Black Friday: how much you really save, and how much you waste
A R2 500 saving on a R7 500 TV paid off at R500 a month on a card at 20% costs about R1 200 in interest, and R3 000 of impulse "deals" saves nothing at all - the real saving can turn into a loss.
In 30 seconds
- A R2 500 discount shrinks to about R1 300 once the R7 500 purchase is paid off at R500 a month on a card at 20% a year.
- R3 000 of extras bought "because they were on sale" is R3 000 spent - a discount on something you did not need saves nothing.
- Pay in full inside the interest-free period and the R2 500 saving stays R2 500.
The headline saving
Take one planned purchase: a TV that cost R10 000 in October, now R7 500 on Black Friday. The headline saving is R2 500. Whether you keep it depends on two things - how you pay, and what else lands in the trolley.
Leak one: paying on credit
Put the R7 500 on a credit card at 20% a year (about 1.67% a month) and pay R500 a month:
- It takes about 18 months to clear.
- You pay roughly R8 700 in total, so about R1 200 in interest - before any monthly card fee.
- The R2 500 saving becomes about R1 300. Pay only the minimum and it can disappear completely.
Paying the full balance within the card's interest-free period avoids the interest altogether. If you already carry a balance, a new purchase usually starts earning interest straight away.
20% is an illustrative rate, just under the legal ceiling. Our post on Black Friday on a store card sets out the ceiling and the monthly fee; your own rate is on your statement.
Leak two: the extras
Sales are built to make the basket bigger. Say the same shopper adds R3 000 of things marked "30% off" - a speaker, a second charger, clothes that were not on the list:
- The tags say you "saved" about R1 290 (R3 000 is 70% of R4 290).
- Your bank account says you spent R3 000 you were not going to spend.
- Net result: the R2 500 headline saving becomes a R500 loss - or about a R1 700 loss if the TV also went on the card.
Leak three: the inflated "was" price
If the "was" price had been nudged from R9 000 to R10 000 before the sale, the real saving on the TV was R1 500, not R2 500. Screenshot prices now and compare on the day - our post on when a special makes sense shows the sum.
A simple scorecard
- Real saving = October price - price paid, on items that were on your list.
- Minus the interest you will pay if it goes on credit.
- Minus everything you bought that was not on the list.
If the answer is negative, Black Friday cost you money, however good the tags looked.
How MaxWealth helps
The debt payoff planner takes your own card balance, interest rate and monthly payment, so you can see how long a Black Friday purchase would take to clear and what it would cost in interest before you buy it.
Sources
- National Credit Act 34 of 2005 and the Regulations on limitations of fees and interest rates (credit facilities: repo rate plus 14 points) - ncr.org.za.
- South African Reserve Bank, current repo rate - resbank.co.za.
- Calculations: R7 500 at 20% a year compounded monthly, R500 a month, about 17.4 payments, total about R8 700 (MaxWealth workings).
Education, not financial advice. This post explains how the rules and the arithmetic work. It does not recommend any financial product, and your own situation may differ - speak to a registered financial adviser or tax practitioner before you act. Figures were checked against the linked sources on the date above.