Five reasons why the bank card is losing ground compared to other means of payment

In this inflationary summer of 2023, Argentines are using credit cards less and turning to other means of payment, according to various public and private indicators. The latest BCRA report on retail payments indicates that in January the number of bank card payments fell by 1.1% in amount and by 8.3% in amount compared to the same month a year earlier, making 115.1 million payments for $976.9 billion.

The trend intensified in February: according to a report by consulting firm First Capital, $2.3 trillion in payments were made with credit cards, implying an increase from January of just 1.4 %, well below the estimated 6% inflation. Compared to February 2021, the increase is 82.6%which in the face of inflation close to 100% implies a fall in real terms.

There are at least five factors that imply the decline in credit card use:

1. Due to inflation and tax pressure, discounts abound on other means of payment. When paying for a dinner, a shirt, an appliance or other, the dialogue is repeated: the customer asks “how much does it cost?” and the seller responds “How are you going to pay? ». It’s that In Argentina, each means of payment corresponds to a different price. Thus, it is more and more frequent that discounts of 10 or 15% appear for paying in cash and that merchants or self-employed people ask to charge transfers, to avoid commissions and taxes. Due to the impact of inflation, the rule that each product has a unique price regardless of the means of payment becomes difficult to respect.

2. Promotions are no longer plentiful. The temptation to pay everything in installments without interest to be liquefied by inflation is no longer so easy to find and such promotions have become rare. The average consumer also already realizes that financing is not always cheap. Faced with the obligation to pay for the purchase in a single payment, many prefer to use the debit card: only what is on the account is spent, without committing for later.

3. Purchase limits are not updated at the rate of inflation. Just as there are fewer promotions for paying with a card, the Ahora 12 plan has also fallen into disuse, which, although valid until June 30, has an obstacle in front of it: banks do not not update purchase limits with the speed with which inflation. The Now 12 plan – or last year’s Now 30 – hit the lowest limits. Not everyone had 200,000 limits on their card to buy a TV or air conditioning in installments. The Prisma index for the fourth quarter of 2022 warned that in the official plan “the preference for short plans is increasing”.

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In this sense, February has not yet seen an increase in purchase limits with a card based on the increase in joint venture salaries. “The accelerating inflationary pace makes it necessary to update credit limits more frequently to maintain the level of spending by cardholders. It is striking that the start of the school year, and the purchases it generates, do not translate into greater growth in sales,” assured Guillermo Barbero, of First Capital.

4. Other means of payment are growing strongly. The BCRA report is unequivocal about the evolution of credit card “skills”. And all the new means of payment are multiplying: payments by QR code, transfers, direct debits, electronic checks or even debit cards, the number of transactions for which has increased by 11% over one year. In addition to the offer of banking means of payment, there is the growing fintech movement.

In this area, for companies, billing by credit card is, in general, the least practical option, since the commissions are higher and the credit period is 8 to 18 working days, an eternity in times of crisis. inflation of 6% per month. The other options are more advantageous and the accreditation is immediate or at least shorter. On the consumer side, the credit card offers the possibility of “cutting” the payment a few weeks until the expiry of the monthly statement; At the same time, this summary also makes all purchases more expensive by 1.2% due to the stamp duty effect.

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5. “The Qatari dollar” has discouraged card spending in dollars. According to First Capital, card spending in dollars has been erratic, in particular because “the application of differential exchange rates for the use of the card in foreign currency limits its use and today it is found at well lower than those usual in pre-pandemic times”.

The complex mechanism of the “Qatari dollar” made taxes more expensive and capped at USD 300 per month (difficult to implement) credit card purchases abroad. And Argentinian travelers, faced with so many controls, often choose to pay with a debit card or withdraw the dollars from the safe and travel in cash.

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