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Credit card debt grew 28% during 2014

SANTO DOMINGO. Dominican users of credit cards seem to have fallen into a growing spiral of indebtedness through the use of this method of payment. The statistics of the System of Payment reveal that as of December 2014, the amount financed through plastic money, at current value, registered a year-to-year increase of 28%.

During the previous years (2009, 2010, 2011, 2012, and 2013) the growth in current value of this financing was 18.8%, -12.6%, 21.8%, 7.9% and 11.2%, respectively.

This then is the greatest increase since 2008, the year in which the Central Bank began the publication of the statistics of the System of Payment, and that it is only approached by the growth of 2011 when the growth rate was 21.8%.

Number of cards

As of December 2014, the total amount of financing with Credit cards was a value equal to RD $30.5 billion, of which 86.1% was in pesos and 13.9% in foreign currency (presumably dollars). But in this same month of last year, the number of credit cards in circulation was 2,339,569, which is 141,631 cards less (-5.7%) than the numbers circulating in December 2013. This points towards the fact that the increase of the credit card debt is not due to a greater number of units in circulation or card holders, but rather that the persons have not managed to pay the total amount of the monthly invoice corresponding to their consumption in that period, which generates a debt which, moved by its own financial inertia, grows at a rate of up to 70% a year. In December 2014, 46% of the credit cards had a consumer limit of RD $20,000 pesos a month or less. Consumption above this limit is considered an overdraft, which generates additional charges.

The growth of this indebtedness is due to a market in which financial institutions are implementing an aggressive strategy of sales of credit cards which includes telephone calls, many times unwanted, to those that they feel are possible clients, and on occasions, they even issue credit cards that were not solicited in the names of these people.

Interest rates

According to the comparative statistics by type of credit card that the Superintendency of Banks publishes, the financial institutions charge a maximum interest for financing of 60 base percentage points a year, which is equal to a monthly charge of 5%.

This interest for financing is generated when the total payment of the total balance shown on the statement before or on the deadline for paymentis not made, according to what is ordered by the Regulation on Credit Cards approved by the Monetary Board of the Central Bank on 7 February 2013.

Source: DiarioLibre

February 9, 2015

Category: DR News |

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