With bank endorsement, Sergio Massa will announce this Monday an increase in credit card funding limits, as a way to support consumption, at a time when pockets are hit by rising inflation.
The measure, together with others announced last week, is part of the package to “strengthen credit to the private sector and improve the regulatory framework”. includes a 30% increase in current limits for installment payments: that is, For every $10,000 a family has in the limit, they can fund up to $3,000 more. An increase of is also planned 25% for purchases made in a single solution.
After announcing a 9 percentage point drop in Ahora 12 Program fees and a reduction in the cost of financing for the summary payment of the credit card, Massa is trying to alleviate what has been the “Achilles heel” for the evolution of consumption in the last three years: the limits that banks place on credit cards.
As a “defensive” measure to avoid the leap in bank arrears, from 2020 to this part the institutions have practically “frozen” the increase in the overall limits that can be financed with plastic, or they were adjusting them, but well below inflation and several parity updates. This has rapidly eroded purchasing power of families, who had already been affected by the near extinction of the “interest-free installments”.
Reinstating credit card limits in an economy with rising inflation had been in Massa’s sights since late last year, when he was still keen to hit a CPI of 3% for April, not 8 .4% as published last month. The negotiations with the banks to be able to create “the cushion” to be able to do so lasted longer than expected.
Now, as explained in the Palacio de Hacienda, the entities have regrouped Adeba and Abappra have already signed this measure. The foreign-owned banks brought together in the ABA would soon do the same. “This increase will allow families to access more resources with the Ahora Plan12”, the sources assure.
At the same time, the Massa plan also contemplates the finance for SMEs, the hardest hit by the last two interest rate hikes tackled by the Central Bank. Even if there will be no reduction in bank financing costs for these sectors, current account advance margins for small and medium-sized enterprises will also increase by up to 25%.
“These measures will lead to an increase in credit available to households and businesses”, they added to Economia. They also explained that the measures aim to “support consumption, increase investment and reduce drought damage”. In the Palacio de Hacienda they stated that “modifications to the regulatory framework are necessary to favor the channeling of society’s savings towards credit”, although they did not clarify what kind of modifications they were talking about.
The announcements, which should be made in the afternoon at the Ministry of Economy, come after months of decline in consumer finance. These lines of credit, which include personal loans and credit card payments, were down 16% in April compared to the same month a year earlier. The figure is symptomatic: the latest record with such a sharp drop in consumer loans It was in April 2020, in full pandemic.
In the consulting firm LCG they warned: “Although periods of improvement can be observed following isolated consumption promotion policies such as the “Ahora 12″, the acceleration of prices and a positive real interest rate would affect the final prices of products to be financed, for which its reactivating effect would be limited to the extent that there is no recovery in purchasing power, which may not happen in the short term”.
Charles Arterburn is a seasoned business journalist for News Rebeat, where he provides comprehensive coverage of the latest trends and developments in the world of finance and economics.