Friday, October 17, 2008

Wal-Mart de Mexico Plans 100,000 Credit Cards by Year-End -- With Interest Rates of 59% to 75%


Next time I hear someone complain about high interest rates on credit cards in the U.S., I'll be sure to pass this story along to them. Wal-Mart de Mexico, which is known as Walmex, plans to ramp up its credit-card business in Mexico by the end of the year, according to Bloomberg sources. All told, the bank plans to issue more than 100,000 cards. The cards will have annual percentage rates that range from 59% to 75%. Ouch. Amazing interest rates, no? Consider this: that's down from 90%!

Bentonville, Arkansas-based Wal-Mart owns about 67% of the Mexican bank. Given the high APRs on these cards, would anyone like to venture a guess on how high the default rate must be? There is a Bloomberg.com story that details Walmex's banking operations, but I don't see any default figures. My guess is that defaults are in excess of 30%, which is why Walmex is charging annual interest of 59% to 75%.

Here are a few choice quotes from Bloomberg.com's story: Walmex's Bank Plans 100,000 Credit Cards by Year-End (link here)

"Walmex, which is two-thirds owned by Bentonville, Arkansas- based Wal-Mart Stores Inc., said in February it would spend 12.5 billion pesos to open 205 stores and add 53 in-store bank branches. That would bring the total to 75 by year-end. The bank has opened about 400 smaller bank service counters as well."

And:

"Mexico's government cut its 2009 economic growth forecast to 1.8 percent from 3 percent Oct. 8 because of the global credit crisis. Consumer confidence in September fell more than economists estimated, the national statistics agency said earlier this month."

Given the high APRs on the credit cards, coupled with a tepid economic growth forecast, anyone want to guess how many of these 100,000 credit card accounts go bust?

Viva la Mexico! Credit Matters Blog

Related Article:

Mexico Rebels At Credit Card Rates, Mulls Limits

14 comments:

  1. Wow, how does one say "rate jack" in Spanish?!

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  2. DM, haha. Hey, at least we're having some fun.

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  3. One more reason to hate Walmart. Apparently Walmart is in the loan-shark business.

    Nikky

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  4. Nikky, I imagine that part of the problem is that the default rates are so high. They're probably just compensating for the risk. That said, maybe it's the rates that are causing the default.

    Whole chicken and egg thing.

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  5. Wow...just wow. Could you imagine seeing that interest rate? DON'T carry a balance, folks!

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  6. No doubt about it, Lion. I don't carry a balance in the U.S. Couldn't imagine carrying one there.

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  7. Don Miguel said...
    Wow, how does one say "rate jack" in Spanish?!


    Oh, that's easy -- WalMex!

    At least it's not the 320%+ rates the payday loan places in the US charge.

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  8. Well, that's true. But 59% to 75% is out of this world.

    That's how you keep a brother down.

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  9. What's so weird about that? What if the annual inflation is 75%?

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  10. Uh, inflation rate is about 5% in Mexico.

    Therefore, rates of 59% to 75% are ridiculous on the face of it.

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  11. People in America need to realize jus what got America in this shape...cheap... yes so-call cheap items from a foreign land.

    quote*Wal-Mart firmly believes in local procurement. We recognize that by purchasing quality products, we can generate more job opportunities, support local manufacturing and boost economic development. Over 95% of the merchandise in our stores in China is sourced locally. We have established partnerships with nearly 20,000 suppliers in China. *end quote!

    Now! if there be 182 country's making items for the world to buy and they have only 5% of the pie in China...duh! This company makes the nice people of China support their currency(yuan) by keeping it in their country working for the people there.... but with the yuan going up in value and the US dollar going down...all the foreign items that the American consumer buys thinking it is cheap has went up in price.

    People...its all about the currency and to keep a currency strong you got to keep it floating around the country you live in so it can work for you. For the past 12 years all them US dollars are being shipped overseas to a foreign bank and with the American worker not making anything for the foreigner to buy the "we the people" have to turn to the "second" largest employer in America(Uncle Sam) to sell "we the people" debt in order to get all them dollars back!

    50 years ago a foreigner would had given their left nut for a US dollar or a Hershey's chocolate bar and today the same foreigner has got Uncle Sam and the American consumer by both all the while Hershey is moving the chocolate factory to Mexico. Wake up! America and think "MADE IN AMERICA."

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  12. You are an idiot!

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