Inflation pushes consumers to resort to ‘revolving’ cards: the volume of credits shoots up 17.6% in July

The increase experienced by the cost of living in recent months is causing consumers to seek new ways of financing with which to face an increasingly complicated economic situation. The latest data from the Bank of Spain indicate that households are opting for products such as ‘revolving’ cards, a financial product that banks market as if it were a credit card that defers payment in monthly installments but with exorbitant interest, as they have denounced the associations of banking users. Not surprisingly, the regulator’s figures indicate that the outstanding balance of credits with deferred payment and ‘revolving’ cards stood at 11,374 million euros in July, which represents an increase of 17.6% compared to a year before . Only since the beginning of this year, its growth has been 13%. This situation occurs in a scenario of triggered inflation, with the interannual rate of the Consumer Price Index (CPI) for August at 10.4%, four tenths lower than that registered in July, which until now marks the maximum registered in the last 38 years. Financial experts attribute the increase in requests for ‘revolving’ cards to the rise in inflation, which has notably raised the cost of living for Spanish households. “This circumstance has drastically reduced the purchasing power of families that, in this situation, they are forced to resort to alternative financing systems that hide high interest rates, such as revolving cards”, they point out to Europa Press from the specialized platform Claim For Me in the defense of the consumer. How do they work the ‘revolving’? The ‘revolving’ cards offer the customer a credit limit that can be repaid in installments through periodic installments that can be established as a percentage of the existing debt or as a fixed fee. The debt derived from the credit is renewed monthly, reducing with the installment payments and increasing with the use of the card and with the interest, commissions and expenses generated, which results in , if the monthly installment that is paid is very low with respect to the amount of the debt, the amortization of the principal is carried out over a very long term, raising the interest to be paid. The Supreme Court determined on March 4, 2020 that the contracts of revolving cards with interests higher than the normal interest of money should be considered usurious, which has caused a flood of consumer demands for this concept. The data from the Bank of Spain show that the average rate for ‘revolving’ credit cards was in July at 18.22%, slightly below the 18.55% registered a year ago, but well above the weighted average rate of 6.82% applicable to the rest of consumer loans. Before the Supreme Court ruling, the average rate for new operations with ‘revolving’ cards was around 20%.