What will be the consequences of Turkish banks' warning to close their customers' credit cards?

istanbul In a proactive move that reflects growing concern for financial stability and alignment with the tight economic policies adopted by Turkey in the light of the economic war on inflation and the decline in the lira's exchange rate, Turkish banks initially issued… In February, it issued a stern warning to its customers regarding the use of credit cards in specific transactions, such as purchasing gold, foreign currencies and crypto assets, especially those that do not rely on “reasonable” justification.

The Turkish banks' warning comes within the framework of a series of measures aimed at reducing the high inflation rate, which has reached 65% on an annual basis, according to Turkish Statistics Institute data, and increasing financial discipline. It also indicates the possibility of credit card closure for customers who violate these policies.

These warnings issued by the banking sector reflect its determination to monitor spending through credit cards, and a strict policy against the use of these financial instruments in investment transactions, other than meeting daily and essential needs. Emphasizes the essential role of credit cards as a means of Of consumers.

worrying numbers

In light of these measures, the Banking Regulatory and Supervisory Authority highlighted a significant increase in personal credit card usage to two trillion and 172 billion Turkish Liras during the first month of the current year 2024, which is an increase of 155% compared to the previous year. In the same period of last year 2023, this amount was 459. one billion lira.

Personal credit card usage volume in Turkey to reach 1 trillion and 172 billion Turkish Lira during February 2024 (French)

In August 2023, the authority announced that it had stopped the possibility of paying by credit card in installments for the purposes of traveling abroad such as flights, travel agency fees and accommodation, with the aim of reducing the drain of foreign currencies from the country. , Turks' spending abroad reached $3.17 billion last year, after halving before 2023, an increase of 84% compared to the same period in 2022.

According to Turkish Banking Union data, Turkey saw a significant increase in the number of individuals using personal credit cards during the year 2023, as the number increased by 1.8 million people, bringing the total number of users to 39.3 million. .

The average monthly usage of a personal credit card in Turkey was approximately 63,700 Turkish lira ($2,080).
It is worth noting that the number of individuals against whom legal action was taken due to personal credit card debts reached 1.1 million during the same year.

Therefore, individuals who have not paid their credit card debt appear to be facing major challenges, as their number reached 3 million 836 thousand 53 people by the end of October 2023. Additionally, there are 2.1 million people who still owe money. Credit card debt, which it sold to asset management companies.

Suggested Solutions

In this context, economic experts believe that there are key areas that can be modified to limit the excessive use of this financial instrument, such as changing interest rates, restricting installment options and providing incentives to consumers. Modifying the available credit limit.

Turkish media reports indicate ongoing discussions about reducing the number of installments available for purchases using credit cards, with this option being banned in some areas with the aim of encouraging responsible consumption and avoiding debt accumulation. The possibility of complete cancellation has been taken into account.

MasterCard credit cards are visible in this illustrated photo taken in London
The Turkish Central Bank announced it would make no changes to the current caps on interest and commissions (Reuters)

Furthermore, with the aim of enhancing the financial stability of individuals and reducing the risks posed by excessive borrowing, the option of reducing the credit limit of users and increasing the minimum monthly payment is on the table.

As far as credit card interest rates are concerned, the Central Bank of Turkey clarified that there will be no change in the maximum limits of interest and commission at the present time, these rates will be determined based on specific criteria including deposits and monetary But interest rates are included. The policy, which confirms the Bank's approach in achieving balance…encourage savings and avoid excessive consumption.

According to the second Financial Stability Report for 2023 released by the Central Bank, an increase in credit card usage was observed after interest rates on consumer loans increased, which prompted citizens to resort to credit cards as a means of financing.

most prominent effects

For his part, economic researcher Abdel Halim al-Abadla says that Turkish banks' warning to their customers comes in light of official figures that indicate a significant increase in the number of users of personal credit cards, in addition to an increase in the average. Is. Monthly usage to a level higher than the minimum wage.

He considered it a good move in line with the strict economic policies adopted by Turkey in the current period, as it would serve to reduce high demand from consumers, thereby reducing inflation rates, but the general situation of countries with banks governed by official laws. Do not allow such warnings to be sent to customers with whom you have a commercial relationship.

Istanbul, Türkiye – 24 July 2015: Denizbank.  Denizbank is a bank in Türkiye.
The number of individuals who did not pay their credit card debt in Turkey reached 3,836,053 people. (Shutterstock)

Al-Abadla pointed out that the decline in the exchange rate of the lira and the increase in the inflation rate force citizens to search for other means that allow them to purchase their basic and secondary needs on an ongoing basis, adding that Turkey People's purchasing culture has seen a gradual shift towards increasing dependence on the use of credit cards.

He pointed to the increase in the percentage of traders in digital currencies within Turkey over the past years, considering it something that does not create the real economy, and creates great bridges between citizens and existing economic development efforts.

It is also possible that if there is no official obligation from the Central Bank to close credit cards for all customers, banks will apply their warnings to the least influential customers, while noting those with large capital or committed to paying. Will ignore.

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