You've probably heard of horror stories of spendthrift shoppers falling into arrears on their clothing accounts, and ending up having to pay dearly months or even years later just for what started out as just one pair of shoes. However, clothing accounts, if used responsibly, can actually be a great way to manage your budget, as well as help you build up your credit ranking.
What to be careful of
Before we get to the good stuff, let's begin with the responsible points.
Credit is not a happy land of shopping where consequences get zapped into some mystical future that never has to be dealt with. Getting into debt is easier than you think, and it's a slippery slope. A little bit of debt easily leads to a lot of debt, and that will set your life back.
If you fall into arrears, not only are you damaging your credit history, but the penalty interest can get seriously ugly, very quickly. So if you don't think you can be trusted buying on credit, don't do it!
The advantages of opening a clothing account
Most clothing stores offer a six month interest-free plan. So you can buy on credit without worrying about how much you are additionally paying in interest - as is the case with credit cards. Although the instalments will be higher, this option is definitely preferable to a 12, 18 or 24 month plan where you are charged interest. It's not just because you don't have to pay extra in interest, but also because it trains you to not go overboard with shopping on credit. The small payments on a yearlong account plan might make you think the payments inconsequential, until they start adding up - and just never seem to stop. By giving yourself the rule of only buying clothing when you know you can afford to pay it in a few instalments, curbs your spending.
One of the most under-appreciated advantages of a retail account is that if they are used responsibly, they can help you budget your income every month. Rather than blowing a lot of cash at once and then struggling for the rest of your month, if you buy what you need and put it on account, you make regular instalments that you can plan and budget for. It's however very important that you plan your budget beforehand, and know what amount you can afford to pay every month, and don't exceed that amount.
Your account can be conveniently paid by setting up a debit order facility. That way you don't have to physically come into the shop, and you won't ever "forget" to pay, which could cost you dearly in penalty interest. It also makes payment a regular thing, being consistently done the same time every month, helping you budget. There's also less chance that you won't spend the money before you can make the payment.
You'll be able to buy things when you need them. This is of course assuming that the clothing you buy is actually something you really need, versus just something you want. For instance, when winter comes and you need a coat to keep warm, or an informal occasion arises that you need an appropriate outfit for. You'll have to be honest with yourself whether the item is a want or need, though.
If you're not yet sure how you will manage with a credit card, a single retail account might be the safest thing to start off with. You won't be tempted into doing your grocery or online shopping on credit, which can get out of hand. You'll be limited to just clothing your clothing, so this gives you a chance to see how you will handle yourself with credit.
And finally, Building up credit is important when you're just starting out in life. One day you'll need to show a good credit history if you want to take out a business loan, invest in property or buy your own car. Opening up a retail account, and diligently making your payments will show that you can handle your money. The main thing is to always budget and know what you can afford to pay, and to shop accordingly.
Queenie Bates is an avid reader, researcher and writer, currently based in Cape Town, South Africa.