Credit Cards Invade Mexico

The number of credit cards in circulation in Mexico since 2002 has tripled to about 22 million, while total consumer credit has doubled since 2004 to $39.1 billion, according to a report this week in the Miami Herald.

But there are problems brewing, partly due to the slow down in the U.S. construction industry, a sector that employs an estimated 20 percent of Mexican immigrants, according to the Herald. The economy has hit the brakes, remittances from the U.S. have declined and past-due credit card debt has doubled in the last year.

Retailers are especially aggressive in promoting their charge cards and credit cards to Mexican consumers. The Mexican government gave Wal-Mart Stores Inc. permission to open its own bank there, a dramatic contrast to the U.S. politicians and activists that put a stopper on the giant retailer’s plan to operate an industrial bank here.

The Mexican government also promotes cards because it can collect taxes on electronic sales. Credit card holders are enticed to use their plastic with a game show, raffles and cash giveaways sponsored by the government.

Mexican cardholders typically pay higher APRs on their credit cards than American consumers. The average annual interest rate on Mexican credit cards was 31.72 percent in June, more than twice that of the average 13.46 percent in the U.S. in May, according to the Federal Reserve’s Consumer Credit report last week. Card APRs in Mexico can surpass 75 percent due to lax banking regulations, according to the Herald.