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MONEY

Why you should be careful if your Spanish bank offers you a ‘revolving’ card

The Bank of Spain is reporting a spike in the number of complaints from bank customers who are being charged sky-high interest for using a particular type of credit card. What is a ‘revolving’ card and do you unknowingly have one?

revolving credit card spain
Spanish banks don't refer to these credit cards as 'revolving' so it isn't always easy to know that you have one until you've been overcharged. Photo: Ahmad Ardity/Pixabay

Tarjetas revolving’ are a type of credit card offered by banks in Spain, a complex financial product which is giving many bank customers a nasty surprise.

Spain’s banking system has adopted this anglicism even though the term ‘revolving card’ isn’t really used in English-speaking countries (revolving credit is, as is evergreen loan). 

The ‘revolving’ system allows a bank customer to delay and split payments for purchases they make with their ‘revolving’ credit card. 

However, instead of having to pay the full amount owed at the end of the month as with credit cards, the payment is made in smaller monthly instalments that generate a lot of interest – often 25 percent a month – something thousands of Spaniards are now saying they weren’t told by their banks.

If for example, you used a ‘revolving’ credit card to make a purchase worth €1,000 and your contract states that you need to pay it back in 40 instalments (€25 a month instalments) with 25.6 percent interest for each, by the time those 6 years and 10 months had elapsed you would have paid more in interest – €1,031 – than for the initial payment.

In its roundup of banking complaints in 2020 published in early January 2022, the Bank of Spain reported a 138 percent rise in the number of fraudulent credit card charges compared to the previous year, and 212 percent when it came to revolving cards specifically.

Most disgruntled customers slam the lack of information provided about the consequences of using these cards, which for Spanish legal complaint firm Reclama Por Mi demonstrates the “malpractice” of Spanish banks with these products, adding that 62 percent of the complaints they deal with relate to ‘revolving’ credit cards. 

“Sometimes bank customers have no choice but to continue using the ‘revolving’ cards that they have in order to meet expenses, and by doing so they keep being charged exorbitant interest, which means that the debt is barely paid off,” Director of Operations Javier Moyano told Spanish daily La Información.

To be clear, Spanish financial entities do not refer to these credit cards they offer as ‘revolving’, so you won’t automatically know that you have one. 

In order to know if you have one, you will have to read your contract’s smallprint, pay special attention to the TIN or TAE interest rate (the annual percentage rate in English – APR), the number of instalments and so on. 

In early January, the Bank of Spain ruled that financial entities in the country will have to provide the client with simulations of how much it really costs to obtain this type of credit that generates double-digit interest in most cases.

It follows an earlier decision by Spain’s Supreme Court in 2020 that ruled that Spanish banks could no longer charge more than 27 percent interest on revolving credit card purchases.

But it seems likely that financial entities in Spain will still find ways to get customers to accept this type of credit card without them really knowing what they’re getting themselves into. 

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The safest way to avoid any nasty surprises altogether is by only owning a debit card if that’s financially possible for you, or making sure that you ask your bank manager as soon as you get a new credit card ¿Es una tarjeta de crédito normal o una revolving? (Is it a normal credit card or a revolving one?). 

It may also be that you have a revolving credit card and have only just found out that you’re being charged hefty interest, in which case you should know you can complain to your bank and try to reach an agreement outside of court, or you can claim through the Bank of Spain or through the courts.

According to Spanish law firm Rico Sánchez Abogados, who can help to lodge a complaint against banks who are overcharging customers, ‘revolving’ cards offered in Spain are the following (tarjeta means card in Spanish) :

Revolving Wizink cards: Tarjeta Visa Classic Popular-e, Tarjeta Visa Oro Popular-e, Tarjeta Visa Classic Citibank, Tarjeta Visa Oro Citibank, Tarjeta Citi Classic, Tarjeta Citi Twin, Tarjeta Barclaycard Oro, Tarjeta Pass Carrefour, Tarjeta Visa Cepsa, Tarjeta Iberia

