“One day I made a bad decision to pay the minimum on the card. And that’s it: I’ve condemned my financial life to banking hell.” This phrase was uttered by tiktoker user @sibadito and her video went viral, reflecting in first person one of the many stories of Argentines having problems dealing with a credit card summary. Although the card minimum is the minimum amount that can be paid to avoid bank defaults, there are families who do not even reach that.
In September, the latest available data indicates that credit violations in the private sector reached 4.2% at the systemic level. This was an increase of 0.4 percentage points compared to August. However, when considering by type of debtor, The loan default rate for households reached 7.3%. This has prompted banks to look for strategies to try to mitigate the situation.
The number of bad debts has not stopped rising in recent months It has reached historically high levels. This rise occurred after interest rates reached numbers well above inflation during the previous election, in an attempt to contain the dollar. Although the situation began to return to normal in November and the short-term credit interest rate corrected downward, The contagion effect takes longer to reach loans.
“We are quite proactive in offering refinancing possibilities to customers when we see that it is difficult for them to pay. Common sense aside, It is not appropriate for the bank for the client to pay fines and get into debts beyond his means.. There you are offered a lower price, so you can order“, one of the private banks said confidently.
at the moment, The average personal loan rate is 75.42% nominal annual (TNA), More than three times the expected 12-month inflation (20.8%, according to the central bank’s market expectations survey). In this case, the strategy of some entities is to offer customers with payment difficulties a preferential rate of about 40%.. Naturally, it is not transmitted overtly: the situation is analyzed, and it is applied to specific groups. “If we communicate broadly, they don’t give you the numbers. “But this is something that is done so that they do not pay 120% (the rate at which it rises due to non-payment),” they added from the entity.
in case Credit cardsAlthough banks confirm that they are not working to reduce maximum spending on a large scale, they admit this Some “more sophisticated” clients have their limits frozen. High inflation and exchange rate appreciation do the rest.
“A lot of people don’t know that if you have a $1 million limit, use it all up and pay the ‘minimum’ of $100,000, your balance will only rehabilitate for $100,000 until you pay the remaining $900,000. If you pay the minimum, you have a lower and lower limit. This happens often; We are seeing a huge growth in the minimum card payment, which is deadly for financing because the interest is very high at the bank. That is why the client is encouraged to pay X amount and not the minimum, to alleviate the cycle of eternal debt,” they admitted from another financial institution. The effective rate of not paying the card in full is up to 9% per month.
There are cases that attract the attention of financial institutions themselves. There are clients who have used their maximum available limit of $14 million and made the minimum payment, which means that in the next month They will receive a credit card statement with $1 million in interest.
Looking at delinquency in more detail, In September 9.1% of customers were unable to make their personal loan repayments, While the percentage of violations related to credit cards reached 6.7%. Behind closed bank doors, they add: “People owe anything, but they don’t stop paying their guarantees or their mortgages.”