Credit card revolving interest reaches 430.5% per year – 04/26/2023 – Market

The average interest rate charged by banks on revolving credit cards reached 430.5% per year in March – the highest level in six years –, according to Central Bank data released this Wednesday (26).

The number represents an increase of 13.1 percentage points compared to February, when interest was at 417.4% per annum. In March 2017, the modality rate was 490.3% per year.

This is the most expensive line of credit on the market, recommended by experts only in emergency cases. Card revolving is activated when the customer does not pay the full amount of the invoice on the due date.

Since 2017, banks have been required to transfer credit card revolving debt to installments, which have lower interest rates, after one month. In this modality, interest rose to 192% per year in March, against 189.6% per year in the previous month – an increase of 2.4 percentage points.

The high level of revolving interest has been debated by the government of Luiz Inácio Lula da Silva (PT).

On March 17, Minister Fernando Haddad (Finance) met with the president of Febraban (Brazilian Federation of Banks), Isaac Ferreira, and the president of CNF (National Confederation of Financial Institutions), Rodrigo Maia, to discuss the current model. No proposal was presented, according to the participants of the meeting.

“Today [dia 17] we spent an hour studying the current model so that there is an understanding of the issues that everyone faces in relation to this. There are many interlocutors, there is the flag, there is the vending machine, there is the bank, there is the shopkeeper, there are many actors in this process”, said Haddad after the meeting.

“I asked for speed because it is a concern of President Lula, and they asked to involve the Central Bank due to the regulation of the product”, he added.

According to the president of Febraban, the government and members of the credit card industry are going to set up a working group with the BC to deepen the causes of the spread [diferença entre o custo de captação dos bancos e a taxa cobrada do cliente] on rotary.

In an interview with Sheet, in mid-April, the director of Regulation at the Central Bank, Otávio Damaso, stated that the monetary authority had not yet discussed the possibility of imposing any type of limit on the revolving or interest rate control. According to him, this could bring instability to the market.

“It is not on the agenda of the Central Bank some kind of interest rate regulation, what we are always looking for are mechanisms to make all types of financial instruments more efficient. Is there anything planned? No, but we are always analyzing this market,” he said.

“But the Central Bank is not thinking of any kind of cap [limite]because that could bring some kind of instability to a super relevant, important market, which feeds the economy and all sectors of the economy, especially retail, which is extremely dependent on this important payment instrument.”

Installment of interest-free purchases on credit cards became a topic of debate in the Brazilian financial sector, after large banks pointed to this modality as one of the culprits for the high interest rates on revolving cards.

Representatives of the big banks also met with Haddad to discuss alternatives that would make it possible to reduce interest rates in the country. “When you talk about the cost of the credit card, you can’t dissociate it from the interest-free installments”, said the CEO of Santander Brasil, Mario Leão, on Tuesday (25), during a press conference to comment on Santander Brasil’s results in the first quarter.

A survey by Abranet (Brazilian Internet Association), which brings together companies such as PayPal, Market Pago and PagSeguro, in partnership with Datafolha, showed that around 75% of the population usually pay for purchases in installments and, for 80% of consumers, the possibility of paying in installments without interest is decisive in choosing the establishment where the purchase will be made.