Some entities begin to market a new type of deferred credit cards with higher costs than usual and as an alternative to conventional debit. The association of financial users Asufin denounced this Friday that
the commercialization of means of payment that work as a hybrid between debit and credit cards (and with characteristics similar to the 'revolving') leads to confusion and that users sometimes incur "in contracting unnecessary and expensive credit", since the APR can reach figures close to 20%.
Specifically, Asufin criticizes the fact that some banks are replacing debit cards without commissions with other deferred payment cards and that they allow installment and deferred payments beyond the usual month on conventional credit cards.
Is about a type of product that mimics the “buy now, pay later” system and that can lead to consumer over-indebtedness for repeated deferrals since the surcharges are very high and are added to the amount owed for the acquisition of a good or service.
The criticism of the association of financial users originates from the tendency to market cards by some entities with high interest rates and close to those of 'revolving' credit. These products do not fit into the debit category, where the expense incurred is automatically and instantly charged to the user's account. Nor can they be classified in the conventional credit modality, where disbursements are settled at the end of the month without added interest in most cases. Deferred credit cards have an APR of around 20% and that allow settlement in short terms or beyond the month if interest is disbursed.
A spokesman for the association of financial users explains that the main difference with a conventional credit card is that in these the charge is settled at the end of the month and without added interest. But, with these new means of payment, interest is charged at the time it is decided to defer payment for a certain purchase, beyond the 48 hours in which payment is deferred. That is, a purchase of 1,000 euros, for example, will be charged to the account after 48 hours, without additional charge. "But if you decide to defer payment for more than three months, you are already charged interest, regardless of the amount: 300 euros, 500 or 1,000 euros, regardless of the amount”, explains the same spokesman.
The mechanism is as follows: if the purchase is made today, the charge will be recorded in the account once 48 hours have passed from the moment of payment with the card. But, if the user decides to activate the option to pay in installments, then that is when interests are added, which in some cases can be disproportionate and close to those applied with a 'revolving'.
Asufin has sent the European consumer organization BEUC and Finance Watch a document with proposals addressed to the European Commission to regulate these cards in the future Consumer Credit Directive. "We argue that the rise of these new products is that banks do not win with the management of collections and payments, but with the payment staggeringsince the seller is paid immediately while the user is charged the amount of the purchase in his account after 48 hours, which is still financing the seller.
In addition, in some cases they are used as a substitute means of payment for the conventional debit card with a higher annual cost. "We ask that the new European Directive on Consumer Credit expressly obliges us to offer a conventional debit card, which competes on equal terms with this type of card and that the cost of maintenance does not represent a deterrent factor."
In addition, from Asufin they remember that the debit card, as a spending control instrument, is a measure to prevent over-indebtedness when charging purchases on balances. While deferred debit cards allow purchases over the balance, due to the possibility of dividing operations at the time of purchase and afterwards.