Photo: Getty Image – Getty
During the convention organized by the Banking and Financial Institutions Association of Colombia, Jorge Castaño, the financial supervisor, spoke about the use of credit cards. Please note this information before using your coupon.
The entity spoke of three supervisory alerts. The first relates to credit terms. “We are seeing terms of eight years and more in the growth of free investment credits.” The second relates to the increase in quotas on credit cards. According to figures from the Superfinanciera, quotas before the pandemic reached $62 billion, today they amount to $96 billion.
Why worry? Because while access to finance is essential, it is also essential to use it responsibly. At this point, Castaño recalled that “credit is becoming more expensive.” In other words, you will have to pay more for a loan you apply for today.
Remember that in order to contain inflation, the Banco de la República has raised its interest rates eight times since September of last year, when they were at one of the lowest historical points (1.75%).
There is concern about the increase in quotas about household debt. “With the information that the Financial Superintendent has, from the system alone, and not from credits from the real sector, we see that the financial burden of families has increased. The amount of money households use to pay their debts is increasing. And if we add the effect of inflation to this, it is clear that there will be more pressure on that ability to pay for it,” said Castaño.
The entity compares the income declared by the debtor and the value of the installments to pay the credit each month. If before the pandemic the part of the income allocated by Colombia to these payments was 26%, it is now over 32%.
The third caveat concerns the fact that new credits “are deteriorating faster than other similar credits have deteriorated at other times, even before the pandemic.”
“The portfolio growth rate is 12% effective annually, that is, discounting inflation. And the balance of the portfolio will be growing more or less at 22%. In normal times, the consumer portfolio grew by more or less 8%”. These numbers are out of the ordinary, at a time like this, they are worrying.
The Superintendent said that when there is growth in the consumer portfolio, it begins to deteriorate, basically, because people take on more debt and cannot meet their obligations.
The entity monitors the behavior of the debtors of the financial system once the credit has been granted. If before the credits deteriorated in the 11th month, now, they are deteriorating in the third month. “They are giving loans to people who are unable to pay. Debt is needed, but we have to be responsible”.
The warnings from the Superintendent of Finance call for the system to be prepared so that this potential decline can be managed in 2023 and there is no problem with over-indebtedness.
In light of this situation, Castaño declared that the entity will use a tool that will use the unused quotas on credit cards as capital for the banks. A strategy for adjusting quotas to Colombia’s ability to pay, “because interest rates are higher, debts are growing, inflation is high. We are trying to reduce the temptation to go into debt.”
Castaño declared that the debtors in Colombia are “less sensitive to the interest rate and more sensitive to the value of the installment.” The Colombian debtor usually asks for the value of the installment, not taking into account that if it is for more time, it will be more expensive.
At this point, the official recalled an aspect that anyone who wants to ask for a loan or use their credit card today should take into account: “it costs more, if the loans are longer, more the interest rate they will have to pay.”
In addition, the entity’s data shows that credit cards are being used more and more for everyday expenses, a counterproductive use.
The suggestion that Castaño’s intervention leaves on the table is that the Colombians should be more reasonable in the middle of this situation and use their cards.
Start investing your money in cryptocurrencies and get Free Bitcoin when you buy or sell 100$ or more if you register in Coinbase