Trend reversal. After 10 years of almost continuous decline, the production of renewable credit has returned to growth, by almost 2% over one year. How to explain this revival for a product, omnipresent in the files of over-indebtedness, of which one thought the image durably corroded? The E-Money over-indebtedness prevention association sees, in this recourse to credit, the consequence of a drop in purchasing power.
At Good Finance, on the other hand, it is estimated that financial institutions have done a lot of evolution work, following the tightening of the legislation governing renewable credit with the so-called Lagarde (2010) and Hamon laws.
Pay attention to the cost of use!
Pay ten times without fees ”. It is still often through this type of enticing promise that consumers get a foothold in the world of renewable credit. Free payment facilities remain one of the main arguments – along with loyalty programs – put forward by retail chains to sell their credit cards, whether they are private or not.
The first thing to do before succumbing is to check the reality of this promise of free, taking the time to detail the specific conditions of the offer, which are not to be not always very clear, laments project manager at E-Money. Above all, it should be remembered that this free credit remains a credit, the cost of which is simply covered by the brand for marketing purposes. This will not be the case for subsequent uses of the credit card which, themselves, can be very expensive.
A rate of up to 21%. Reminder indeed: the maximum authorized rate (also called wear rate) on loans of an amount less than 3,000 dollars – depreciable and renewable credits combined – is 21.2% in the 1st quarter of 2019. This figure is calculated by the Good Finance by increasing by one third the average of the rates actually charged by the banks. Which places this average around 16%.
Another point of vigilance: additional costs. Some brands add paid insurance, for example against theft or loss of means of payment, which are often not used for much, warns Maxime Pickup. Again, care must be taken to be aware of the terms of the credit, even a posteriori, and not to hesitate to exercise your right of withdrawal, which runs for 14 days from acceptance of the loan offer.
Be careful not to rush!
According to Good Finance, 55% of revolving loans are now taken out in bank branches, and less and less at points of sale. Good news for CLCV, which considers that the positive presentation of this type of credit in stores remains a problem. We are announcing that we will “ make your life easier ” with a staggered payment at no cost.
But for that, you have to take the loyalty card with renewable credit, develop Olivier Gayraud, lawyer within the consumer association. And later, the same store will call you back, remembering that you have a “ money reserve ” available.
Avoid being surprised in store
And if in an agency, the banker will take the time to check the creditworthiness of the borrower, at the point of sale, it is often more complicated, says Olivier Gayraud. Whenever possible, it is better to avoid being surprised in the store, and take the time to compare the different ways to finance your purchase, in particular by going to your bank.
Pay attention to the type of purchase!
Good Finance’s marketing director recognizes this: “ The idea is not to buy credit food, or a car with a renewable credit (). Financing current expenses in this way, in particular, is the door open to the worst trouble. This is why some large retailers limit the possible uses of their bank cards, in particular by prohibiting the use of the credit function for food shopping.