Introduction to Crediário
The ever-growing consumption level of the new Brazilian middle class has led retailers and credit card companies to offer “easy credit” and payment options configured by installments that can last for years. Learn in this article what are the particularities of this payment option and how it affects the Brazilian economy.
The concept of “crediário”
“Crediário” refers to payment in several installments. This payment option is very popular among Brazilians and it is commonly acceptable to pay a considerably low value of BRL 20,00 in installments.
At the same time this payment option makes it possible for individuals with a lower income to acquire goods they would be unable to acquire otherwise, it is also the direct responsible for the high levels of insolvency we see in Brazil. Some people would rather use the credit card even when they have the necessary amount in cash, right there in their pockets.
Originally, “crediários” were offered in the form of boletos by major appliance stores such as Casas Bahia and Ponto Frio. All the installments were organized as in a checkbook: each page contained one invoice that would correspond to the amount of the installment to be paid in that particular month. Every month customers would have to go to the store to pay for their installments, what in many cases would lead them to acquire another good.
The transition from boleto to credit cards
As stores began to improve their services, the paper was replaced by plastic and boletos gave room to credit cards. The main advantage of these credit cards is to provide the possibility to pay for your purchases through installments as low as BRL 5,00 and with low interest rate or no interest at all (at least in theory).
As previously mentioned, before credit cards were implemented, customers had to actually go to the store to pay for their debts, but now some stores offer the option of online payment. There are also some advantages related to discounts in concerts sponsored by the store and additional discounts on the purchase of some items.
Insolvency: the great villain
According to Confederação Nacional do Comércio (National Commerce Confederation), last October 59,2% of the Brazilian families had short-term debts. The same research points out that the number of insolvent families was of 20,% in the same month and those who are unable to solve their debts sum up 7%.
IPEA – Instituto de Pesquisas Econômicas Aplicadas -, has been worried with what happens to those who borrowed money from banks and financial institutions. Would they still be employed? Have they received any salary increase? How much of their income is compromised with the payment of the loan?
These questions led SEAE (Secretaria de Acompanhamento Econômico) , Ministério da Fazenda, Banco Central (the Brazilian central bank) and Ministério da Justiça to perform a study regarding the regulation for credit operations in Brazil. This research aims to identify the profile of the Brazilian consumers who rely on credit cards.
Lack of planning and the increase of formal jobs have been pointed out as the main reasons that have led Brazilians to lose control over their finances. The consumer is not the only one responsible for this lack of planning; credit providers should also consider that inflation or unemployment may occur and destabilize a family budget, for example.
Fernando Cardim de Carvalho, a professor from the Institute of Economy of Universidade Federal do Rio de Janeiro, have said in an interview given to IPEA that household debt has never been a major concern until now, when they are presented as a provider of crucial information for the formulation of a more prudent regulation. As economy is global, one simple insolvency is no longer so simple when multiplied by many others, what leads to economic destabilization.
Aware of the consumption power of class C, retailers also wanted to reach class D and the main strategy for it is to offer easy credit and installment options. Excited with the consumption power, the members of these classes are likely to consume without any planning, abusing of the installments option, unaware of how of their income is actually being compromised by the acquisition of goods.
Crediários give the impression that anyone can buy anything, what is far from being true. The more people consume, the more credit card companies increase the credit limit of their credit cards. Depending on how long an individual is a customer to a credit card company, his credit limit can be 10 times higher than his own salary, what is considered by specialists as a very risky situation as the ideal is that your limit does not surpasses 50% of your monthly income.
According to a study presented by Jornal do SBT Noite, the direct result of this strong offer of easy credit to class C is that 47% of the insolvent customers in Brazil belong to this class. Women from 35 to 45 are the most indebted ones.