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Credit Card Scam

Credit cards are useful financial instruments used to pay for purchased items such as goods and services whether face-2-face or online. They facilitate purchase decisions because of their immediate convenience while allowing flexibility to pay back.

However, since arriving in Brazil and observing exorbitant repayment interest rates, it got me thinking what possible reason do banks have to charge them. Then I thought, no wonder Brazil is classified a third world country; will it ever be considered on par with the first world countries like Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Turkey, the United Kingdom, and the United States?

Certainly, if Brazilian politicians don’t lobby against banks to bring about a change for a fairer policy for the population, then the middle class and poor will get poorer while having their hopes for a better quality of life trampled on until living conditions become intolerable. It seems that banks have the monopoly of innocent citizens who perhaps know no better.

I had never heard of credit card interest above two percent (2%) a month interest on outstanding credit in England where I was born and brought up. If the monthly statement wasn’t paid in full then the interest would be charged on the balance. If it wasn’t paid off on the next due date then interest would accumulate month after month.

In England credit cards typically charge 23% APR, but some deals charge as little as 9.9%, offering a cheap way to borrow long term as there is no need to switch once an introductory deal has expired. A 23% APR means that the credit card's balance will increase by approximately 23% over the course of a year if the cardholder carries a balance the whole time. For example, if the APR is 23% and you carry a $1,000 balance for a year, you would owe around $226.85 in interest by the end of that year.

In Brazil it is a completely different ball game as the credit card revolving interest rate (APR) reached 411.5% per annum in January 2023 which was the highest level since August 2017 when the rate was at 428%. The data was released by the Central Bank in February. (Source: Exame)

Bill 1166/20 determines that credit card and overdraft interest will be limited to 30% per year (about 2.2% per month), exceptionally, during the state of public calamity on account of the pandemic, which started on March 20, but finished in July 2021. This law should have been made compulsory forever so banks would get in line to stop penalizing law abiding citizens. This also clarifies that government officials could make the country a better place to live by putting pressure on banks to get in line with first world countries.

Of course, they would use the excuse that Brazil’s real is unstable against the US dollar, but that has absolutely nothing to do with credit card usage. Sales are in reais and sellers receive in reais. If international purchases are made then that could be considered, especially if the user doesn’t pay back when the card payment is due. Outstanding money accrues, but that situation requires special circumstances. If purchases are made in Brazil, in reais then stop using the dollar as an excuse.

I’m not blinded by dire circumstances, and realize there are intangible factors regarding average interest rates of Brazil’s inflation but if we consider the base rate which currently stands at 13.75% then it’s much more attractive than over 400% credit card interest which is currently being experienced in Brazil. Credit card interest rates constitute legal theft and as such it is an immediate area the government should be curbing.

Additionally, Brazilian legislation has recently approved a new law number 14.871/2021 which defines over-indebtedness of consumers who are unable to pay the sum off. These outstanding debts are too high to meet budgetary constraints, and in good faith consumers are able to settle a fair monthly value in order to survive.

Have a great day!

Prof. Carl Boniface

Vocabulary builder:

Trample on/over (phrasal verb) = to inflict injury or destruction especially contemptuously or ruthlessly. usually used with on, over, or upon. trampling on the rights of others, to crush, injure, or destroy by or as if by treading.

APR (abbreviation) = Annual Percentage Rate

Over-indebtedness is where a person or business accumulates debt that exceeds their current income.

In good faith (idiom) = in an honest and proper way. He bargained in good faith. Both parties acted in good faith.

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