Credit card usage has increased: The Central Bank announced the reasons for the 78% increase.

The Central Bank of the Republic of Turkey published an analysis titled "Recent Trends in Card Spending Preferences." It was stated that the proliferation of digital channels and the increase in cash carrying costs due to high inflation have led to an increase in the use of bank and individual credit cards (BKK).

CITIZENS FIND CARDS MORE ADVANTAGEOUS

The analysis stated, "The proliferation of digital channels and the increase in cash carrying costs due to high inflation are increasing the use of bank and individual credit cards (BKK). The ability of cards to offer cash advances and installment payment options also contributes to this development. With the impact of the high inflation seen in recent years, the card spending balance is significantly increasing in both nominal and real terms. In this article, we examine the real increase observed in card spending balances and show that individuals' preference for using cards instead of cash is a significant determinant of this increase."

CARD SPENDING REACHED 12.8 TRILLION TL

The analysis noted that in Turkey, there are approximately 28 million active credit card users, 125 million credit cards, and 191 million bank cards, while the total volume of card spending has reached 12.8 trillion Turkish liras. It was recorded:

"From the end of 2021 to the third quarter of 2023, the fact that interest rates remained relatively below inflation played a significant role in the rapid increase in balance growth. However, factors other than the cost of borrowing with credit cards also affect the increase in spending made with credit cards. The ease of use of card payment methods, the rapid increase in contactless payment preferences during the pandemic, and the decrease in cash carrying also play an important role in the increase in spending made with cards. Indeed, the fact that there has been a higher real increase in spending made with bank cards, which do not offer any borrowing options, compared to credit cards during the same period supports this view. Since 2015, spending made with credit cards has doubled in real terms, while spending made with bank cards has increased nearly threefold. It is observed that almost all of this increase (100% for credit cards, 80% for bank cards) occurred after the end of 2021."

COVID-19 INFLUENCED THE INCREASE IN CARD USAGE

The analysis indicated that the number of transactions made with credit cards significantly increased in the post-COVID-19 pandemic period, influenced by the development of financial technologies in card payments. It was reported that while the number of BKK transactions was around 4 billion annually before the pandemic, this amount approached 10 billion by 2024.

The analysis also stated that the preference for contactless payments, which accelerated with the pandemic and was supported by the development of technological infrastructure in payment systems (including bank cards), continues to spread, with only 2 million contactless payment transactions per month in 2015, while currently over 1 billion contactless payment transactions occur each month.

NOTABLE INCREASE IN INSTALLMENT-FREE SPENDING

The analysis expressed that the shift in payment preferences from cash to card usage is also reflected in household spending types, stating, "The share of spending made with BKK through installment-free methods or with bank cards in household consumption expenditures, which is the largest component of gross domestic product (GDP), has been increasing in recent years. For example, the share of spending made with bank cards in total household consumption has increased from 6.8% to over 10%, while the share of installment-free credit card spending has reached from 21% to 34%."

INFLATIONARY PRESSURE CHANGED CARD USAGE HABITS

The analysis supported the view that the fact that approximately three-quarters of BKK spending is made through installment-free methods and that the volume of cash advance usage has a low share in total card spending indicates a low tendency to use credit cards for borrowing purposes. It was noted that the low growth rate of money in circulation compared to inflation supports the view that more people prefer cards over cash in their daily transactions.

The analysis recorded that the historically high levels of card spending balances seen in previous years reflect a significant change in consumer payment habits due to inflationary pressures and the convenience of using cards instead of cash, stating, "Policymakers and analysts need to consider these potential behavioral changes when evaluating demand conditions in the economy and household debt. The increase in card usage, which is largely independent of borrowing needs, reflects a change in spending behavior rather than an increase in debtor demand, so inferences based solely on traditional indicators like credit card usage can lead to misinterpretations."