As of December 2023, 1,030,677 fewer cards were circulating than in the same month of 2022. PHOTO: CARLOS VELÁSQUEZ
With usury rates significantly high, it seems that many Colombians opted to get off their credit cards and avoid temptations.
Those who have had those small pieces of plastic in their wallet know that it is easy to fall into financial indiscipline and end up with debts that, perhaps, were unnecessary and will end up expensive anyway.
Many people have been faced with this situation, which, for example, was perfectly portrayed in Shopaholic, the comedy film that tells the story of Rebecca Bloomwood, a young woman who ends up overdrawn, harassed by bank collectors and forced to search for a job with better pay to get out of the quagmire he got himself into.
To bring it to the local level, the reality in Colombia reveals an economy that suffers from annoying inflation that led to an increase in the cost of credit. And the figures from the Financial Superintendency show that, as of December 2023, 1,030,677 fewer cards were circulating than in the same month of 2022.
The aggressive strategies of financial entities were of little use to revive the appetite for this payment instrument that, among other things, usually has the highest interest rates on the market.
Catalina Rivera is an insurance advisor and canceled her card because she hadn’t used it for months and still paid a handling fee. A week ago, her financial institution called her to offer her a bonus of $200,000, redeemable in a network of allied businesses.
“It seemed strange to me that someone offered me $200,000 right off the bat. When I asked what the reason for that was, they told me it was to encourage the use of the card and there they informed me that I had to attend a 40-minute talk. The truth is, I rejected that because I know that in those types of meetings they induce one to spend, it was better to say no,” commented the user.
There is a problem
Credit cards are facilitators for consumption; Their holders do not have to request loans if they want to buy items such as furniture, televisions or cell phones and with them they speed up commercial transactions.
This allows us to infer that this payment instrument is relevant for the national economy, since it must be mentioned that the generation of wealth in the country is highly driven by consumption and if there are fewer cardholders, the possibilities for purchases of goods to grow are reduced. durable and the performance of trade is affected.
Camilo Herrera, director of the consulting firm Raddar, indicated that, depending on the month, “the credit card represents between 11% or 13% of household spending. Fortunately, for February, usage appears to be growing at 2% annually.”
“That is to say, it once again had increasingly greater growth and left the deceleration path it was on (…) it had a very strong deceleration in 2023, which was normal due to the base effect and everything that It happened to the Colombian economy,” he added.
Although there were fewer cards in circulation, the number of transactions grew by around 10.3%. A dynamic that, in part, explains why in the midst of all the difficulties facing the country, the economy did not contract last year and grew at least 0.6%.
There it is worth asking whether the decline mentioned above is a risk. From the point of view of the director of Raddar, “it is not a problem, let’s say it is a cycle that normally occurs.”
“When households feel they have to tighten their pockets,” he added, “one of the first things they do is pay credit cards and return them to the banks. And that’s without even getting into the portfolio purchasing war, which will surely take place this year.”
Herrera pointed out that this decrease in the cards has already happened, “it is something that happens from time to time; What it does is remove the capacity to place credit in the market (…) so, although it seems like a negative message in the short term, it is actually positive because it prepares households to expand their credit capacity towards the second half of the year. 2024.
Wilson Triana, banking expert and consultant, emphasized that credit cards are a massive means of payment and are one of the financial products preferred by lenders given their high profitability. However, in his view, “a solid change is required that adjusts to the economic reality that affects homes.”
For example, he indicated that in periods of financial stress – such as the one Colombia is experiencing – it would be important not to push interest to the limit of the usury rate, strengthen benefits, avoid over-indebting users with more than one plastic and grant moderate quotas by shortcutting the over-indebtedness.
From the perspective of Luis Fernando Mejía, director of Fedesarrollo, “as this year we will have slightly higher economic growth, and a reduction in interest rates — which we estimate may even exceed five percentage points — it is very “It is likely that this number of cards will be reversed.”
“So there are two key elements: economic growth and interest rates. Since this year we are going to have a little higher growth, well, surely that will also generate a greater willingness to have cards,” he pointed out.
2024-03-17 21:52:23
#million #credit #cards #circulation
