Natália Nunes, coordinator of Deco’s Financial Protection Office, stated that a significant milestone was achieved in 2010 when legislation mandated that the Bank of Portugal (BdP) quarterly establishes the maximum APR (annual percentage rate) applicable to personal loans, consumer credit, and credit cards. However, she argues that additional information should be provided to consumers.
“It would be important to inform consumers about the APR they have contracted [on credit cards] and also to ensure that annually, banks are required to send information about the contracted and charged APR, as well as the maximum APR [defined by the Bank of Portugal] at that moment,” said Natália Nunes.
As an example, she highlights that there are current credit cards with a contracted APR exceeding 30%, which is notably higher than the maximum APR of 19.2% set for the second quarter of this year, often due to consumers being unaware of the situation.
The Deco coordinator suggests that legislation should have rules similar to those currently compelling banks, every January, to send a statement detailing all fees charged the previous year for services associated with the account.
This statement, for instance, shows the interest rate applied to the checking account, the total amount of interest received, the unit fee charged for each service, and how many times it was used.
For credit cards, sending information about the contracted interest rate would allow consumers to understand if it significantly exceeds the maximum interest rate set quarterly by the Bank of Portugal.
According to Deco, this would provide consumers with more tools to decide whether to keep the card or terminate the contract and acquire a new one.
To cancel a credit card, the customer must fully pay off the debt, which often amounts to thousands of euros, as indicated by Deco, and this can be a constraint for many individuals.
Beyond the maximum rate issue, credit cards often lead to situations where customers incur unexpected costs or do not fully understand the terms at the time of agreement.
Mariana Albuquerque recounted that she subscribed to a credit card but never activated it, thinking this would incur no costs. However, months later, she noticed fees had been charged even without activation, and the bank explained that this was stipulated in the contract.
Miguel Santos shared that to reduce the mortgage ‘spread’ to 0.8%, he accepted a credit card requiring monthly spending of 1,500 euros. Since he spent this amount monthly and paid off the debt in full, no interest was charged. Nevertheless, over the years, there were a couple of months when he forgot to make purchases with the card, resulting in the ‘spread’ increasing to 1.8%, causing him to pay hundreds of euros more for the mortgage for those months.
Additionally, there are instances where unilateral bank decisions raise legality concerns.
Sofia Silva obtained a credit card 20 years ago with an interest rate of 18.24% and a “quite high” annual fee. During the pandemic, the bank unilaterally decided to cancel that card and replace it with another, which offered fewer benefits than the former, which allowed accumulating travel miles. However, the bank maintained the previous card’s interest rate.
Upon realizing the change, the client filed a complaint with the bank, noting that the maximum permitted rate at that time was below the 18.24% being charged. Nevertheless, the bank argued that maintaining the previous rate was valid.
