Installment payment limits come into play
ANKARA - Anadolu Agency
Under the new regulations introduced by the BDDK, it is no longer possible to buy food, fuel, mobile phones or gold products by installment. DAILY NEWS photoThe credit card installment volume shrunk 5.4 billion Turkish liras within five weeks after restrictions to curb spending came into force, Turkey’s banking authority has reported.
The Banking Regulation and Supervision Agency (BDDK) brought in new measures at the beginning of February to curb the use of credit cards to pay for goods in monthly installments in the hope it would restrict the country´s growing inflation and current account deficit.
Loan value declined by almost 7 percent from Feb. 1, when the measure took effect until, the BDDK announced March 13.
In the five weeks following the introduction of the restrictions, the loan volume of installment credit cards fell to 43.9 billion Turkish Liras ($19.6 billion) from 47.2 billion liras ($21.1 billion).
In reaction to the decreasing loan volume of installment credit cards, the loan volume of non-installment cards rose by 3.5 percent, reaching 36.9 billion liras from 35.6 billion liras during the same period.
Overall expenditure using credit cards, since the beginning of February declined 2.3 percent to 80.9 billion liras ($36.1 billion).
Under the new rules, consumers are no longer allowed to defer payments on small items such as food, petrol and mobile phones.
Payments for larger items – such as TVs, furniture and appliances – can only be delayed up to nine months.
Luxury items have also been affected. Installment plans have been banned for jewelry, hitting a sector that employs 250,000 people in 32,000 stores.
Jewelers have complained about a 40 percent drop in sales since the measures were introduced.
However, many analysts and the government’s economy managers have been strongly voicing an urgent need for controlling consumer spending.
Around a 55 percent jump in the number of indebted Turkish citizens in 2013 supported those concerns.
Credit card and personal loan debt has reached alarming levels as the number of people who have not been able to pay their personal loan or credit card debt surpassed 1 million in 2013, while the amount was around 698,000 in 2012, according to the latest report from the Turkish Banks Association (TBB).
There are 57 million credit cards in Turkey – one for every Turk of working age.
“We see a problem when someone has to pay for one pair of shoes in 24-month installments,” Deputy Prime Minister Ali Babacan said.
“Excess is harming the economy. If the credit is used for production, exports, and investment, we say ‘yes,’ but if it is for consumption, then we need to be careful,” he said.