Tuesday December 27, 2022 | 8:15 a.m.
Despite the progress of digital payments that began in the last decade and intensified during the pandemic, the number of people using credit cards fell by 17% in the last 5 years and went from 21,720,000 unique users in 2018 to 18,027. 000. This reduction left 3,700,000 Argentines without the most traditional instrument of financing for consumption, and the most affected in this retraction are the low- and middle-income socio-economic segments.
The credit card, which has the double role of serving as a payment and financing instrument at the same time, lost ground in a large segment of the population, according to a report by the Chamber of Credit and Purchase Cards (Atacyc). The study establishes that of the total number of users who have left the system, 96% belong to the most vulnerable segments of society who, in this way, must access other options to finance their purchases.
The survey details which were the users who stopped using plastic money in relation to their socioeconomic condition. At the high (ABC1) and medium-high (C2) levels there was no impact: they have almost the same number of users as 5 years ago. In the medium-low and low segments, the drop in the number of users is palpable. Of the 3.7 million users lost, 3.6 million are located in those groups.
What are the reasons why so many Argentines have been left without a credit card? In the banks they do not find the explanation for this phenomenon in the fluctuations of consumption, which in a period of 5 years and in a country like Argentina can intersperse both negative and positive stages.
The main cause that almost 4 million Argentines have been left without a card, they say in the financial system, is in the caps on interest rates. The existence of maximum rates, combined with high and rising inflation, forces many banks to withdraw the cards of riskier customers, who could only qualify if higher rates were allowed.
Given this scenario, there are entities that prefer not to renew the credit card of low- and medium-income users. This decision is especially present in the case of small banks dedicated to consumer financing and non-financial entities authorized to issue credit cards, such as financial institutions linked to supermarkets or commercial chains, they explain in the system. Those card issuers with less back than the big banks are the ones that tend to target customers from the lowest social strata who, at the same time, are the ones most at risk due to low or irregular income.
“The policy of regulated rates, which supposedly aims to protect users from abuse with excessively high rates, ends up leaving out credit for those who most require it. A registered employee will always be able to access a credit card, at least in the bank where he has the account-salary. On the other hand, informal wage earners are running out of cards due to rate controls”, they explained in a bank.
Those who pay the minimum and must finance more than $200,000, a maximum rate applies: banks cannot charge more than 25% above the rate they charge for personal loans. For those non-bank entities that issue cards but do not grant personal loans, the limit is 25% above the system’s average rate for those credits.
The use of the credit card, for different reasons, showed a drop in the last year. According to a report by the consulting firm First Capital Group, the total balance of operations in pesos with credit cards exceeded 2 trillion pesos last November, reflecting a growth of 68.1% in relation to the same month of 2021. In this way, the stock of card financing grew well below inflation, which in the same period was 92.4 percent.
The report mentions another aspect that, in a way, limits the use of credit cards by customers with higher purchasing power. In recent years, many banks have stopped updating card spending limits to keep up with inflation. Unlike low-income customers, in these cases the card continues to be renewed but less and less can be financed with it because their margin to spend has become scarce.
This point, they explain in the banks, was the main reason why the recent Now 30 plan launched by the Government did not have a very massive acceptance. The program contemplated the purchase of cell phones and televisions, among other products, with prices of up to $400,000 including the interest to be paid. There are not so many users who have this limit on their card. The rate that banks charge to those users who pay the minimum summary payment, known as the “revolving rate”, is currently a nominal 77% per year, which leads to at an effective rate close to 140 percent. This rate applies to finance summaries of up to 200,000 pesos.