Revolving Bankia cards: MasterCard: Tarjeta MasterCard Champions. Visa: Tarjeta Visa Compras, Tarjeta Visa Crédito Particulares, Tarjeta Visa Crédito Plus, Tarjeta Visa Dual Plus, Tarjeta Visa Flexible, Tarjeta Visa ON, Tarjeta Visa Oro

Revolving BBVA cards: MasterCard: Tarjeta MasterCard Negocios, Tarjeta MasterCard Infinit Oro. Visa: Tarjeta Visa A Tu Ritmo, Tarjeta Visa A Tu Ritmo Blue, Tarjeta Visa Después, Tarjeta Visa Después Blue, Tarjeta Visa CX Oro, Tarjeta Repsol más Visa, Tarjeta Iberia Classic, Tarjeta Iberia Icon, Tarjeta Dorada Renfe, Tarjeta Motor+, Tarjeta Viajes+

Revolving BBVA Consumer Finance cards: MasterCard: Tarjeta Mastercard Travel Club. Visa: Tarjeta Visa Club Vips, Tarjeta Visa Consum, Tarjeta Visa De Compras. Tarjeta Affinity Card

Revolving Caixabank cards: MasterCard: Tarjeta MasterCard Estrella, Tarjeta MasterCard Oro. Visa: Tarjeta Visa Classic, Tarjeta Visa Gold, Tarjeta Visa Gold Flexible, Tarjeta Visa Imagin Crédito, Tarjeta Visa Oro, Tarjeta Visa Platinum, Tarjeta Visa Platinum Gold, Tarjeta American Express Amex Plus, Tarjeta American Express Plus

Revolving Caixabank Consumer Finance cards:Tarjeta Mediamarkt, Tarjeta Ikea, Tarjeta Fnac, Tarjeta Lecrerc

Revolving Banco Sabadell cards: MasterCard: Tarjeta MasterCard Classic, Tarjeta MasterCard SIN, Tarjeta MasterCard Oro. Visa: Tarjeta Visa Classic, Tarjeta Visa SIN, Tarjeta Visa Oro, Tarjeta Visa Shopping Oro, Tarjeta Visa Platinum

Revolving Banco Santander cards: MasterCard: Tarjeta MasterCard Box Gold, Tarjeta MasterCard Día a Día, Tarjeta MasterCard Santander 123, Tarjeta MasterCard Santander 20, Tarjeta MasterCard Santander Plus. Visa: Tarjeta Visa Classic, Tarjeta Santander PRIME, Tarjeta Mundo 1|2|3, Tarjeta Mi Otra 1|2|3, Tarjeta Zero 1|2|3, Tarjeta Mi Otra Zero 1|2|3, Tarjeta Iberia Classic, Tarjeta Iberia Icon, Tarjeta LaLiga Santander

Revolving Openbank cards: Tarjeta Visa 123, Tarjeta Visa Classic, Tarjeta Visa Oro, Tarjetas 

Revolving Santander Consumer Finance cards: Tarjeta Visa Light, Tarjeta Visa Box, Tarjeta Worten, Tarjeta General Óptica

Revolving Oney cards: Tarjeta Leroy Merlin, Tarjeta Alcampo, Tarjeta Decathlon, Tarjeta AKI, Tarjeta Simply

Revolving Abanca cards:Visa: Tarjeta Oro, Tarjeta Clásica, Tarjeta Clip, Tarjeta Proyecto

Revolving Unicaja cards: Visa: Oro, Classic, Tarjeta Gold, Tarjeta Platinum, Tarjeta Blue

READ ALSO: Is it worth reporting your Spanish bank for misconduct and how do you make a successful claim?

