stabilization of the foreign exchange market -although uncertain and without any certainty that there may be continuity beyond a very short period- is high cost to consumers, Customers who have become accustomed to buying hardware in the “now 12” or after interest rates have steadily increased, find it difficult to directly refinance their credit cards. A measure which the government opposed but which has now become the only way to appease the fever of the dollar.
It is not a question of discussing whether a sharp rise in interest rates will succeed in containing the wave of dollarization and reducing the evolution of the exchange rate. Nor if Sergio Massa would have another device on the operating table to train with.
The only indisputable thing is that Massa wants by all means to avoid a sudden devaluationThis is a difficult objective to achieve in the current context of high inflation and the absence of dollar income at the Central Bank.
Nevertheless, after the first month of management, the minister was able to achieve this goal. Of course, the cost is visible and paid for by a . will be done with cooling consumption And so, in economic activity. The scarcity of dollars, which leads to bottlenecks in imports and accelerating inflation, causes this bitter pill amid uncertainty.
what is the cost of refunding the card
What was said: A sudden rise in rates tells the biggest investors to stay in the peso. And that the little people stop thinking in dollars to keep their fixed mandates in the banks.
The undesirable effect is the increase in the cost of borrowing. Or to refinance a credit card balance.
Refinancing increasingly expensive credit card balances.
One question a consumer should keep in mind before deciding to defer a payment or take out a loan is whether their salary can be big in accordance with this debt, preferably not. The problem is that with interest rates like this, wages are very likely to fall several notches behind.
To get an idea: if the consumer pays off only the minimum of the card and carries the rest, this debt will increase at a cost of 125% per year. This is the total financial cost. It should be borne in mind that this is a variable regulated by the Central Bank, and that it was considered to be very low in times of pandemic.
For example, in 2020, the rate charged by administrators was around 50% over one year. At that time, inflation had fallen to 40% and salaries were updated within this range.
Now, it is almost impossible for salaries to increase by 125% per year to match the cost charged by the card if only the minimum is paid and the rest activated.
Map: Worst case scenario is at the supermarket
If the consumer can decide with whom he is financed, the possibility of cards issued by supermarkets – Through financial companies that issue their own plastic – is the most expensive option.
These plastics, which the chains launch specifically to offer promotions in the category of household appliances, set very high interest rates when it comes to consumer finance that is not included in the offer.
Supermarket cards are the most expensive when it comes to financing.
These costs start at 163% per year, but go up to 199% in the case of some chains, according to information that the supermarkets themselves publish on their Internet pages.
With bank cards, the scenario is not much better.
If a person decides to buy in a store in 12 installments, The total financial cost will be 165% on averageObviously far from inflationBut above all, his salary is far from changing.
“now 12” is not recorded
Very different from what happened more than ten years ago when it was built.12 now, This means no longer buying at 0% interest,
Financial costs, since the last update, have already increased at 70% per year in line with inflation over the past 12 months. Salary improvement as well. But it is no longer “free” logically.
It is one thing to allow subsidies when annual inflation is 20% or 25%, and quite another when it reaches 70% or 90%, because it is very likely to end This year. East. If not, more.
Note: 12 no longer means interest-free payments.
it’s clear that These cost increases will affect the level of consumption in a double way. Because of the loss of the purchasing power of the salary, which inevitably loses in the face of such price increases, and because the contribution is also far from being paid by an employee.
Goal: Dollar in peace
Massa wants to raise interest rates to reduce dollarization. and that a better exchange rate environment is helping to calm inflation expectationsThe key is also to raise the cost of credit to a level that curbs the “cheap” financing of producers, who take pesos on the market and then become dollars.
The big question is how high interest rates would have to rise for this to happen. So that those who take credit in pesos feel that they can lose money doing these tasks.
To achieve this, from the economy they insist that ministers want to gain credibility in the market. That without this step, it would be very difficult to achieve the desired stabilization of the foreign exchange market.