By Jay Forte, Contributing Reporter
RIO DE JANEIRO, BRAZIL – Caixa Econômica Federal, the second largest government-owned financial institution in Latin America, announced yesterday (April 11th) the reduction of interest rates on credit cards, which now ranges from 8 to 11 percent per month, depending on the type of customer card.
Before, the interest rates on the revolving credit ranged from 11.15 to 17.12 percent per month. The ‘revolving credit’ is the credit taken with the financial institution when the consumer pays less than the full amount of the card’s invoice.
According to the bank, the reduction in the rate of the monthly balance was 7.7 percentage points. “The measure will contribute to reducing delinquency and encouraging consumption,” Caixa said in a statement.
Under the new rules for revolving credit, announced by the government late last year and in effect since April 3rd, whenever the consumer enters the revolving credit and can not pay off the debt in the first thirty days, the bank will have to offer a credit installment of the outstanding balance, with lower rates.
In practice, this is intended to prevent credit card debt, which has the highest interest rates on the market, and can quickly snowball. In 2010 and 2011, Brazilian credit card use spiked, quickly leaving over half of the families in the country in debt.
According to Caixa, from the invoices due on May 3, 2017, customers with a revolving balance will have three options: to clear the total invoice; pay the minimum; or join the credit installment plan.
“Caixa’s clients who opt for the installment of the debtor balance, as of May, may choose the following payment terms: 4, 8, 12, 16, 20 or 24 months, with rates ranging from 3.3 to 9.9 percent per month,” Caixa detailed in a statement.
The bank also offers the option of automatic installment of the invoice amount, which will occur when the customer pays any amount below the minimum payment and different from the six installment options mentioned above.