Friday, September 30

Revolving cards skyrocket your commissions. How to reduce debt?

If revolving cards were already delicate for users due to their interest rates, now they are more so. And it is that the price of this type of cards rebounded for the first time in the series analyzed by Ausfin, since December 2019, and coinciding with one of the times of greatest intensity in purchases and expenses, such as Christmas.

Specifically, the average APR of the market rises to 20.17 percent, compared to 18.88 percent, registered in June, and after the progressive decrease of the last two years, from the record of 25.20 percent December 2019.

Revolving card debt can be eliminated, but banks are reluctant to do so without litigation

SOURCE: Rastreator

According to the association, this is due to the effect of the commissions that some of these cards apply and that contribute to making these products more expensive. Specifically, the Uniduo Mastercard card, from Unicaja, applies a commission of 44 euros per year, if no purchases are made with it.

New commissions on the cards

This increase in commissions is beginning to be generalized. Thus, there are several entities that have incorporated new charges such as the BBVA After and After Gold card, which charge 43 and 80 euros, respectively; the aforementioned Uniduo Mastercard, from Unicaja, and the Visa Diamond Infinite Credit, from Openbank, which charges 55 euros.

Likewise, payment protection insurance, which is contracted optionally, triggers the cost of these cards. In this period, the rates are maintained, ranging from 0.62 percent for Bankinter Platinum, 0.76 percent for WiZink Oro and 0.80 percent for Visa Pass Carrefour.

These percentages are charged on the amount owed, thus generating a higher overcharge when the debt is larger and the installment paid is smaller.

This increase in commissions has a negative impact on the interest applied by these cards compared to others such as credit cards.

According to data from the Bank of Spain, the cost of revolving, 20.17 percent, is 2.46 percent higher than the average for credit cards, which stood at 17.71 percent in September. With loans of 1 to 5 years, the 20.17 percent revolving is 13.02 percent higher than the loan rate.

Issuers begin to pass prices on commissions

After several years of decline, card issuers are beginning to pass higher inflation on fees. The consumer price index (CPI) in Spain soared in November to 5.6 percent, the highest level to date.

What does this increase in commissions imply? For users of these cards, the high cost of revolving cards is a heavier slab, since the use of revolving cards entails monthly payments of the fees established in the contract.

But the debt increases with the use of the card, since interest is generated that is financed jointly with said debt, which means that this amount does not decrease but increases month by month, they point out from Rastreator.

And this share has risen with the new commission increases.

What can the customer do?

To prevent this debt from becoming eternal, from Rastreator it is advised “to stop using said card and, if it must be used, not to make monthly payments that exceed the limit set in the credit agreement.”

“Likewise, if this debt loop is already large, it will be essential to contact professional lawyers, because despite the fact that this debt can be eliminated, the banks are reluctant to do so without litigation. And this, even with numerous judgments that establish that the high interest applied to revolving credit cards should be considered as usury. “

For its part, the Bank of Spain recommends to the client that when they are contracted they allow them to obtain detailed details of the operations carried out – with reference data, charge and valuation dates, rates applied, commissions and expenses incurred … – of a way that the outstanding debt is reflected as clearly as possible.

And in the cases in which the repayment of the principal is going to be carried out in a very long term, they should periodically provide you with the repayment term as well as the installment.