In less than a month, paying the minimum credit card has become 14 points more expensive
From Friday you pay the minimum card it costs almost 10 percentage points more at the beginning of the month. The cost of funding the abstract went from From 62% per year to 71% per year. Thus, for the second time in less than thirty days, the monetary policy decision of the Central Bank affects consumers: at the end of July the agency had raised this rate from 57% to 62%.
Last Thursday the Central Bank decided to aggressively raise rates to try to contain inflationary expectations, after the CPI measured by INDEC reached 7.45% in July and given the expectation of monthly inflation around at 6% for this month, it has brought the cost of money from 60 to 69.5%.
This measure can have a positive side for the foreign exchange market and savers, as it improves fixed-term yields in pesos and brings its effective annual rate to nearly 97%, to almost match expected inflation. However, it will have a cost in activity and consumption.
Is that hand in hand with this increase in interest rates, lending rates, those charged by banks for the loans they grant, have also become more expensive. It will cost more for companies to self-finance: for example, working capital lines have started to have a rate of 69% and the cost of productive investment has grown to 59%, from a rate level which has remained at 50% per annum.
Consumption will also be affected, as the BCRA measure applies to the financing of credit card statements. At the annual rate of 71% set by the agency, the banks they add taxes and other financial chargestherefore, those who do not balance the total of the summary of their card, will have to face a Total Financial Cost more than 125%.
Hand in hand with the acceleration of inflation, which has already exceeded 71.4% in the cumulative of the last 12 months, the cost of choosing to refinance the summary of the cards, revolving as it is known in financial jargon, is 22% higher than in January.
The Central Bank decided to “unblock” rates in January to fund summaries of up to $ 200,000. which had been set in the order of 43% since 2020, when the coronavirus pandemic began.
The banks had claimed this adjustment and given the rise of the rest of the prices in the economy they have stopped “updating” the available credit amountstherefore they have practically reduced the purchasing power of many of their customers.
This new increase in the financial cost of plastic money directly affects a line of credit which already shows enough punishment. According to data from the Central Bank itself, compiled in its latest Monthly Monetary Report, last month, without the impact of this double rate hike for revolving, this type of operation, fundamental for the family economy, it fell by 0.9% in real terms. This represents 6.4% of the levels seen twelve months earlier.
For Guillermo Barbero, economist at First Capital Group, a combination of factors explains this phenomenon: “After the period of promotions carried out by electronic commerce and before the interest rate hike established by the Monetary Authority, there is a decrease in offers to sell in installments without interest, this is why we are witnessing a decline in real terms in the accumulated balances of this item ”, he said.
Economists have anticipated that the rising cost of money will cool consumption even faster, affected by the loss of wage purchasing power. “Let’s wait a contraction in inventories and an increase in insolvencies“LCG economists warned.
It is also more expensive to pay in installments
In addition to making the cost of financing the summary balance more expensive, last month the government decided to raise the “subsidized” financing rates for the Now installment programs.
The current phase of the program, announced last July 1 and valid until January 2023, provides a rate of 42% for loans in 3, 6 and 12 installments and 49% for the purchase of goods and services in 18 and 24 installments.
According to data from Prisma Medios de Pago for the second quarter of the year, today the Now 12 plan represents 25% of total credit card spendingor. Before the pandemic, it was just over 10%.
Ana Chiara Pedotti