In a context of very high inflation, the a striking phenomenon. Argentinian consumers are doing a less use of credit card, the line of financing for individuals and families most popular.
According to data released by the Central Bank in its recent monthly retail payment reporttransactions paid for by credit card it contracted by 6% in real terms -i.e. discounting inflation- in October 2022 compared to the same month in 2021.
The most recent numbers show that just over 108 million transactions were made for 806,620 million pesos. The figures show that, on average, an expense of $7,467 was settled for each trade.
The lower use of the card corresponds to another report known a few days ago, drawn up by Atacyc, the chamber that brings together credit card issuers: this work indicates that in the last four years the number of actually active cards has decreased by 3.8 million plastics.
The lower use of credit cards reflects, on the one hand, that many users, especially in the middle and low income brackets, have seen their funding capacity shrink in various ways:
1) Banks or issuing companies may not have updated theirs spending limits monthly in line with inflation;
2) accrued installments to be paid and which has reduced their monthly consumption capacity to finance themselves with a card;
3) are users of non-bank cards, which in recent times have seen their business reduced due to lack of profitability. Other non-banks disappeared directly, as in the case of Garbarina.
What is striking about the lesser use of credit cards is that today, with inflation of 5 or 6% per month, the card is very useful and very beneficial. People can finance for free for 30 days. In addition, if the user is disciplined and has what, he can make the largest expenses on the first day after the monthly summary closes and invest the weights of those expenses in a fixed term, which expires on the same day the summary is paid. Next . 6% was earned on the invested capital, i.e. buying with a card is 6% cheaper.
In truth, what is happening is that other payment options are growing but with money transfer on the spot, that is, despite not being the classic debit card.
According to the BCRA report, this can be seen on an individual level:
– The instant transfers exceeded 4 trillion pesos in October and had real growth of 14.6%:
- payments with transfers between digital wallets PSPCPs (payment service providers offering payment accounts) reached $355 billion and grew by 84%. At a rate of $2,754 per trade;
The transfers between users intra PSPCP were $250,000 million (average of each deal $3,074) and had real year-over-year growth of 116%.
Instead the traditional debit card reached 639,000 million ($3,596 average per deal) and the amount reflects a 3% year-over-year real contraction
How do you see this phenomenon of less use of cards in banks? Clarín spoke to two managers of this business line, one from a public bank and another from a private bank.
In reserve, in the public bank they indicated that several phenomena have occurred: the maximum interest rate set by the BCRA at 77% per annum, the lower commissions that can be charged to companies and the reduction in the number of days to settle a transaction removed incentives for banks to promote the use of the card: “There is not much enthusiasm in promoting a business that does not make us profits” The outlook has improved slightly for banks this year when in exchange for joining Now 30 programs they received a regulatory compensation of minimum reserve and cash requirements.
In the foreign bank they pointed to similar problems.
“A driver of consumption are installment plans, and above all Now 30, which explains 70% of credit card use. Many banks have removed promotions from these installment plans because they have lost money. And on a global level, the decline in the use of cards can be explained above all because non-bank cards have not entered Now 30, because they do not have access to the concessions that the BCRA has granted to banks.
The trend of payments at the retail level is clear: immediate transfers, i.e. payments in cash, are growing and recourse to the possibility of paying in installments is reduced, wasting the possibility of playing in favor of winning those days between the time of the purchase and the day of payment.
Source: Clarin
