Imagine you’re looking at a new phone. Your current phone works. The battery still lasts most of the day. It takes perfectly decent photographs. Messages arrive. Calls work. Google Maps continues to know where you are, occasionally with rather more confidence than you do. But there’s a new model. It’s beautiful. The camera is better….
You have a credit card. There’s a phone contract. The car is financed. You bought something on Pay-in-3. There’s still a balance on the store account. And somewhere in the background, a personal loan quietly removes its instalment every month. None of these necessarily looks alarming. The credit card payment is manageable. The phone contract…
Compound interest sounds like something that should involve a calculator, a spreadsheet and possibly somebody wearing a tie. It doesn’t. The basic idea is remarkably simple. Imagine you have R100. Your money earns 10% interest over a year. At the end of the year, you’ve earned R10. So now you have: R110 Nothing particularly exciting…
R499. That’s not too bad. It might be a gym membership. A phone contract. Fibre. Insurance. A subscription. Perhaps something considerably less exciting that nevertheless leaves your bank account every month. Whatever it is, R499 sounds like R499. And this month, it is. But sign a 24-month contract and that R499 becomes: R11,976 Sign for…
You’re buying a car. Or perhaps applying for a home loan. Eventually, somebody presents you with an interest rate that looks something like this: Prime + 3% Excellent. Except what does that actually mean? Is prime a good interest rate? Who decides what prime is? Why are you paying more than prime? And perhaps most…
You put R50,000 into the bank. The bank pays you around 8% for letting it use your money. Someone else borrows R50,000. The bank charges them 22%. There appears to be a fairly obvious question: What happened to the other 14%? At first glance, banking looks like a spectacular business. Take Fred’s R50,000. Pay Fred…
A price can be hiding a disappearing act. R3,000 sounds like a fairly substantial purchase. R1,000 today sounds considerably less alarming. And if the shop lets you take the item home immediately and pay the other R2,000 from your next two pay packets, the arrangement can be genuinely useful. You haven’t made the product cheaper….
A loan advertisement can perform a surprisingly effective bit of sleight of hand. It takes a fairly large amount of money and turns it into a much smaller number. R20,000 sounds like a lot. R552 a month sounds considerably less alarming. Both numbers can describe exactly the same loan. The difference is that the first…
A credit card statement can perform a rather impressive magic trick. You owe R20,000, but somewhere on the statement is a much smaller number labelled “minimum payment due”. Suddenly R20,000 doesn’t look quite so frightening. Pay the minimum, and you’ve dealt with the credit card for another month. Right? Well… not quite. The minimum payment…