Turkey in credit card crackdown

Turkey is clamping down on credit-card instalment plans, to try to stem spending on imports and rein in the ballooning current account deficit.

With the Turkish government already facing protests over its clampdown on internet sites and the media, new credit card restrictions are now adding shoppers and retailers to the list of angry citizens.

Turkey's banking regulator introduced new rules earlier this month to clamp down on the use of widely-used credit card instalment plans, in a bid to stem spending on imports and rein in the ballooning current account deficit.

Prime Minister Recep Tayyip Erdogan's government also hopes to rein in personal debt in a country where many use credit card instalments to pay for items as small as bread.

Under the new rules, consumers can no longer defer payments on small items such as food, petrol and mobile phones.

Payments for larger items - such as TVs, furniture and fridges - can be delayed only up to nine months.

"I have lived abroad for many years. Nowhere else in the world has anything like instalments for credit cards," Finance Minister Mehmet Simsek said in January.

"We want our citizens to cut their cloth according to their means. Consumers should be rational."

Luxury items have also been affected. Instalment plans have been banned for jewellery, hitting a sector that employs 250,000 people in 32,000 stores.

The government is seeking to reboot investment into a Turkish economy that has plummeted from nine-per cent growth three years ago, to an estimated 3.7 per cent last year.

Faced with soaring inflation and a widening trade deficit, the central bank massively hiked interest rates last month.

The government hopes that controlling consumer spending will allow interest rates to come back down.

Few deny that some form of action is needed to rein in Turkey's debt problems.

There are 57 million credit cards in Turkey - one for every Turk of working age.

They have collectively built up debts of $US45 billion ($A50 billion), while non-performing loans have shot up by 20 per cent in the past year to $US14 billion ($A15.5 billion).


2 min read

Published

Updated

Source: AAP



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