Two experts suggest five strategies to manage your credit cards well in times of economic crisis.
Credit card billing in Ecuador is recovering from the hit of the Covid-19 pandemic, but it is not reaching the levels it had before.
Between January and December 2020, card consumptions totaled USD 5,227 million, 32% less compared to the same period in 2019.
If historical billing with credit cards in Ecuador is analyzed, 2020 looks similar to 2012, according to the Superintendency of Banks.
In 2012, credit card billing was USD 5,071 million.
In 2020, April was the month with the greatest contraction in billing for credit cards: a drop of 63.35% or the equivalent of USD 413 million compared to April 2019.
As of June, with the relaxation of social distancing and mobility restrictions, card consumption experienced a slight recovery.
In December 2020, turnover reached USD 546 million, a 30.71% less compared to December 2019, when card operations reached USD 788 million.
In what Ecuadorians use credit cards the most is for expenses in supermarkets.
It is followed by the categories of health, hardware and tools, education and communications.
New priorities
For Javier Velasco, general manager of the Aval credit bureau; and Pablo Jiménez, professor at the UISEK Business School, the drop in credit card billing responds to four factors:
- Consumption contraction due to the drop in household income due to an 11.50% drop in private sector sales, the reduction in working hours and deterioration of the labor market.
- Changes in consumption priorities. People are not spending on products and services in categories that represent large amounts of money, such as travel, cars and real estate.
- Prioritization of savings in the face of economic uncertainty in the country and the world.
- Presence of new digital payment methods, to reduce contact and avoid possible Covid-19 infections.
Fewer cards in the wallet
Efraín Unda is one of the Ecuadorians who during the pandemic reduced their consumption with credit cards and even decided to cancel two of them.
“Now I have three cards, one for my company purchases, another for family expenses and the third for personal consumption. Both cards that I closed were intended to pay for travel, which I’m not doing at the moment, ”says Unda.
With those credit cards, I was spending around $ 800 a month.
Smart Credit
For Velasco, the change in the consumption habits of Ecuadorians, due to the pandemic, is an opportunity for people to learn to use your credit cards wisely.
These are some recommendations, according to Aval, to give the cards a correct use:
Number of cards
Each person should have one or two credit cards to keep track of expenses easily.
The idea is that with one, the daily purchases are made and rewards are obtained, such as miles and the return of part of the money.
The second is intended for large consumptions, for which it is better to defer without interest.
– Payment amount It is preferable to pay the entire amount consumed on the card on a monthly basis and not just the minimum balance. The minimum payment is an amount less than the total balance that must be paid, so it does not offer a notion of the real value of the debt acquired. – Deferral Opt for deferred payment when they are expenses that generate a future return, such as education or business. The deferral must be made according to the useful life of the product or service. – Keep score Save your consumption receipts and carefully review your account statement each month to avoid possible over-indebtedness. – Pay on time Each cardholder must keep in mind the maximum date of payment of their card to avoid additional costs for interest on arrears and collection management. – – –
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