The Traditional Model: Compound Interest and the CAT
Traditional bank credit cards operate under a system where users have a line of credit, make purchases, and if they don’t pay off the total before the payment deadline, the remaining balance incurs interest.
These interests are calculated on the average daily balance and compounded monthly, creating the compound interest effect that can rapidly multiply debt over a few months.
The Costo Anual Total (CAT), regulated by Banxico, aims to standardize this cost. However, its complexity makes it difficult for the average user to understand how much they will truly pay for financing a purchase.
Novacard’s Proposal: Fixed Daily Commission
Novacard operates differently. Instead of compound interest, it applies a fixed daily commission of approximately 29 pesos plus VAT for each day the user maintains a balance after their grace period.
The cycle works as follows:
- The user makes purchases during the period and receives a notification on the 14th (cut-off date) of the amount to be paid.
- They have until the 28th (payment deadline) to pay off the total without additional costs.
- If they don’t pay in full, the daily commission is applied retroactively from the date of their first purchase in the period.
- Once the total balance is paid off, the counter resets, and the next period begins without accumulated commissions.
This model eliminates the compounding of interests—the primary factor that exponentially grows debt in traditional credit cards—and replaces it with a linear and predictable charge.
Analysis: When Does Each Model Conviene?
To evaluate both schemes, concrete numbers are needed.
Scenario A: 5,000 pesos for 14 days. With Novacard’s model, the commission would be approximately 471 pesos (29 pesos × 1.16 VAT × 14 days), equivalent to just over 9% of the original amount.
With a traditional bank card at an annualized rate of 60% (common in the Mexican market), the monthly interest on the same balance would be around 250 pesos, though this amount would compound if not paid off.
Scenario B: 5,000 pesos for 5 days. Novacard’s commission would be approximately 168 pesos.
Bank interest would continue to calculate over the full month, resulting in a similar or higher cost depending on the specific rate.
The Conclusion: The daily commission model favors those who pay quickly and is designed to prevent over-indebtedness. For users who usually pay the minimum and carry balances for months, the traditional interest scheme—though opaque—could be less costly in absolute terms.
Target User Profile
Novacard’s model is not designed to compete directly with traditional banking in all segments. Its value proposition targets specific profiles within the Mexican market:
- First, independent workers and freelancers who cannot prove income through pay stubs. This segment has historically faced barriers to accessing formal credit products.
- Second, young people and those without a credit history who want to build their credit profile with the Buró de Crédito. Novacard’s reporting of payment behavior functions as a gateway to the formal financial system.
- Third, financially disciplined users who prefer a transparent and predictable cost model, where they can calculate exactly how much they will pay for each day of financing without complex formulas.
Finally, people seeking a secondary or backup card without incurring fixed costs like annual fees. As it doesn’t charge an annual fee, the product can remain active without generating charges as long as it’s not used.
The Context: Emissoras vs. Traditional Banking
Novacard is part of the Mexican company ecosystem, which, according to Finnovista data, includes a significant portion of the region’s financial startups.
The company offers credit lines of up to 200,000 pesos, does not require income verification, and eliminates annual fees, explaining its appeal in a market where 47% of adults lack any formal credit product, according to the National Financial Inclusion Survey.
The daily commission model’s merit is undeniable: predictability. The user knows exactly how much they will pay for each day of financing, without complex formulas or compounded interests.
Moreover, the direct comparison between daily commission and bank interests does not consider costs typically included by traditional banking: annual fees averaging between 600 and 2,000 pesos annually, unsolicited insurance, cash withdrawal or inactivity fees. Novacard eliminates all these categories, modifying the final balance for users who keep their card active throughout the year.
The challenge for Mexican users remains the same: inform, compare, and choose the product that best suits their needs and financial habits. The existence of alternatives to the traditional banking model is, in itself, good news for the market.
Information valid as of January 2026. The CAT and conditions may vary. Consult current terms at novacard.mx ***
