Pick n Pay Offer Food On Credit
Pick N Pay is busy transitioning their very familiar smart shopper rewards card into a clever but dangerous short term credit facility.
Consumers have become familiar with the smart shopper rewards card and enjoy the benefits of discounts on various products and accruing cash back points.
If the debt is paid back soon (within 55days) there will be no additional charges beyond the R10 monthly fee. Pick N Pay have decided on a low monthly fee though they could charge a much higher one based on the National Credit Act if they chose to. They have also chosen to forego any initiation fees and will rather offer clients some money back on their initial purchase on credit. All these steps are being taken in an effort to make the offering as user friendly and attractive as possible.
As to the rate each consumer will be charged for payments after the initial charge free period, this will vary slightly from consumer to consumer but you can be sure that the cost will be high and close to the maximum allowable 28% per annum. Consumers will also be offered the opportunity to take credit insurance if they want to, at an additional charge.
Consumers who fall behind on payments will face all the usual negative non payment consequences; negative credit bureau listings, default administration costs and of course, possible legal action to collect the debt if traditional pestering collections methods fail.
‘Consumers who are so financially stressed that they are now desperate enough to buy food on credit should strongly consider debt counselling’
Consumers who are so financially stressed that they are now desperate enough to buy food on credit should strongly consider debt counselling. Rather than plunge further and further into debt to just put food on the table, it is much better to slowly and progressively get out of debt. Debt review can help adjust a consumers debt obligations so that they can afford to pay for all their necessary monthly costs (such as groceries).
Stop Shopping Smart
Pick n Pay obviously are making an educated choice in offering their clients the facility. They are simply reacting to the actions of their competitors (like Woolies and Massmart) and the needs of their increasingly cash-strapped clients. Consumers are not spending as much as they used to as they adjust their budgets and spending habits to try make ends meet. PnP too are feeling the pinch of tight financial times and must feel the risk to reward ratio of offering food on credit is worth it. The extra R10 per credit using client alone will bring in a huge amount.
Pick N Pay have recently been looking for innovative ways to increase their profit margins (like letting clients use Bitcoin and even possible self-service checkout tills) and the latest credit facility offering ties into these ongoing efforts.
RCS who will have to do all the collecting and carry much of the risk on delinquencies must be ecstatic at the opportunity to offer so many potential clients a line of credit for a product that all consumers actually need. RCS will benefit directly from any credit charges while PnP will benefit from their clients adding additional items to their shopping carts.
No doubt this new credit facility will be used by hundreds of thousands if not millions of smart shoppers and will become a standard account included on many debt review applications to court for restructuring.