Banks must refinance unpaid credit card balances in 9 installments, but it is convenient to see the fine print to assess the convenience
The Central Bank (BCRA) today established a new measure to help bank customers with their credit card maturities. This time, it forced financial institutions to refinance the balances within a period of one year, with a 3-month grace period and 9 installments, and a maximum rate of 43%.
The question debtors ask themselves is whether it is convenient or not to accept the deferral in payment. The specialists, for the moment, agree that it remains to see the fine print of this initiative to know the real application that it will have.
This Monday, April 13, the maturities of the cards that had been postponed since the quarantine was imposed, on March 20, will begin to fall. The first numbers of the financial system already begin to show the pending payments in the loans with card. In the first three days of April, the credit stock in this line remained practically stable compared to the last day of March, contrary to the usual dynamics. In general, the stock decreases in the first half of each month, as maturities are paid (which are usually between the 1st and 10th days) and rises again towards the end of the month, when the summaries begin to close.
According to the statement sent today by the entity led by Miguel Pesce, customers who choose not to pay the total maturities that occur between April 13 and 30 will be able to access refinance them for one year, with 3 months grace. The BCRA established that the cap rate for refinancing will be 43% starting on Monday and that, in addition, those who do not pay the full amount will be able to access this new credit without any additional paperwork.
On the other hand, the agency recalled that those who are adhered to the direct or automatic debit, can request the reversal of the same to their bank within 30 calendar days from the date of the debit and highlighted that the return of funds must operate within 3 business days of the request.
To pay or not to pay?
From the point of view of personal finances, the question is about the convenience of taking this alternative offered by the BCRA. And in this regard, they recommend checking four points:
1. If there are compensatory interests
“The issuing banks must offer at least three months of grace and 9 fixed installments in such a way, the installments will begin to be paid in August at a value of 147 pesos for every 1,000 pesos refinanced,” the Central reported in its statement. This would seem to indicate that first three months would not accrue interest for those who choose to refinance.
However, analysts and banks did not understand this. Conversely, they estimated that the 3-month grace period refers to the deferment of payment but that they will continue to count when calculating compensatory interest.
“Maturities from April 13 to 30, which include what had already been postponed, are refinanced with a loan with 12 installments, of which there are 3 grace and 9 installments equal to 43% with no possibility of collecting penalties (for do not pay.) My interpretation is that compensatory interest may be charged during the 3 month grace period“they said in one entity.
In another financial institution they agreed: “We are still talking to the Central Bank, but for us, the 3-month grace period adds to the interest. Therefore, cLet’s say that we are not going to do it automatically, so that the client can choose whether or not to do the refinancing in these terms “.
2. Check that the CFT is “capped”
Another doubt that concerns the pocket passes through the total financial cost (CFT) that the operation will have. It is that the Central limited the annual nominal rate in 43% but did not regulate this other cost, which includes additional charges for the management of the banks. There, entities could increase the costs of deferring these payments.
“I think they are going to have to limit CFT because otherwise the actual cost may end up being higher at the rate of 49% that there was until now for the minimum payment, “said Mariano Otálora, director of the Argentina School of Personal Finance. However, the specialist maintained that the measure” gives air for 3 months “for those who cannot afford the full payment of the card.
3. Pay attention to the ability to pay
A third point that those who intend to use this modality must take into account is that, although the first installment will be paid from August, the same will be added to monthly expenses the person to do with the card.
“If the usual cost with the card is $ 40,000 per month and in April the client only pays half, the other $ 20,000 will be divided into 9 installments payable from August, with the corresponding interest. in August he will pay the $ 40,000 of always plus the first installment of the refinanced amount“Otálora exemplified.
4. Contemplate the loss of available balance
Otálora also noted that The balance that is refinanced will be automatically subtracted from the purchase quota that each client has on their card, so the ability to take credit with the plastic will be reduced for the next 12 months.
Along these lines, the expert warned that in this exceptional situation, and with the BCRA lowering refinancing rates, banks can choose to raise the minimum payment amount (each entity determines it unilaterally) or lower purchase limits. Thus, they protect themselves from a possible delay in payments by customers and lower their exposure to risk.
Given that, for now, the Central regulation did not set a ceiling on the CFT, it will be important that each client contact their bank to check what will be the total cost of delaying payments. If it were to remain at 49%, at the same level as the nominal rate, it would be in line or slightly below the projected inflation for the next 12 months, so it would be a relatively acceptable cost to defer payment.
Behind the operation
In the middle of the Good Friday holiday, the banks were trying to set up this regulation that, in addition to the possibility of refinancing, establishes that the “refinanced balances may be prepaid in whole or in part at any time and without cost –Except the compensatory interest accrued until the pre-cancellation– when the client requires it “.
“Is a operational mess Because the bank builds the credit and, if the client pays after maturity, there is no cost. The loan must be modified. The idea is that the flow is assembled by the card holder“explained a bank source referring to Prisma and First Data, the main acquirers in the country of Visa and Mastercard, respectively. However, neither of the two companies responded to inquiries from iProfessional.
This is the third drop in rates that the BCRA imposes on credit card refinanced balances. First, it brought the cap to 55%; then 49%; and from next Monday it will be at 43%. “It is a further blow to profitability. They punished the cards a lot “, they summarized at a table. In another bank they estimated, before this last cut in the rate, a cost of $ 100 million for the decreases that the Central had already implemented.
According to the agency’s statement, the continuous reduction of the balance refinancing rate has to do with “ensuring that the trajectory of said rate is aligned with the monetary policy rate”
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