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Credit cards: the true financial cost of refinancing

2020-08-28T12:34:43.364Z


The Central Bank once again allowed the balance to be paid in 9 installments. What variables to look at in order not to overpay.


Ismael Bermudez

08/28/2020 - 9:25

  • Clarín.com
  • Economy

As it did in April, the Central Bank resolved that credit card statements that expire between September 1 and 30 can be financed in twelve months, with three months of grace and nine fixed installments, at a nominal annual rate ( TNA) of 40% plus VAT and "no other surcharge" . In April the same scheme was applied but with a rate of 43%.

However, as a result of the complaints of many credit card users, a study by the Ombudsman's Office of the Autonomous City of Buenos Aires came to the conclusion that, although since mid-April the TNAs remained in the ceiling of 43% imposed by the BCRA in the vast majority of banking entities ”, the total financial cost (CFT) exceeded 60% and therefore the fees were higher.

“When taking a loan, we must not only take into account the annual rate, but also other expenses associated with the loan, which must affect the final value that we have to pay. These other expenses will commonly be life insurance, commissions, administrative expenses, taxes or others. The interest rate is the principal price of the loan, but when the other associated expenses are added, the result is the Total Financial Cost (CFT) of the operation ”, says the Report.

According to the Ombudsman's Office “the lowest CFT registered in August corresponds to Banco Credicoop (62.62%). Banco Ciudad and Provincia present a CFT of 63.63%, ICBC follows with 65.29%. Banco Nación, HSBC, Santander, BBVA, Hipotecario and Galicia present a CFT of 66.44%. Once again, these CFTs are made up of the TNA, other administrative expenses of each bank, as well as VAT on interest ”.

Consequently, "it can be deduced that the households that refinanced their debt in this way had inadequate or insufficient information on what was the rate at which the installments would be calculated," the Report warns.

From now on, on a debt of $ 10,000, with a rate of 40%, the 9 capital installments are fixed at $ 1,111.11 (1,111.11 x 9 = 10,000), the monthly interest rate of 3.33% also it is fixed (3.33% x 12 = 40) plus VAT plus the incidence of the three months of grace applied on interest.

These interests are decreasing because the capital is being paid in installments. In the fourth month (first payment) the total installment (capital, plus interest, plus VAT) is $ 1,648.89, while the 12th installment is $ 1,290.37, according to the calculations of the economist Juan Pablo Di Iorio of the consultancy ACM. An average of $ 1,450 per month. In this example, the total financial cost is 48.4% for VAT incidence.

But if commissions, expenses or surcharges are added, the CFT is much higher. With a CFT of between 62 and 66%, the average fee rises to $ 1,800 / 1,900 per month, between 24 and 30% more.

Thus, the BCRA should guarantee that the 40% rate will only have the VAT surcharge and "no other surcharge." In April, Communiqué N ° 6964 of the BCRA also said 43% plus VAT and "no other surcharge", but according to the Ombudsman's Office there were surcharges that took the total financial cost above 60%.

NE

Source: clarin

All business articles on 2020-08-28

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