Huge cost of consumer credit in Mexico is going up again

Guadalajara -
It costs a lot to borrow money for ordinary consumer purchases in Mexico. And it will cost even more in the year ahead, according to a study released this week by Banxico, the nation's central bank.

In 2012 the total annual cost of credit, known here as CAT, increased an average one to five percent on most bank cards. Annual interest rates now range from a low of 41.6% to high of 88.3%.

The Mexican CAT is the direct equivalent of the U.S. APR (annual percentage rate). At a 65% CAT or APR - with minimum required monthly payments - consumer debt can double in less than two years.

Those rates, as Banixco pointed out, are for card holders with a very low credit limit of 4,500 pesos - about $360 USD at today's exchange rate.

Among Mexico's largest banks, the Bancomer Blue card carries a 52.9% annual interest rate; the HSBC Classic, 62%; the Santander Light, 41.6%; the Banamex card, 57% and the Banorte card, 52.5%.

Wal-Mart Mexico's card reached a CAT of 70.2% in 2012, one of the nation's most expensive credit lines for those seeking short or long term consumer financing.

But Mexican credit card monolith Bancoppel beat even Wal-Mart, with a whopping 88.3% CAT. Bancoppel is to this country what consumer financial services giant Washington Mutual was to the United States before the 2008 economic collapse. WaMu failed and was taken over by U.S. financial regulators in September of that year.

In the same report Banixico noted that at credit ceilings above 15 thousand pesos ($1,200 USD) the CAT drops on most cards. But that borrowing limit is far above what the average Mexican consumer can qualify for. Even with a higher limit, rates are still steep: Santander, 32.9%, Bancomer, 34.8%; Banorte, 45.8%; and Banamex, 46.6%

Earlier this month Banixco said it would reduce its interbank overnight loan rate, the rate of interest charged by the central bank for brief extensions of credit to member institutions. Theoretically that could push down consumer interest rates. But no bank has announced it will lower credit card rates.

Feb. 20 - Mexico has 14th largest global economy, but citizens rank 81st in food purchasing power
Jan. 28 - Mexican peso "well anchored," says central bank director
Jan. 11 - Banxico chief: grim prognosis for U.S. economic growth
Jan. 10 - Mexico's impoverished grew by more than 11% in two years, with 13 million in extremis
Nov. 16 - Gross economic disparity still a hard fact of Mexican life

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