The Central Bank ordered this Wednesday new conditions for credit card refinancing. Banks must maintain as maximum interest of 43% per year for its clients who want to finance unpaid balances of up to $ 200,000 for each plastic issued.
Above that figure, the rate may be up to 25% more than that charged for personal loans, which currently stand at around 55%.
However, the regulations clarified that “only on additional balances banks may apply the differential rate”. In other words, if a client has a consumption to finance of $ 210,000, the 43% cap will be applied on $ 200,000 and on the remaining $ 10,000 the bank may charge that differential rate.
The limits to the interest rate were defined by the Central last April, after the first extension of social, preventive and mandatory isolation to try to contain coronavirus infections. The measure allowed the refinancing of unpaid balances for consumption with credit cards in up to nine installments and with a three-month grace period, with a maximum interest rate of 43% per year.
Refinancing applied automatically if at the expiration date of the account summary the client had not made the full payment or had made a partial cancellation, with no maximum limit on the amount.
The objective of the measure was alleviate the accounts of families whose income was heavily affected by the crisis caused by the pandemic.
Already in a stage of social distancing and with a large part of commercial and productive activities made more flexible, the Central Bank reformulated the scope of the measure, establishing a benefit cap according to the amount the client must refinance. If the balance is up to $ 200,000, banks must charge a maximum of 43% annual interest which, as it does not include other factors that end up increasing the Total Financial Cost (CFT), in fact ends up representing up to 64% of final interest rate.
For debts over $ 200,000, Banks may apply a differential rate up to the maximum allowed by the Credit Cards law, established in 25% above what they charge for personal credits. In this way, a fee ends up being charged similar to that applied by non-bank cards.
According to estimates by the monetary authority, the benefit of the interest rate cap will be maintained for “95.5% of the users that use this financing mechanism”. Only 4.5% of the cards issued register balances above the ceiling of $ 200,000 and only on these additional balances the banks may apply the differential rate.