According to the Monetary and Credit Statistics released by the Central Bank of Brazil (BC), average interest rates on revolving credit cards increased in May, whereas rates on overdrafts and payroll loans declined.

In May, the average interest rates on revolving credit cards reached 449.9 percent per year, up 5.7 percentage points from 444.2 percent in April, data from the BC show.

Revolving credit is charged when the full credit card bill is not paid by the due date, and the remaining balance is rolled over and paid in installments with interest.

In the case of overdrafts, the average interest rate charged was 134.7 percent per year in May. This was 2.7 percentage points lower than the rate recorded in April (137.4%).

An overdraft is a pre-approved credit linked to the account holder’s bank account, designed to cover transactions when funds are insufficient. When used, the bank charges interest on the borrowed amount—that is, the outstanding balance.

Another type of credit widely used by Brazilians is the payroll-deductible loan. In May, the average interest rate for this loan type dropped by 0.4 percentage points compared to the previous month, reaching 26.5 percent, according to the Central Bank (total payroll loans).

In May, payroll loans for civil servants—typically cheaper due to the job stability guarantees—carried an interest rate of 24.8 percent per year. For private sector workers, payroll loan interest rates were significantly higher, reaching 55.6 percent annually.

For payroll loans taken out by beneficiaries of the National Social Security Institute (INSS), the interest rate charged was 24.3 percent in May.

Original Story: Agência Brasil | Author: Pedro Peduzzi
Edition and translation: Prime Yield