Credit cards are a matter of state in Türkiye

From time to time, the issue of credit cards in Türkiye comes to the fore of national debate. It happens because new regulations appear, warnings about their abuse or, in the worst case, because the number of suicides of citizens overwhelmed by the weight of their debts increases. And one of the things that most attracts the attention of foreigners residing in Turkey is how banks distribute credit cards like business cards—yes, only to Turks; If you are a foreigner, you must pass the 12 Hercules tests before the entity agrees to grant it to you. It is also shocking how extensive the use that the citizens of this country give to cards is, cheating with them to make ends meet, covering the debts of one card with the other, in a flight forward waiting for a better situation. The fragile existence of the Turkish middle class, even of the consumer society itself, is based on the pillars of plastic money.

According to data from the World Bank, in a country with a low income per capita of 12,000 euros (two and a half times less than Spain), a third of the population over 15 years of age has a credit card, that is, the penetration is greater than in other Eastern European countries with higher incomes, such as Poland, Greece, Bulgaria or Romania. Over the past 10 years, the number of credit cards has doubled in Turkey and there are currently 119 million in operation. That is, those who have a credit card have, on average, more than five. For comparison: in Spain there are about 24 million users and 41 million credit cards.

The accumulated debt volume of these cards in Turkey exceeded 35 billion euros in February, an increase of 153% compared to last year (when it had also increased almost 130% compared to the previous year). As in any vicious circle, this abuse of cards is the cause and effect of inflation. Prices have been out of control in the Eurasian country since autumn 2021 and, despite the fact that the country's new economic administration has implemented an aggressive policy of raising interest rates (currently 50%), the inflation rate does not drop below 65%. . With loans very restricted and their prices sky-high, Turkish citizens, who fear that prices will continue to rise, advance their purchases and do so with credit cards, which allow them to pay several months in advance, that is, when their money will have a lower relative value.

Government concern

Personally, this allows Turkish families to maintain a certain purchasing power. At a macro level, however, it only increases the rise in prices, which in the future will result in personal impoverishment. Domestic demand has been one of the main drivers of Turkish growth in recent years, but also of rising prices, explains economist Mustafa Sönmez, so the Government is now seeking to “cool down the economy and demand”, since the increase of rates has not been enough to reduce inflation. For the moment, banks have been ordered to reduce the number of installments they offer for credit card payments from 12 to a maximum of three and the amount of cash that each card can advance has been restricted. Sönmez believes that the policy will be even more restrictive after last weekend's elections. After these elections, the Government has a horizon of several years without having to respond to the polls, a moment that it will take advantage of to apply the “bitter recipes,” according to analysts.

But there is a problem: card addiction is not just rampant consumerism. Studies show that most of the spending made with them is dedicated to paying for food, fuel and education. Therefore, an excessive restriction on the credit that cards represent could make the survival of many families difficult. As a banking source says: “It is essential to control the issue of cards, but we will see if they go too far or not. “It is a very delicate balance.”

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