Banks are closing the taps on South Africans

The latest TransUnion Industry Insights Report for the second quarter of 2025 shows that banks are tightening lending, reducing credit limits on new accounts, and shifting to a more cautious stance when it comes to credit.

“Consumers, particularly younger cohorts, are increasingly relying on credit to manage affordability constraints, while lenders are recalibrating their approaches to growth and risk,” TransUnion said.

The report noted that broader economy is showing some improvement. South Africa’s GDP grew by 0.8% in the second quarter, up from just 0.1% in the first quarter. 

Manufacturing, mining, and trade performed better, while inflation dropped to an average of 3.6%. In June, headline inflation reached 3.0%, which is the bottom of the Reserve Bank’s target range. 

The central bank responded with another interest rate cut, bringing the repo rate to 7.0% in July. However, the report highlighted that even with these positive signs, the jobs crisis is holding the economy back. 

Unemployment stayed at 32.9%, leaving many households under severe pressure. This is why credit demand is rising, but also why lenders are nervous about how much risk they take on.

The number of active credit cards grew to 7.4 million in Q2, up 3.7% from a year earlier. Outstanding balances rose to R186.5 billion, up 7.5% year-on-year. On average, South Africans now carry R25,200 on their credit cards, a 3.6% increase. 

“Consumers continue to rely on credit cards to manage everyday expenses amid persistent economic pressures,” TransUnion said.

Big bank lending is down

But while people are swiping more, banks are cutting back on how much they lend to new customers. 

The average credit limit on newly opened credit cards dropped to R22,800, a steep 19.5% fall compared to last year. At the same time, the number of new cards being issued shot up to 266,100, a 36.5% increase.

“The drop in average new credit lines suggests lenders are balancing growth with risk mitigation,” TransUnion explained.

This means banks are still giving people cards but with smaller limits, making it harder for new borrowers to access large sums of money.

When it comes to repayment, the picture is mixed. The overall value of overdue credit card balances rose slightly to 18.1%. 

Encouragingly, both account-level and consumer-level delinquencies, which measure how many people are actually falling behind, dropped to 12.1% and 16.4% respectively.

This suggests that although balances are getting bigger, most consumers are still keeping up with payments.

The number of South Africans carrying a balance on their credit cards climbed to 4.7 million, showing that more people are using credit cards as a financial buffer rather than just for convenience.

Personal loans tell a similar story. Bank-issued loans are shrinking in number, but the amounts being borrowed are growing. 

The number of active bank personal loans fell to 5.6 million, down 3.5% from last year. But the average balance rose to R51,500, while the average new loan size jumped to R25,400, representing a 18.3% increase.

These loans are likely being used for bigger, targeted needs such as consolidating debt or covering major expenses. Delinquency rates for bank loans also improved, with fewer consumers falling behind on payments.

Despite this, non-bank lenders now account for 8.3 million active loans, a 30.3% increase from last year, with 5.6 million consumers carrying balances. 

“This growth reflects strong demand from consumers who may be underserved by banks or seeking faster, more flexible access to credit,” TransUnion said. 

However, delinquency rates remain much higher in this segment, showing the risks of borrowing outside the traditional banking system.

The report makes it clear that South Africa’s credit market is under pressure. More households are turning to credit to make ends meet, but banks are closing the taps by offering smaller limits and being more selective with who they lend to.

TransUnion said this environment requires refined segmentation, stronger early warning systems, and tailored credit line management so that lenders can support consumers while protecting themselves from rising risk.

Issued on BusinessTech by Malcolm Libera | https://businesstech.co.za/news/banking/838779/banks-are-closing-the-taps-on-south-africans/