Credit cards: debts that go beyond ability to pay
SANTO DOMINGO. A cardholder interviewed by the Diario Libre reported that his monthly consumption carried out by way of her credit care was around RD$10,000. She told how that by accepting the offer of paying a minimum on her credit statements, she accumulated a debt that was over RD$100,000.
The young woman as that her name not be revealed. But she has seen this debt grow like a snowball going down a hill, which threatens to bury her credit history. She decided to find out the possibility of obtaining a personal loan in a bank at an interest rate that she hoped would be less. In this way she hopes to pay off everything at once, in order to stop the snowball.
Regarding this issue, the Association of Commercial Banks of the Dominican Republic (ABA) says that “in elemental logic nobody finances more than they have consumed.” Nevertheless, in light of the debts that cardholders accumulate, registered in the statistics on payment instruments that is published by the Central Bank, the majority of the cardholders consume more that their financial possibilities will allow. They get into debt at interest rates that by the effects of the new regulatory rules, from November 2013, are, in most cases, at 66% APR.
In 2008, the average monthly consumption in plastic money, in pesos and in dollars, was the equivalent of RD$8.2 billion. In this same year, the monthly average of the amounts financed (accumulated in previous periods) was RD$14.96 billion. This means that this debt was 1.8 times greater than the average consumption per card, corresponding to the previous months.
Although in 2013 this proportion was reduced to 1.5 times, the absolute value of the average amount financed rose to the value equal to RD$22.3 billion.
The ABA in a letter sent to the director of the Diario Libre, Adriano Miguel Tejada, made some observations regarding what they considered to be errors in the story published by this newspaper last 24 January titled: “Cardholders financed RD$135 for each RD$100 consumed”. The entity explained that the data of the story corresponded “to numbers of a month of consumption with cards (not a year), and the RD$19.5 billion are comparable to the total of the loans accumulated through credit cards to those that are charged in the contracts with their financial institutions.”
But the amounts (in pesos) do not belong to a particular month, but rather to the average monthly consumption during a whole year. This relation reflects that in absolute values and with relation to the consumption of each month, the debt generated by the financing of the credit card is increasingly greater.
And just as the ABA says, this is due to “the interests for the cardholders not having paid off their consumption within the specified time.”
This is precisely the motor that pushes the snowball down the hill.
Category: DR News |