2024-05-13 00:09:24
Paying debts with a card and postponing expenses indicates that the financial situation is getting complicated, according to the Banking Products Negotiating Agency.
Misuse of a credit card can lead families into a financial crisis. According to a study by the credit intermediation fintech Agencia Negociadora de Productos Bancarios, six out of ten people make harmful use of cards when they use them to pay off other debts or to postpone the payment of regular expenses.
The study is carried out based on 30,000 application files for debt grouping operations carried out by the company in the last 12 months. One of the most striking conclusions is that 16% of the applicants in the group use the credit card to pay the mortgage. A new use, in the words of the company’s general director, Luis Javaloyes, that “constitutes the worst financial decision.”
This practice consists of accumulating the mortgage loan installments and, at the same time, deferring the payment for the maximum period allowed by the card. A final option that, according to fintech, is used by 95% of those who use the card to pay the mortgage. “The operation is repeated as many times as the available credit card limit, even subscribing to the contracting of more cards,” the report states.
The result, according to the Banking Products Negotiating Agency, is that a mortgage loan is converted at an affordable interest rate (the average cost of new operations is 3.57% and 3.07% at fixed and variable rates, respectively, according to February data from the National Statistics Institute), in a short-term loan with high interest, around 25% APR (annual equivalent rate).
Misuse
But the greatest misuse of credit cards refers to the payment of other financing installments with the balance available to pay off a cheaper loan. According to the fintech, this situation is reproduced in 64% of the cases of over-indebtedness of its clients.
The economic situation also has to do with the inappropriate use of cards. The sharp increase in food and fuel prices forces 51% of over-indebted people to divide payments for essential expenses. “It is an indicator that the financial situation is one step away from becoming complicated,” the report states.
In addition, 45% of people who request a group of credits use the card to pay for energy or Internet supplies. For their part, one in three over-indebted people finances the purchase of consumer goods such as mobile phones, computers or household appliances.
A practice that in most cases is inappropriate and that, according to the Banking Products Negotiating Agency, doubles the interest that would be paid with a traditional personal loan. The other option is to finance directly with the establishment where the product is purchased. In this case the rates are also lower.
Upwards
“Consumer credit is growing at levels not seen since 2020 and this strong expansion also increases the rates of over-indebtedness of individuals and families, which pushes many of them to misuse the credit card, using it as a means of exhaust. Easy to cover debts that are due immediately. This practice represents an increase in the financial burden of consumers, which in most cases is unaffordable,” says Luis Javaloyes.
The Trading Agency warns of this bad practice on the part of users and recommends using credit cards for what they are designed for, which is to use them for the full payment of monthly payments (at no cost) and exceptionally use the possibility of financing purchases. . .
With 18 years of presence in the market, the Banking Products Negotiation Agency has participated in 400,000 managed financing operations and more than 10,000 formalized operations, generating a total volume of 1,000 million euros.
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