Travel card usage grows in Brazil

Brazilian tourists who vacation in the United States, and especially in Florida, are apparently using prepaid travel cards in greater numbers. In the Aug. 13, 2012, edition of Portals and Rails, the blog of the Federal Reserve Bank of Atlanta, it was reported that Brazilians choose general purpose reloadable cards for travel to avoid a new tax imposed by Brazil on foreign purchases using credit cards and to lock in favorable exchange rates for the duration of trips.

Paul Graham, Assistant Vice President and Branch Operations Officer at the Miami Branch of the Federal Reserve Bank of Atlanta, wrote on the blog that approximately 1.5 million Brazilians traveled to Florida in 2011, second only to the number of tourists from Canada visiting the Sunshine State last year. Brazilians spent over $1 billion in Florida in 2011, with average per-visit amounts exceeding $5,000, Graham said.

Several factors have spurred travel card usage by Brazilians in Florida, according to Graham. "In 2011, the Brazilian government imposed a new financial operations tax of 6.38 percent on foreign transactions made with Brazilian-issued credit cards," he said. "The tax, called the IOF – short for Imposto sobre Operações Financeiras – makes using credit cards abroad very unattractive for Brazilians."

Another benefit of travel cards for Brazilians is the cards offer favorable exchange rates and fixed rates that insulate tourists against rate fluctuations, Graham noted.

Additionally, banks in Brazil are promoting travel cards because they benefit from U.S. dollars loaded on the cards. Graham said that move by Brazilian banks has inspired U.S. commercial banks to roll out marketing campaigns in Brazil that promote their dollar-denominated travel cards.

"All these conditions and incentives have combined to create a 50 percent rise in travel card applications by Brazilians shortly after the tax regulation was introduced," Graham said.

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