of cover.

This payment relief will allow you to set aside your funds for other urgent expenses while not defaulting on your payment commitments or damaging your credit record.

"However, you must negotiate this upfront with your provider and stick to your agreement, as many will not look favourably on a credit holder who misses a payment without a word. This could end up costing you more – literally – in the long run in the form of higher premiums," Nyati said.

If you have to borrow, do it safely

If you have to borrow, borrow from a registered financial services provider that is bound by the conditions of the National Credit Act, Nyati says.

Check for a legitimate loan with a reasonable interest rate and pay it off as quickly as possible to avoid the steep debt servicing fees.

Avoid borrowing from unscrupulous lenders who prey on your desperation as well as providers which advertise that they don’t perform credit checks or affordability assessments as this ease of access is generally offset by steep fees and/or interest rates that are hidden in the fine print.

Never borrow from providers that require consumers to make an upfront payment.

Clean house

Avoid getting stuck in the same situation next year January. Now is a good time to plan ahead and ask, how can my money work for me in 2025?

"January is a good time to revisit all your financial obligations and see where you can make the necessary adjustments that will stand you in good stead for the year ahead," Nyati said.

The start of the year is also a good time to start an emergency fund which can help you avoid relying on credit to cover basic expenses and can be useful in a financial crisis.

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