The purchase limits that remained low in the face of rising inflation and the growth of other payment mechanisms left the more traditional tool for financing consumption at a disadvantage
Jujuy up to date ®- In the inflationary summer of 2023, Argentines are using credit cards less and leaning towards other means of payment, according to various public and private indicators. The latest BCRA Retail Payments Report stated that in January the number of credit card payments fell 1.1% in amounts and 8.3% in amounts compared to the same month of the previous year, making 115.1 million of payments for $976.9 billion.
The trend was accentuated in February: according to a report by the consulting firm First Capital, payments of $2.3 trillion were made with credit cards, which implies an increase compared to January of only 1.4%, well below the 6 Estimated % inflation. Compared to February 2021, the increase was 82.6%, which in the face of inflation close to 100% implies a drop in real terms.
There are at least five factors that imply the decrease in the use of the credit card:
1. Due to inflation and the tax burden, discounts abound in other means of payment. When paying for a dinner, a shirt, an appliance or anything else, the dialogue is repeated: the customer asks “how much does it cost?” and the seller responds “how is he going to pay for it?”. It is that in Argentina, for each means of payment corresponds a different price. Thus, it is increasingly common for discounts of 10 or 15% to appear for paying in cash and for merchants or self-employed people to ask to charge with transfers, to avoid commissions and taxes. Due to the impact of inflation, the rule that requires each product to have a single price regardless of the means of payment becomes difficult to comply with.
2. Promotions no longer abound. The temptation to pay everything in interest-free installments to be liquefied by inflation is no longer so easy to find and such promotions have become rare. The average consumer also already realizes that financing is not always cheap. Faced with the obligation of having to pay for the purchase in a single payment, many prefer to use the debit card: only what is in the account is spent, without making commitments for later.
3. Purchase limits are not updated at the rate of inflation. Just as there are fewer promotions to pay with a card, the Ahora 12 plan also fell into disuse, which, although it is valid until June 30, has an obstacle ahead: the banks do not update the purchase limits with the speed with which the inflation. The Now 12 plan – or last year’s Now 30 – hit the low limits. Not everyone had limits of 200,000 on their card to buy a television or air conditioning in installments. The Prisma Index for the fourth quarter of 2022 warned that within the official plan “the preference for short plans is growing.”
In this sense, February has not yet registered an increase in limits to buy with a card according to the salary increase of the joint ventures. “The acceleration of the inflationary rhythm makes it necessary to update credit limits more frequently to maintain the level of spending by cardholders. It is striking that the start of the school period, and the purchases that it causes, are not reflected in a more significant growth of the balances”, assured Guillermo Barbero, of First Capital.
4. Other means of payment are growing strongly. The BCRA report is unequivocal as to how credit card “competences” have grown. And all the new means of payment are expanding: QR code payments, transfers, immediate debit, electronic checks and also debit cards, which in number of transactions grew by 11% year-on-year. Added to the offer of bank payment methods is the growing movement of fintech.
In this field, for businesses, charging with a credit card is, in general, the least convenient option, since the commissions are higher and the crediting term is from 8 to 18 business days, an eternity in times of inflation of 6 % monthly. The other options are more advantageous and accreditation is immediate or at least shorter. From the consumer side, the credit card offers the chance to “kick” the payment a few weeks until the expiration of the monthly statement; At the same time, this summary also makes all purchases more expensive by 1.2% due to the effect of the stamp tax.
5. “The Qatari dollar” discouraged card spending in dollars. According to First Capital, card spending in dollars has been irregular, especially because “the application of differential exchange rates for the use of the card in foreign currency limits its use and today it is found at values well below the usual ones in pre-pandemic times”.
The intricate mechanism of the “Qatar dollar” made taxes more expensive and put a cap of USD 300 per month (difficult to implement) on credit card purchases abroad. And Argentine travelers, faced with so many controls, often choose to pay with a debit card or take the dollars from the safe and move in cash.
Fernando Meaños
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