Consumers accelerated their credit card spending. While Central Bank data showed that card expenditures exceeded 100 billion liras in a four-week average, BRSA data revealed that the share of retail credit card spending stock in consumer loans was 30 percent.
According to the news of Şebnem Turhan from Ekonomim, in addition to the rapid increase in consumer loans in Turkey recently, bank and credit card expenditures broke records. According to the Central Bank data, bank and credit card expenditures increased to 100 billion 85 million 182 thousand liras on an average of four weeks. The annual increase exceeded 150 percent.
According to the Banking Regulation and Supervision Agency data, retail credit card debt stock increased by 123.78 percent in the week of January 20, with 460.6 billion liras compared to the same week of the previous year. Experts pointed out that the interest limit imposed on credit cards by the Central Bank’s policy rate cuts makes borrowing attractive for consumers, and that in any interest rate policy change, household indebtedness and its impact on domestic demand will be heavy.
CREDIT CARD EXPENDITURES INCREASED
After the policy rate cuts started by the Central Bank in August 2022, the maximum interest rates that banks can apply to their credit card transactions also decreased. The maximum contractual interest rate for credit card transactions, which was 1.80 percent before policy rate cuts, increased to 1.73 percent in September, 1.63% in October, 1.5 percent in November and 1.36 percent in December. declined. The default interest rate in credit card transactions decreased from 1.74 percent in August to 1.68% in September, 1.60 percent in October, 1.5 percent in November and 1.39 percent in December. Credit card interest is currently 1.36 percent, and the default interest rate is 1.39 percent. On the other hand, general purpose loan interest rates continue their high level of 30 percent.
According to Central Bank data, bank and credit card expenditures have entered a rapid upward trend in recent weeks. With the effect of the new year, weekly card expenditures, which broke a record with 116.1 billion liras in the week of 30 December 2022, reached 100.1 billion liras as of the week of January 20, according to the four-week average. In the same period of last year, the amount of spending with cards was only 39.6 billion liras, according to the four-week average. Central Bank card expenditure data includes expenditures on both individual and commercial cards.
The share of individual credit cards in total loans also increased. In the week of January 21 last year, the share of individual credit card stock in the total loan stock was at the level of 4.17 percent. In the week of January 20 this year, this share reached 6 percent with 5.97 percent. In other words, its share in total loans increased by 43.2 percent.
‘HOUSEHOLDS CAN BECOME EXTREMELY EXTREMELY indebted’
Banking experts stated that consumers evaluate the point where the upper limit on credit card interest has reached and that they evaluate borrowing from these levels optimally, adding that it has become very advantageous to spend from this side with the credit card limits that have increased after the minimum wage hike. Saying that it is easier to use credit cards and that consumers are now starting to use their credit cards in the form of credit shopping, the banking expert said that the opportunity of shopping in installments in the expectation of low interest and high inflation attracts consumers. Noting that he brought the needs of consumers forward in order to protect himself from inflation, the banking expert pointed out that although household indebtedness levels are not very high at the moment, when borrowing continues at this rate, households will become over-indebted. Experts pointed out that in addition to credit card expenditures, consumer loans also increased rapidly despite the high interest rate, emphasizing that this was a factor that would increase domestic demand and parallel growth. However, the expert pointed out that if there is a normalization in the interest rate policy and if the interest rates rise, the households will meet this new situation as high debtors, and said that the high debtor consumer will be more affected by the interest rate and its impact on domestic demand will be great. The expert also warned that if the increase in credit card spending goes at this rate, it can reach very serious levels.