Buying basic foods such as rice, beans, tuna, cooking oil, coffee and more on installment payments is now possible in Costa Rica, although it is a risky terrain for consumers who decide on this option.

Six out of ten households in Costa Rica have at least one type of debt in Costa Rica, according to data from the Encuesta Nacional de Ingresos y Gastos de los Hogares (ENIGH 2018) – National Survey of Household Income and Expenses. Image from social networks

A series of advertisements published by the Gollo store chain, in their social media accounts, opened the debate on the sale of food from the basic basket on credit.

This payment option is not like checking out at the supermarket using a credit card, rather, it is similar to installment payments when buying an appliance or a television, for example.

Among the advertising of this company, for example, a seven kilogram (kg) bag of rice with a cash price of ¢6,260 that is sold financed with a down payment of ¢1,255 and three installments of ¢1,785, which means the final price of the product is ¢6,610.

The same ad offers a 900 gram (g) bean bag whose cash price is ¢5,815, but on credit requires an upfront payment of ¢1,165 (just over 20% of the total price) and financed at three installments of ¢1,660. The consumer would pay ¢6,145 in total.

The publication indicated the effective interest rate for these products is 40%.

Eduardo Córdoba, Gollo’s marketing manager, explained that the company entered the new market option five months ago after studies on consumer habits. “The general products of the basic basket came out as part of the result,” Córdoba said.

The spokesperson said the consumer has the choice of payment, their financing option is to offer consumers an option that meets their financial needs.

Córdoba defended that the financing is “transparent” and pointed out that they also have a promotion that includes the possibility of buying food on three months without interest, or at a 40% discount if the consumer acquires an appliance product.

“Our clients are varied, we have people who do not have access to credit or financing with banks and we are an inclusive option for them,” the spokesperson added.

Image from social networks

Gollo defends the practice in saying there is a consumer who demands it.

However, the mechanism raises criticism from the Government and demonstrates, at the same time, the high indebtedness of Costa Ricans.

Victoria Hernández, Minister of Economy, Industry and Commerce (MEIC), said that the Government criticizes such behaviors that seek to charge high-interest rates for the purchase of food included the Basic Food Basket.

“An effective rate of 40% is completely objectionable. It is outrageous that perishable goods are sold under these conditions. The Government makes a vote of moral censorship in this regard,” said the minister.

According to Hernández, if businesses really want to help people, they should use three-month interest-free payment mechanisms like that of some credit cards.

“We are going to do market checks to know in depth this and other cases about which we also receive information and that are based on the sale of basic basket products on credit. After that we will evaluate the measures to be taken,” said the Minister.

The underlying problem behind this type of sale is that there are people in economic and financial conditions so adverse that they need these options to buy food.

Danilo Montero, director of the Office of the Financial Consumer (OCF) said these types of sales formats are a reflection of a different economy, with high levels of indebtedness of people and households.

“Ideally, the person should first consider the possibility of not opting for financing. It can be with a combination of readjusting expenses and savings to have money to buy priority goods,” Montero said.

Erick Ulate, president of the Consumers Association of Costa Rica, sees with concern the high dependence of the consumer on credit with the false expectation that this will generate more immediate liquidity.

“Costa Ricans love credit and almost dislikes cash payment,” said Ulate. “That is a culture that by necessity began to revert since we have almost 800,000 cases in judicial collection and high levels of indebtedness in the population.”

What’s the difference between paying with a credit card or on installments?

Basically, the purchase made with a credit card allows the consumer up to 45 days to pay without interest, meanwhile, installment plans are financed from the first day, meaning a higher price.

Cinthya Zapata, director of the Directorate of Consumer Support, explained, “Remember that a credit card is a means of payment that well used may not generate any interest, but in this case, we are facing a purchase in which, according to the publicity, interest charges will be charged associated with financing.”

Among the comments on social networks, “only this was missing”, “It fille me with indignation and sadness in thinking that we have compatriots who need now to finance even their food for lack of work, a worthy salary and opportunities”, “With this foolishness, it is urgent to legislate against usury!”, “How sad to profit from the most basic needs of the population”, “What a twisted mind to think about financing rice and beans”.