From 22.86% registered in June of last year to 22.84% in December. In six months the average annual cost generated by paying with a card revolving —that peculiar type of plastic that is characterized by automatically renewing the part of credit that the consumer repays to the bank each month and by having reduced return fees— has remained practically stable and almost three percentage points above what the Supreme Court considered be the threshold for considering an interest rate usurious, in a ruling pronounced in March of last year. This is the main conclusion of the latest barometer of the Association of Financial Users (Asufin), from which it can be deduced that this cost remains almost unchanged, despite some downward adjustments by different entities, due to the high issuance and renewal fees of these products.
Through his ruling, issued in court on a card revolving of Wizink that applied an equivalent annual rate (APR, that is, the nominal interest rate plus expenses and commissions) of 27%, the High Court called this cost “disproportionate and usurious”, as it was notably far from the 20% that the Bank of Spain indicates as the average interest rate of the cards. The decision was based on the usury repression law, which in its article 1 establishes that “any loan agreement that stipulates an interest notably higher than normal money will be null and void.” A doctrine recently endorsed by the Court of Justice of the European Union (CJEU) which, in an order dated March 25, states that this regulation is not contrary to the Community directives for consumer protection.
If the Supreme Court ruling marked a turning point in the market for revolving, to such an extent that the average APR for these products was almost three percentage points below the 25.20% registered at the end of 2019 in the middle of last year, the decline seems to have stopped dead just 10 months after the pronouncement. In this way, for a financing of 1,000 euros over 24 months, the average cost of the 13 main products on the market studied by Asufin is 229.40 euros, but it shoots up to 472.94 euros in the case of the most expensive plastic and It goes down to 124.39 euros, in the case of the cheapest. The APR for withdrawing cash at ATMs with these cards reaches 27.99%.
Although many entities have lowered the APR of this type ofe product, as is the case of the Wizink Gold Card, which has gone from 21.94% to 20.90%, or has been replaced by plastics cheaper —Bankia, for example, has changed the Compras Card, with an APR of 26.08%, for the new Flexible Card, at 19%—, the high issuance or renewal commissions keep the average prices at high levels, according to Asufin data.
10% more for insurance
In fact, the cards revolving more expensive are those that incorporate these expenses. In this way, “Openbank’s Diamond Infinite, with a 59.47% APR, is followed by the BBVA Gold After Card (80 euros renewal fee), with 27.49%, and the BBVA After Card (the Classic version, with an annual commission of 43 euros), with 25.41%. On the opposite side, there is the Abanca Project Visa, with a cost almost six times lower than the most expensive, that is, an APR of 11.99%”, they point out from the association.
One of the elements that can make the cards even more expensive revolving are the insurances that cover non-payment in certain circumstances, such as being unemployed. For a debt of 1,000 euros to be repaid in two years, its cost rises up to 10% more than the same operation without insurance. This expense is not included in the APR, since the insurance is not compulsory. However, “it is common for this possibility to be highlighted when contracting the card, without its cost being properly explained,” they point out from Asufin.
The results of the study of the association refer to a period that precedes the entry into force, on January 2, of an order with which the Ministry of Economy imposes stricter conditions on entities for the sale of cards revolving. On the one hand, it requires them to offer more transparent information about its complex operation and its conditions. On the other hand, the solvency analysis that the bank carries out to grant these cards must determine the client’s ability to repay the debt at an interest rate of 25% per year. For any type of credit, in addition, the entities have to communicate to the Risk Information Center of the Bank of Spain (Cirbe) the operations that exceed 1,000 euros, 8,000 euros less than what was previously required. It remains to be seen what consequences the application of this regulation will have on the price of revolving.
In any case, and in line with other consumer associations, Asufin strongly discourages the use of these cards for managing the domestic economy, since “they make it much easier to enter a spiral of debt that generates high interest.”