The usury rate is the maximum interest rate you can be charged on consumer credit. Banco de Portugal has already released the maximum rates for the 1st quarter of 2023.
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Sometimes this concept can go unnoticed. Maybe you don’t even know that there is a ceiling for the interest you pay when you borrow money or use your credit card. This limit is called usury fee.
Therefore, if you are thinking of taking out a loan, the usury rate can give you some clues as to whether or not it is the best time to do so.
After all, what is the usury rate?
The usury rate represents a ceiling for the interest your bank charges you. This fee is set quarterly by Banco de Portugal for each type of credit.
In a simple way, we can say that the usury rate corresponds to the Annual Global Effective Charge Rate – maximum APR that the bank can charge you for making a certain credit.
What is your purpose?
By setting a maximum limit on interest, commissions, expenses, insurance and other charges that may be associated with credit, the usury rate helps to protect consumers of abusive behavior by financial institutions, preventing the charging of excessive fees (practice known as usury).
In addition, it gives an idea of the conditions of the economy and how it is evolving through the price of money. It is, therefore, a factor to consider before applying for a loan.
Paying attention to this rate, checking whether the trend has been up or down, for example, can provide you with valuable clues about the best time to borrow money from the bank.
It may also have influence when deciding whether to buy on credit or in cash, in order to avoid paying uninviting interest rates.
How is it calculated?
In force since January 1, 2010, the maximum rate regime applies to consumer credit agreements falling within the scope of the Decree-Law No. 133/2009of 2 June, and is mainly intended to protect private customers.
These rates correspond to the average APR that financial and credit institutions charged in the previous quarterin the different types of contracts, plus a quarter.
Furthermore, no rate may exceed 50% of the average APR of all consumer credit agreements entered into in the previous quarter.
What credits do maximum fees apply to?
The maximum APR only applies to consumer credit agreementssuch as personal credit, car credit, revolving credit (credit cards, lines of credit, bank current accounts and overdraft facilities) and even overdraft credit.
Thus, home loans or other credits secured by mortgages are excluded from this regime.
Maximum rates for each type of credit agreement
Every quarter Banco de Portugal calculates and publishes in the Bank Customer Portal the maximum rates in force for each type of consumer credit.
You can consult the maximum rates in force in the first quarter of 2023 in the tables below.
Maximum rates applicable in the 1st quarter of 2023
| Type of credit agreement | ||
|---|---|---|
| 4th Quarter 2022 | 1st Quarter 2023 | |
| Education, Health, Renewable Energy and Equipment Leasing | 6.8% | 6.3% |
| Personal credits for other purposes (no specific purpose, household, consolidated) | 13.3% | 13.0% |
| Type of credit agreement | ||
|---|---|---|
| 4th Quarter two022 | 1st Quarter two023 | |
| Finance leasing or ALD for new cars | 3.3% | 3.5% |
| Finance leasing or ALD for used cars | 5.1% | 5.5% |
| With reservation of ownership and others for new | 8.9% | 8.9% |
| With reservation of ownership and others for used | 11.9% | 11.9% |
| Type of credit agreement | ||
|---|---|---|
| 4th Quarter 2022 | 1st Quarter 2023 | |
| Credit cards, lines of credit, current bank accounts and overdraft facilities | 16.0% | 15.7% |
| Type of credit agreement | ||
|---|---|---|
| 4th Quarter 2022 | 1st Quarter 2023 | |
| Credit overruns* | 16.0% | 15.7% |
* In the overdraft contract, the reference rate is the nominal annual interest rate (TAN)
don’t be fooled
Did you know that if you apply for a consumer credit and your bank charges you interest rates higher than the maximum rates applicable in that quarter, you are committing a crime?
For example, if during the 1st quarter of 2023 you apply for a loan to finance your studies, or that of your children, the maximum APR that the bank can charge you is 6.3%. If the credit is intended, for example, to change the decor of your home, the maximum interest rate allowed is 13.0%. The same is true with regard to the fees charged by the credit card which, if contracted in the 1st quarter of 2023, cannot exceed 15.7%.
If your bank or credit institution charges you an interest rate above that applicable to the credit agreement in question, you can and should file a claim with Banco de Portugal.
This is the entity responsible for regulating and supervising credit institutions, financial companies and payment institutions authorized to operate in national territory.
In addition, you should also do so through your Bank’s complaints book, available at Complaint book online. In all cases, complaints are analyzed by Banco de Portugal and a response will be provided.
Article originally published in January 2020. Updated quarterly since then.
