Credit Card Purchases with Immediate Payment Rise, Offering Benefits But Masking a Growing debt risk
LIMA, Peru – A growing trend of credit card users opting for “direct” payment – foregoing installment plans – is gaining traction in Peru, offering financial advantages but potentially obscuring a larger issue of increasing credit card debt fueled by installment purchases, according to recent analysis. While 30% of credit card spending now utilizes immediate payment, a important 70% still relies on dividing purchases into installments, incurring interest charges.
This shift towards direct payment is particularly noticeable among premium cardholders who leverage benefits and special products, frequently enough using installments for larger expenses like travel. Though, experts warn that a substantial portion of this trend is driven by lower socioeconomic segments using cards for everyday consumer expenses, potentially leading to a dangerous cycle of debt.
“There are two subgroups,” explains Dr. Chang, a finance expert from the University of Piura. “There is the premium or signature customer, who has benefits and special products, who, even though they make purchases with immediate payments, also divide large amounts, for example travel, into installments. There is also the client from lower socioeconomic segments, who uses the card for consumer expenses, buys clothes or things on credit, begins to carousel the money and that is where their problems begin.”
The rise in installment purchases, despite the availability of direct payment options, highlights a critical risk: the accumulation of debt through interest charges. This trend is occurring as banks begin to restrict credit access to individuals targeted by extortion, further complicating the financial landscape for vulnerable populations.
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Zulema Ramirez Huancayo, a finance editor at Diario Gestión and an economist from the University of Piura, reported this story.