CBRT data revealed: High inflation has increased individual credit card usage

According to an analysis by the Central Bank of the Republic of Turkey, the proliferation of digital channels and the rising cost of carrying cash due to high inflation are rapidly increasing the use of debit and individual credit cards. This rise in card usage is creating a significant shift in household spending.

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CBRT data revealed: High inflation has increased individual credit card usage

The Central Bank of the Republic of Turkey's (CBRT) blog, Merkezin Güncesi, published an analysis titled "Recent Trends in Card Spending Preferences," which states that the proliferation of digital channels and the increased cost of carrying cash due to high inflation have boosted the use of debit and individual credit cards (BKK).

The analysis notes that as the practice of carrying cash has declined, consumer payment preferences have shifted toward cards.

INCREASE IN CREDIT CARD USAGE

It was reported that since 2015, spending via credit cards has increased 2-fold in real terms, while spending via debit cards has increased approximately 3-fold. It was emphasized that interest rates remaining below inflation, particularly since the end of 2021, played a significant role in the growth of credit card balances.

The analysis included the following statements:

"The proliferation of digital channels and the fact that cards offer borrowing opportunities are causing card spending to rise in both nominal and real terms. The rapid increase in the preference for contactless payments, especially during the pandemic period, also contributed to this development."

CONTACTLESS PAYMENT PREFERENCES ARE RISING

Pointing out that contactless payment preferences became widespread during the pandemic, the analysis stated that while only 2 million contactless payment transactions were made per month in 2015, this figure has exceeded 1 billion as of 2024. This development is supported by advancements in the technological infrastructure of payment systems.

THE SHARE OF CARDS IN HOUSEHOLD CONSUMPTION EXPENDITURES IS INCREASING

Card usage is showing its impact not only on individual spending but also on household consumption expenditures. The analysis highlighted that the share of debit card and non-installment credit card usage in household consumption has increased significantly in recent years. While the share of spending made with debit cards in total household consumption has risen above 10 percent, the share of non-installment credit card spending has reached 34 percent.

CARD USAGE IS NOT FOR BORROWING PURPOSES

In the CBRT analysis, it was noted that approximately three-quarters of credit card usage is for non-installment transactions, and the low share of cash advance usage within card spending indicates that the tendency to use cards for borrowing purposes is low. This situation points to a period where households prefer cards over cash.

CARD USAGE SHOULD BE MONITORED CAREFULLY IN ECONOMIC DATA

According to the Central Bank's analysis, it was emphasized that policymakers and analysts should be cautious when making inferences based on credit card usage while evaluating household debt. It was stated that because the increase in card usage reflects a change in spending behavior independent of borrowing needs, analyses based on traditional indicators could be misleading.

News Source: 12punto