The use of credit cards surpassed cash as the most used means of payment

According to a report from the Cordoba Stock Exchange next to Institute of Economic Research (IIE), consumption that managed to recover after having hit a floor during the COVID-19 pandemic, is still below the levels of 2017. But in addition, the document revealed that 36% of the shopping in basic necessities is carried out at creditbeing the card the most used means of payment.

According to the report, from the beginning of 2022 the tgrowth loop of the real consumption due to the increase in inflation that that year was 94.8%, while in inflation expectations according to the last BCRA Survey of Market Expectations by 2023 they were already at 140%.

How is consumption in Argentina

We must add the fall of the real wages both formal and informal work, so both savings and consumption were negatively affected. Thus, consumption levels are still below the peaks of 2017.

In the consumption of durable goods – sales of household appliances and household items according to INDEC-, the level of spending is lower than in non-durables (supermarket sales survey). In durables, demand is much more affected by economic cycles, with which the variability of spending is greater. In addition, it is a segment in which the consumer tends to finance their purchase.

in matters of immediate consumer goodsit is relevant that 76% of the operations are explained by the purchase of food or beverages.

Last June, 36% of the purchases made in supermarkets it was paid with credit card, 32% with debit and 25% with cash. These data reveal a change in the participation of means of payment compared to 2017: the use of cash fell 27%, while debit and credit increased by 21% and 12%, respectively. This evolution allowed to position the consumption with credit cards as the most used means of payment.

Why are basic necessities financed?

Some factors that explain why more than a third of the purchases of basic necessities are made with financing are:

-Fall from real wages of the economy. As of June, the year-on-year loss in purchasing power in the case of the informal sector was 15%. 37% of the employed make up this group.

–cost increase of the basic basket. So far this year it has accumulated 63.2%.

-Measures promoted by the Government such as the increase in purchase limit with a credit card to “incentivize” credit and consumption.

-In highly inflationary economies, the phenomenon occurs that the constant rise of the price level “benefits” debtors and hurts creditors, due to real interest rates that can be very low or even negative.

In any case, taking into account the billing through the main financing program at the national level, which is the “Now 12”, the first semester of 2023 presented a real fall of around 3.6% compared to the same period of 2022, despite the announced measures to reduce the interest rates of the program.