The cost of the credit card has never been cheap, it is one of the most expensive in the Mexican financial system and in the world in general.
In Mexico, the cost of the card has increased due to the increase in nominal rates in recent months as a result of the rate hike carried out by Banxico, emulating the Fed.
Today the costs are very high, even those that are supposed to be cheaper: The National Commission for the Protection and Defense of Users of Financial Services (Condusef), carries out comparative exercises on a daily basis to provide tools to users, so that they can make decisions more informed.
Shortly before the end of the first half of the year, in one of its exercises, it considered the Top 5 credit cards with the lowest and highest CAT.
With the lowest CAT, the following stood out: Banorte with 18.1 percent; Consubanco with 22.7 percent; Santander with a CAT of 31.1; BBVA WITH 33.6 percent, and Banco del Bajío with 34.1 percent.
Those with the highest CAT are: Banco Famsa (in liquidation), with 88.2 percent; BanCoppel with 88.3 percent; BBVA with 89.1 percent; Invex with 100 percent and Consubanco with another card that charges 105.9 percent.
Based on these figures, It turns out that the average CAT of the top 5 of the most expensive and cheapest credit cards in the Mexican banking system has risen to 61.11 percent, which compares with the 48 percent registered at the end of the first half of last year, and had already increased from 42 percent at the end of 2021.
The impact of the rise in interest rates is already evident in the cost of financing through credit cards, and more expensive. But what is most worrying is that these increases will continue for a long time. These are the causes.
According to figures from Banco Base, the cost of credit cards in the United States reached a maximum historical rate of 22.16 percent at the end of the first half of the year; Despite this, consumption is at its peak, driven by this type of credit.
For its part, in Europe the cost of card credit is also at a maximum of 21.90 percent, practically the same as the rate charged in the United States.
You may wonder, dear reader, what does that have to do with us Mexicans?
The big banks that operate in Mexico are foreign
We must not forget that we are not isolated, many things that happen in the world, no matter how far away, have an impact on us, this phenomenon is not new and it will not stop.
Although it is true that the cost of money in our country is determined by the conditions of internal rates, these in turn are largely determined by external factors. In addition, we must not forget that a large percentage of the large global banks operate in our country. With the exception of Banorte, a 100 percent Mexican institution, in reality the most important banks, which have the most influence in the system due to the number of loans they handle and the percentage of fundraising, are essentially foreign.
But that’s not all, there are additional factors that make it possible to foresee that interest rates for consumer credit cards will not drop in Europe, nor in the United States, and possibly the same will happen in Mexico.
We are facing a global phenomenon determined not only by the performance of interest rates in the world, but also by economic conditions that determine the performance of the cost of credits.
Nominal rates will not drop, neither will card rates
At the beginning of 2023, there was an expectation that interest rates would begin to drop this year-end, but the performance of inflation began to condition expectations, especially for core inflation.
Before the end of the first semester, Banco de México practically buried all hope that nominal rates would fall this year, since it announced that the reference rate would remain fixed at least until November, said rate is located at 11.25 percent. Given the current conditions, the scenario indicates that it will not move in December either.
In fact, for the year 2024 a closing rate is expected above levels of 10.25 percent, just 100 base points below the current level, which means that there would not be a significant downward adjustment.. Abroad, conditions are more or less similar, a downward adjustment in the Fed rate is practically ruled out, while in Europe; in fact, rates are being raised by your central bank.
US rating downgrade, another factor
Before Tuesday, the interest rate scenario was the one outlined above, but it was not ruled out that a significant drop in inflation could lead the Fed, above all, to initiate rate cuts. However, it was all thrown out the window with the downgrade of Fitch’s rating for US sovereign debt.
As we know, the securities rating agency Fitch Ratings downgraded the United States’ credit rating by placing it at AA+ from AAA, with a stable outlook.
Much can be said about the measure; in fact throughout the session on Wednesday there were different reactions and the financial markets on Wall Street had a bad day.
Fitch’s measure sends a signal of fragility to the markets and determines, among other things, a low probability that rates in that country will fall in the short term; therefore, neither in Mexico nor in other parts of the world.
In summary; the cost of credit card financing has increased substantially in Mexico and due to external conditions will not decrease in the short term; in fact, there is more risk that it will continue to rise if the fragile conditions existing in some economies such as the United States deepen.
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