Interest-free card installments become a topic of debate – 04/25/2023 – Market

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 —charged from customers who do not settle the entire monthly bill. .

The criticism of the big banks was made in a meeting with the Minister of Finance, Fernando Haddad, last week, to discuss alternatives that would make it possible to reduce interest rates in the country. “There’s no way to dissociate one thing from the other. 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, this Tuesday (25), during a press conference to comment on the results of Santander Brasil in the first quarter.

As for Abranet (Brazilian Internet Association), which brings together companies such as PayPal, Market Pago and PagSeguro, the end of interest-free installment payments would have a negative impact on consumption at an already fragile moment in the Brazilian economy.

A survey by Abranet 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 a determining factor when choosing the establishment where the purchase will be made.

“From the moment that the shopkeeper offers the interest-free installments, his dependence and that of the consumer on the bank’s credit line ends up being smaller”, says Carol Conway, president of Abranet.

She adds that, in the current macroeconomic situation in which the country finds itself, reducing the possibility of installments would cause a downturn in the economy. “We don’t believe that the government would be capable of taking a measure like that.”

Economist at the ACSP (Commercial Association of São Paulo), Ulisses Ruiz de Gamboa says that a reduction in interest rates is important to stimulate the pace of economic activity, but there is no single answer to deal with the problem. He points out the level of household indebtedness and the low competition in the credit market among the main reasons. “The problem is rarely solved with a silver bullet.”

In the evaluation of João Frota Salles, an analyst at Senso Investimentos, when fighting interest-free installment payments, banks present the argument that they would need to compensate for this absence through other more expensive lines, such as CDC (Credit Direct to the Consumer), loans to individuals and SMEs (small and medium-sized companies) and the revolving credit card.

“However, interest-free installments already come with interest built-in”, says Salles.

According to the CEO of Santander Brasil, the meeting with the Minister of Finance did not serve to present or negotiate proposals, but to make a general presentation on the macroeconomic scenario. “It was a conversation to share information and impressions”, stated Leão, who classified the meeting as positive.

The presidents of Bradesco, Octávio de Lazari Junior, of Itaú, Milton Maluhy, and of Nubank, Cristina Junqueira, also participated in the meeting. The president of Febraban (Brazilian Federation of Banks), Isaac Sidney, and the president of the National Confederation of Financial Institutions, Rodrigo Maia, were also present.

“Febraban and its associated banks have as a priority the reduction of the cost of credit in the country, being necessary to understand and attack the causes of high interest rates, with the adoption of correct measures, which take into account the cost structure of the sector, the specificities of each product and follow economic rationality”, said the federation of banks.

At the end of the meeting, it was agreed that the parties would meet again in the coming weeks and months to develop proposals that could be implemented to improve credit conditions for end customers.

Sought, the Ministry of Finance did not comment.