The Ultimate Black Friday Survival Guide
It's the one day of the year where your favourite store turns into the Hunger Games. With discount starved crowds, limited products, thin security and extended hours - may the odds be ever in your favour. A 65in smart, 4k TV catches your eye, it's 75% off but there's just one left so you take off quicker than Usain Bolt to secure the prize... but wait, you actually came here for an air fryer. 3 hours later you reluctantly look at your till slip which includes a TV, a DVD box set of Takalani Sesame, 5kg weights and bulk pack of nappies (you don't have kids). Now you're standing outside the store with R24.50 for food to stretch for 9 days.
How did you get here?!
What are the chances of financial survival after Black Friday? We ran the numbers using TransUnion's South Africa credit database around Black Friday and Cyber Monday from last year & unfortunately, it looks grim. Maybe you are better off signing up for the Hunger Games.
First there's a wave of new credit, then a few months later... there's a wave of new defaults
Across the Black Friday period there's an increase of new accounts opened, higher credit card spending and an increased use in retail revolving accounts (compared to the previous month). The dangerous part is most of this growth comes from higher risk loans. Last year there was a 35% increase in retail instalment accounts opened-normally used for furniture and electronics-and a 23% increase in clothing, normally used for clothing and smaller household items. Higher debt across high risk loans used to fund consumption is the catalyst for a terrible outcome. In fact, just six months later, more than half of those new Black Friday accounts were in arrears by one month or more.
Will this year be any different? No.
Another piece of useful research we rely on is the TransUnion Financial Hardship Study, which measures the impact of COVID-19 on South African consumers. 77% of South African consumers say their finances continue to be impacted by the pandemic. For these consumers, credit products are the bills most say they will not be able to pay. These include personal loans (36%), retail/clothing store accounts (35%) and credit cards (33%).
Here are the pro-tips to make sure you're not another Black Friday statistic:
Set a budget and stick to it religiously
If your budget is R3k & your cart flashes up a price of R3.2k, start over. Most people look at their Black Friday discounts but forget to adjust for the interest cost from servicing debt. So if you're saving R500 but end up paying R300 in additional interest your "discount" is much less appealing. Every time you purchase using credit, there's a cost you only see afterwards -that cost is interest. It's easy to get carried away with the flashing lights and glossy pop-ups but it will hurt in the long run. Take an honest look at your existing finances and decide what you can afford.
Check your credit is match fit
Before you start dreaming of shopping carts full of bargains, take the time to know your own financial health. Do you know what you currently owe your lenders? Have you pulled your credit report recently to see whether you have debts you are unaware of? Do you have any defaults or judgements against you that need sorting out?
If your cholesterol levels are through the roof, will you really devour an entire bucket of KFC for dinner every night? Probably not. There's good and bad cholesterol and also good and bad credit.
The more you understand your current financial health, the more realistically you can set limits as to what you can afford. And if your credit score is low, rather stay away from credit now, and instead start rebuilding your credit health. Don't sacrifice a rejected home loan application down the line because you couldn't say no to a flatscreen TV today.
Here's a guide on how credit scores work: Credit Scores: Inside the Machine
Go easy on the loan applications
There's no problem with opening a new credit card, or taking out a revolving credit facility. But too many loan applications in a short space of time could be a red flag to lenders that says you're potentially in financial trouble. Even if your credit score doesn't take a hit, at the very least, you will be attracting attention the next time you ask a lender for credit.
Every time you apply for credit, the lender will draw a credit report on you - something known in the trade as a 'hard' enquiry. Even things like applying for a new cell phone account and requesting a credit limit increase in a short period of time can affect you, so make sure they are absolutely necessary.
Read the fine print - til debt do us part
Many credit agreements offer the option of credit insurance, which ensures your debt is paid if you are unable to continue payments due to job loss or illness. It's also important to meet the minimum monthly repayments on any credit agreements you have - and if possible, it's advisable to pay the debt off faster. Missed, or late, payments are the biggest factor that affects your credit score negatively. If you're paying off a PS5 over 6 years, you're in for a different type of dual-shock.
Do your homework - Black Friday isn't always the cheapest day in the year to shop
Be very clear on what you want to get out of Black Friday and Cyber Monday. Prioritise according to what you really need: a washing machine may be more important than a PS5. Bad decisions is how you end up with garden furniture in your lounge and a GTi in the garage. We will not mention any specific neighbourhoods you're likely to see this. *Cough Cough* Midra...
Black Friday and Cyber Monday are just the start of the festive retail season. There will be plenty of sales coming up. It's better to hold off for a better sale than end up with a mountain of debt you can't afford to repay.
"Wait, I thought Black Friday is the cheapest day in the year to shop?!". That's exactly what the screaming adverts would have you believe, but it's not true across all product categories. Adobe Analytics measures trillions of visits to US retail sites to develop a Holiday Forecast. Here are the best days to buy according to each product category as measured by the lowest price points.
While Black Friday is an excellent day to buy appliances, a week before Christmas is when you can really score on electronics.
Beware the fake bargain
Keep an eye out for "artificial" discounts. This is when the discount is measured off a much higher base to look far more attractive. If a product usually retails for R100 and is now on sale for R80, that's a 20% discount. But if the product price is inflated to R160 (pre-discount) and now sells for R80, that's a 50% discount... except it was never a 50% discount. Read online reviews very carefully. It is common in the lead up to Black Friday to see a wave of fake positive reviews from bots. Sites such as ReviewMeta can help show you how authentic reviews are on Amazon, for instance.
This Black Friday, pour yourself a drink and watch the chaos unfold from afar.
The best way to survive the Hunger Games?
Don't volunteer as tribute.