Can You Use Credit Cards In Russia

The storefront for FastMoney, a payday lender in Moscow. A growing number of Russians are using a quick swipe of plastic or relying on payday lenders to cope with hard times brought on by Western sanctions and slumping oil prices.


Credit…

Max Avdeev for The New York Times


MOSCOW — Yekaterina V. Bulgakova gushed near the cozy ane-room apartment that she and her beau share, and particularly about the way they could e’er encompass the hire: by charging it on credit bill of fare.

“Our salaries don’t make it plenty” to pay for housing, food and other necessities every month, Ms. Bulgakova, a tattoo artist, said.

She earns almost 35,000 rubles, or $560, a calendar month, which she considers a skilful paycheck for a young person. Her swain, a naval buck, receives a monthly military stipend of $480. Together, their income is above the average monthly wage in Russia of near $735, and information technology unremarkably covers their expenses. But every few months, Ms. Bulgakova has a drop in business. That’s when she relies on her credit card from Tinkoff, a large private bank.

“Nobody wants to become into debt,” Ms. Bulgakova, 21, said. However millions of Russians similar her are doing just that, spurring a smash in consumer lending.

The growth in such lending has alarmed some economic policy officials, who notation that a growing number of Russians are using a quick swipe of plastic or relying on payday lenders to cope with hard times brought on by Western sanctions and slumping prices for oil, 1 of the land’due south major export bolt. The spending has lifted the economy but with ballooning consumer debt that could help showtime a recession.

Since the onset of Russia’due south military interventions in Ukraine and the ensuing sanctions, total outstanding personal debt amid Russians has roughly doubled, according to the land’s central bank. Outstanding average debt per person has reached about $3,300, according to the National Association of Professional Collection Agencies, a trade group whose membership has grown by a third since the crisis began in 2014.

Some independent and government economists say that the personal credit industry has found a mother lode in a population that was wholly debt-free when information technology entered the capitalist era a generation ago. Others warn that the industry’south expansion is unsustainable.

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Credit…

Max Avdeev for The New York Times


Many start-time credit card users have little experience managing debt. And with Russia facing other economical woes, these spenders are also seeing their aggrandizement-adjusted salaries refuse.

Elvira Southward. Nabiullina, the central bank’due south chairwoman, has played downwardly the problem while too imposing some regulatory restrictions to slow consumer lending. “It’s admittedly wrong to think that already now we take risks to financial stability or a risk of a bubble,” Ms. Nabiullina said at an economical briefing in St. Petersburg last calendar month.

The cardinal bank has tried to cool the marketplace past raising so-called provisioning requirements that dictate how much coin banks must set aside to insure against defaults and by capping the corporeality of interest that payday lenders can charge at 1 percent per solar day, however a steep 30 per centum a month.

Debt payments are taking a seize with teeth out of some slim paychecks: Depression-income households spend an average of viii percent of their monthly incomes on debt payment, co-ordinate to the central bank. Surveys bear witness that most borrowers are 25 to 35 and that they are taking more than than 3 loans from unlike sources, co-ordinate to Vladimir Tikhomirov, the master economist at BCS Global Markets.

There were warnings from others at the St. Petersburg conference, where Russian officials laid out their economical priorities for the yr. Andrey R. Belousov, an economic adviser to President Vladimir V. Putin, said the debt market was “overheating.” Maksim S. Oreshkin, the government minister of economy, warned that the surge in short-maturity consumer debt could bring on a recession within two years.

“Y’all had a like story in the United States,” with debt rising faster than salaries earlier the recession in 2008, Mr. Tikhomirov said.

In the start quarter of 2019, real incomes vicious ii.3 per centum from the aforementioned period a year earlier. Over the aforementioned three months, the amount of newly issued unsecured consumer debt rose 22 percent.

Consumer lending in Russia, as elsewhere, benefits the economic system by sustaining consumer need. The lending boom may have prevented a recession in the first quarter, according to a central bank written report published in June. State-endemic banks issued the bulk of this credit, most 70 percent, the report said, suggesting that the Kremlin has at least partly endorsed the rise in consumer lending.

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Credit…

Max Avdeev for The New York Times


For some Russians, personal debt is alike to the garden plots of their parents’ generation. In that era of mail-Soviet economic depression, many families short on coin grew their own food, transforming their kitchens into storerooms of pickled vegetables, stale mushrooms and sacks of homegrown potatoes.

Despite the wretched poverty of those years, Russians entered the state’s capitalist era with some advantages. Families had no debt, and most every adult wound upwardly owning the property where they lived. But they were also unschooled in matters of lending or in calculating reasonable levels of debt. And they were unprepared for a rush of predatory lenders offering quick loans burdened with high rates.

At the end of 2018, at that place were 2,002 payday lending companies in Russia, with many operating from storefronts in provincial towns and offering one-month loans with interest rates compounded daily. Established banks joined in, offer loans and credit cards with quick approvals.

Igor Kostikov, chairman of the Wedlock for Protecting Financial Consumers, an advocacy grouping for debtors, said that poor Russians were accumulating payday-lending debt. “They are getting deeper and deeper in problem,” he said. “The poorest will non be able to repay.”

On Vkontakte, a social media site, Russians swap stories of debt and bankruptcy, revealing the naïveté of their experience with debt.

One user, who identified herself as Helga, wrote seeking gratis legal advice. “Respected lawyers! I have an opportunity to take a loan of 3 to five million” rubles, or $48,000 to $lxxx,000. “If I take it out, pay a few times, and then declare bankruptcy, what bug might arise?” She mused virtually peradventure using the money for a down payment on a home.

Helga’due south optimism might be crushed if she considered the realities of debt collection. Russian debt collectors are notoriously trigger-happy. The state allows courtroom bailiffs with minimal oversight to enter homes to confiscate televisions or other valuables to offset debts. Scofflaws face harsh punishment, including a ban on foreign travel.

Ms. Bulgakova knows credit tin cause trouble, but she and her fellow believe that they can stay afloat. She likened their experiment with debt to her approach to tattoos. “Nosotros are trying this out on our own pare,” she said. Credit has helped them afford their Petrograd flat, and condolement is important in these uncertain times. So far, she has paid off her debts promptly.

“I want to say thank you that I can at least keep upwards this lifestyle” by using credit, she said. “Merely it would be improve if I didn’t have to.”

Source: https://www.nytimes.com/2019/08/05/business/economy/russia-consumer-debt.html

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