Living in Peru : your everyday companion

Peru credit card holders affected by measures to curve inflation

(LIP-ir) -- Consumers in Peru, especially credit card holders, are beginning to feel the effects of the measures taken by the Andean country's Central Reserve Bank (BCR) to curve inflation.

In an effort to tame accelerating inflation, the government raised interest rates and hiked reserve requirements. In response, banks have begun increasing the cost of using a credit card and acquiring a loan.

Banks have already begun sending customers letters which explain that interest rates for loans and for the use of a credit card will increase, in some cases by almost 40 percent.

It was reported that these new interest rates and service fees would go into effect after April 15.

Credit card holders that wish to withdraw cash from their credit cards are seeing one of the highest increases in interest rates.

Some banks have reported that this type of loan will no longer have its 59.92 percent annual interest rate, but will have a new 98.95 percent interest rate per year.

Peru's Expreso daily reported that a 1,000 sol loan would now cost customers 2,000 soles after one year.

According to financial consultant Rolando Castellares, the measures taken by Peru's Central Reserve Bank were not targeted towards consumers but were measures taken to counter the U.S. currencies decline in value.

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# Michael says :
26 March, 2008 [ 12:45 ]

So when is the government going to protect consumers from outrageously high interest rates?

# Anonymous Dave says :
26 March, 2008 [ 13:08 ]

" ...will increase, in some cases by almost 40 percent. "

So... central bank rates increase by a very minor percentage, while the rates at comercial banks increase by more than 10 times that minor percentage.

"Banks have already begun sending customers letters which explain that interest rates for loans and for the use of a credit card will increase"

That's going to have to be one hell of an explanation to get away with their new rates. I bet swamp gas and the position of the moon will be in there somewhere.

# homer simpelton says :
26 March, 2008 [ 19:43 ]

Gee why dont the banks just say they dont want to give anyone loans or credit.
 Peru should thank the nice banks for not makeing credit slaves out of the general population like some other countrys do.

# Terry Osborn says :
26 March, 2008 [ 19:57 ]

It sounds to me like a great business opportunity.  A person with some cash could set up a small consumer loan business and make small loans.  Charge a modest interest rate of perhaps 15%, get collateral, and make a good return.  People will come in droves.  Everybody wins, except the banks.  Anyone feel sorry for them?

# Huh! says :
26 March, 2008 [ 20:38 ]

So to tame inflation we are going to double your fees.  I guess I'd rather just pay 10% more for bread.

Seriously is anyone actually paying these rates?

# Michael says :
26 March, 2008 [ 20:53 ]

You know, from a business perspective, you could charge 40% interest and still be below the original rate.

And, yes, how inflation becomes tamed when fees and interest skyrocket is beyond me too.....

# David says :
27 March, 2008 [ 00:04 ]

Terry,

I don't think it is just that easy to set up shop in Peru. I've thought very much about the same thing you mentioned. Kind of a credit union.

I do remember reading somewhere that the powers that be in Peru would close it down if you got it started or would not allow it from the get go.

And Peru is trying to become more business friendly? I don't get it. Yes the people with outstanding credit card bills will get killed with the new rates but know one will be able to afford any new purchases.

Sounds like it is discouraging business if you ask me.

But the small competitive bank would be a good option.