Revolving Bankinter and Bankinter Consumer Finance cards: Bankinter: Tarjeta Visa Única (Clásica y Oro), Tarjeta Visa Quiero. Bankinter Consumer Finance: Tarjeta Bankintercard Oro, Tarjeta Bankintercard Platinum, Tarjeta Visa Coinc, Tarjeta Visa Air Europa, Tarjeta Visa Vodafone, Tarjeta Visa BP, Tarjeta Línea Directa, Tarjeta Halcón Viajes, Tarjeta Renault

Revolving Barclaycard card: Tarjeta Visa Classic, Tarjeta Visa Oro, Tarjeta Visa Barclaycard

Revolving EVO Banco y EVO Finance cards: EVO bank: Tarjeta Visa Classic, Tarjeta Visa Extra, Tarjeta Visa Oro, Tarjeta Visa K26+, Tarjeta Mastercard Evo Crédito. EVO Finance: Tarjeta Visa EVO Finance Classic

Revolving Deutsche Bank cards: Tarjetas Visa: Familia, Shopping, Preferente y Preferente Oro, Tarjeta MasterCard Premium Gold, Tarjetas Revolving Cetelem.

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PROPERTY

What the Euribor rise means for property buyers and owners in Spain

The rise in the Euribor interest rate, used to calculate mortgage payments in Spain, is causing big changes in the mortgage rates.

What the Euribor rise means for property buyers and owners in Spain

Looking to buy property in Spain? Already a homeowner here? Well, you may have heard something about rising interest rates recently.

Or perhaps changes to the terms of your mortgage. Or the Euribor – but what is it, and what’s going on?

What is Euribor?

In Spain, Euribor is the interest rate most often used to work out mortgage payments and to calculate both variable and fixed rates.

It is anchored to the interest rate set by the European Central Bank, and, as we are now seeing, quite responsive to global economic events.

It’s the interest rate that banks in the Euro Zone use to lend to each other, so when the base rate goes up, the Euribor does too, which sends mortgage interest rates across the Eurozone rising. 

Rising rates

Most Spanish mortgages with variable rates normally vary based on a variety of factors, but this number has been rising and in May 2022 saw figures of 0.240 percent (Tuesday May 17th), well above the average. 

The rises throughout May are leading many in Spain, and indeed across Europe, to wonder how high their mortgage rates can go, and when the rises will stop.

Banco de España has estimated that the increases could range from anything between €35 a month to an additional €400. Bankinter predicts the Euribor rate will finish the year at a staggering 0.40 percent, but, more encouragingly, Caixabank’s prediction puts it at just 0.13 percent by the end of 2022.

On Euribor.com.es, a website that tracks the index on a daily basis, they suggest that the market consensus predicts the Euribor will finish at around 0.3 percent at the end of the year, but could reach as high 0.8 percent in 2023.

All of them agree, and most other economic indicators suggest, that whatever the figure at the end of the year, it will remain positive, so it seems almost certain that mortgages will continue to rise throughout 2022 at the very least.

This instability, in addition to global inflation and supply chain problems, could mean that mortgage rates will be affected at least until 2023, with some predictors even signposting 2024 as the possible end of a rise in mortgage prices.

With things uncertain in the mortgage industry, and the world economy more broadly, perhaps you’re thinking of ways to try and insulate yourself from the climbing interest rates.

How to protect yourself from the rising rates

One way to weather the storm of interest rate increases is to change your mortgage from a variable to a fixed rate, either by negotiating with the your bank or by changing bank altogether – a process known as subrogation.

According to data from MyInvestor, during March and April the number of subrogations has started to rise.

Subrogation basically means switching the mortgage from one bank to another to change its interest rate. Although it does involve certain charges in order to do so – you pay the valuation of your house, which normally costs a few hundred euros, and a fee charged to the bank you are leaving, which can cost up to 2 percent of the outstanding amount – it could, and probably would, work out cheaper than paying the hiked interests rates over time.

You could also try and take out a new mortgage with another bank and use the borrowed money to settle the loan. This is, of course, a more expensive option as you have to pay the appraisal, the commission for early repayment of the current credit (again, up to 2 percent of the outstanding amount) and the expenses associated with its cancellation of registration, which normally runs to around €1,000.

READ ALSO: Spanish mortgages – Ten things foreigners should know before getting one

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