Credit Cards : How Latin America compares to the rest of the world

by Debt Free Hispanic on January 18, 2011

“Just charge it.”

These words are spoken by millions of customers of every race and gender across the world each day. Credit cards have become a staple in our modern-day economy because of their convenience and capacity to let us to live beyond our means. We can buy anything we want from anywhere in the world with one swipe. From the time we turn 18, we are bombarded with offers and expected to have and maintain credit cards and an acceptable credit score. Not doing so can affect our ability to take out loans, purchase a car or even a house. Credit is mandatory in our society; and that may not be such a good thing.

Let’s consider for a moment how the other half of the world lives – the southern half, that is. Latin American countries handle credit cards in a way that is starkly contrasted to our first-world society. Much of Latin America has only recently come to a point where credit is available on a wide-spread basis. Fluctuating currency values and unstable government made it difficult for countries like Brazil and Argentina to establish a system of credit until the last ten years. Chile and Colombia are just now beginning to make credit cards available to the general population, and many businesses still do not accept them, especially in smaller cities. Those that do often charge a hefty fee just to run the card through.

In Brazil, most credit card rates are almost twice what they are in the U.S. and U.K., resulting in only a small number of users – roughly 20% of the population. The majority of citizens live on cash and a checking account. Though the expanding use of credit cards is certainly making an impact as Brazil becomes a greater player in the world market, the cautious spending of its people may actually be playing a part in stabilizing its fluctuating economy. While the number of credit card users in Latin America is rising, these countries still have a long way to go before they even scratch the surface of our high-spending culture.

One big benefit of Latin America’s high interest rates and low credit circulation is its prevention of big spending. Unfortunately, our modern mindset has driven us to a point where we believe we can hae anything we want instantly. We have the credit to prove it. This attitude has sent millions spiraling heavily into debt, led to an economy-changing mortgage crisis, and shifted the world market as a whole. We are forced to ask ourselves: would this have happened had we only kept a tighter rein on our credit? The average credit card debt of a family using credit cards is over $16,000. Nearly 75% of American households have at least one card, and the average user had 3.5. Notably, only around 50% of Americans of Latin American descent owned credit cards, and the majority of those owned only one.

Other countries throughout the world have proven that it is possible to be economically successful without the constant reliance on credit we seem to have developed. Japan is a leader in the world market, yet the country’s culture thrives on the mandate that its denizens not live above their means. Japan reports its citizens only using credit cards an average of four times per year. A cash-based society is thriving as one of the most technology-driven countries in the world day.

Likewise, India’s economy has expanded tremendously in recent years, yet only 4% of its citizens report owning credit cards at all, one of the lowest numbers in the world. Some may contribute this lack of credit card use to India’s high poverty level, but even among affluent Indians, credit card use is at a mere 28%. Clearly the issue is not availability, but the culture’s precedent that a country cannot be built on what it does not have.

The next ten years may prove vital in Latin America’s economic development. As these nations enter the world economic scene, they will take strides towards deciding what type of economy they will have, and where their reliance will be. Will they follow in our credit-loving footsteps? Only time will tell.

Matthew Polo works at Credit Card Compare where Australians can compare the numerous balance transfer credit cards that are available. For more, subscribe to their RSS feed or follow @thecreditletter on Twitter.

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