Avoiding Over-Indebtedness: A Guide to Credit Card Consumption in Ecuador

The average consumption with a credit card in Ecuador was USD 205 as of June 2023. How to avoid becoming over-indebted? Read a guide.

Los credit card consumption of Ecuadorians grew 23% annually and closed in USD 10,382 million to June 2023.

These figures are part of the study ABC of Credit Cardsprepared by the Association of Private Banks of Ecuador (Asobanca) and Aval Buró, cut to the first half of 2023 and published on September 18, 2023.

This greater dynamism is also observed when looking at the number of operations with card, which sumo 50.7 million in the first half of 2023.

Compared to the same period in 2022, it is an increase of 11% in the number of operations.

This means that, on average, each consumption made with credit card was USD 205.

Few differ without interest

But how do Ecuadorians make these consumptions? The Ecuadorians defer or pay in installmentss most of his purchases with cards of credit in Ecuador.

Thus, the report ABC of Credit Cards shows that between January and June 2023, 43% of the operations corresponded to installment payments with interest.

Meanwhile, the 14% of operations is deferred no interest. Commercial establishments usually offer to defer interest-free purchases to three or six months.

On the other hand, the 42% of operations with credit card you pay as revolving creditthat is, when the customer only pays the minimum or a little more than the minimum payment each month.

And the 2% of consumption is made with current payment. Current payment means that, when a purchase is made, the customer cancel the total amount of consumption on the card payment datethat is, you get a interest-free financing of between 15 and 45 days.

How to avoid getting over-indebted?

He misuse of credit cards can lead to overindebtedness. Some recommendations to avoid it are:

• Do not pay only the minimum payment. Paying only the minimum leads to over-indebtedness, since payments become, in the long run, a snowball.
• It is advisable to defer purchases of long-term goods such as clothing or appliances. Food, on the other hand, must be paid for in the month of consumption.
• Pay attention to the payment date. It is suggested to mark it on the calendar or agenda.
• Always review your account statement to control expenses.

There are more and more women with cards

In the first half of 2023, 1,981,964 cardholders were registered in Ecuador, which represents a annual increase of 10.3%.

Of those clients, the 52% corresponded to men and 48% to women. However, according to the Asobanca and Aval study, the women have higher annual growth rates to those of men.

Women register an annual increase in 12% in the number of cardholderswhile in the men, that increase was 8.5%.

Los men have 1,894,276 active cardswhile women have 1,693,546 cards in the first half of 2023.

But, in the same way, the annual growth of plastics on the part of the women It amounts to 12,5%. This is 2.9 percentage points more than menwho had an annual growth of 9.6%.

And by age?

When looking at the data by age, the 56% of cardholders are clients of between 26 and 45 yearsaccording to the study.

Besides, 50,540 new Ecuadorians they accessed first time to the formal system through a credit card. They carried out 192,999 operations.

Los new cardholders they made average consumption of USD 200 per operation in the first six months of 2023.

Asobanca and Aval highlighted that this financial product helps build a credit history.

“Credit cards are considered one of the first channels to access formal financingso they become an important tool that contributes to financial inclusion,” says the report.

Of the total new clients, the 55% of users who access for the first time are young people under 25 years of age.

And, of these new clients who enter the formal system through a credit card, the 51% correspond to women.

But these figures are insufficient. Only two in 10 people over 15 years of age accessed formal credit at a financial institution in Ecuador, according to the World Bank’s Global Findex 2021.

According to Aval and Asobanca, the fact that few people have access to financing is due to the ceilings on interest rates that exist in the country and that has generated financial exclusion since its implementation in 2007.

And they add that this is reflected in the fact that the number of credit operations by private banks decreased despite the fact that the average amount increased; That is, there is a greater access to credit, but from the same clients.

Finally, the study highlights that the 98.6% of active cards are internationalThat is, it allows its customers to make purchases inside and outside of Ecuador.