Brazil’s credit card industry clings to sky-high interest rates

Illustration: TVS/Shutterstock

In a move that may not be enough to calm the nerves of the federal government and Congress, Abecs, an association that represents all the major players in the Brazilian payments sector, has proposed a small change to revolving credit card debt: reducing the payment term from 30 to five days. After this period, the debt would automatically be converted to an installment plan, reducing the time during which interest is accrued.

Revolving credit is created when someone fails to pay a credit card bill in full and is the most expensive type of credit in Brazil, reaching an average annual rate of 441 percent in September.

The issue is at the center of discussions between the Central Bank, financial institutions, acquirers, retailers, and even restaurants, which have until next January to propose an alternative to the law approved by Congress last month that caps the interest rate on credit card debt at 100 percent of the original amount due.

A third meeting on the issue (the second since the regulator created a working group with stakeholders from all sides) was held on Tuesday.

Abecs presented the same proposal it made to the Central Bank in August. In addition to...

Fabiane Ziolla Menezes

Former editor-in-chief of LABS (Latin America Business Stories), Fabiane has more than 15 years of experience reporting on business, finance, innovation, and cities in Brazil. The latter recently took her back to the classroom and made her a Master in Urban Management from PUCPR. At TBR, she keeps an eye on economic policy, game-changing businesses, and people driving innovation in Latin America.