High interest rates did not stop consumers from borrowing more

Despite rising interest rates on individual credit cards and overdraft accounts (KMH), consumers have not hit the brakes. Increases remained relatively low in Hatay, Kahramanmaraş, and Malatya, which were most affected by the earthquake; total credit card debt increased by 180.2 percent, and overdraft account debt by 177.6 percent.

The increases in the policy rate made by the Central Bank since June caused interest rates on credit cards and overdraft accounts to rise from 1.36 percent and 1.66 percent to 3.66 percent and 4.72 percent, respectively. However, despite the significantly high increase in interest rates, consumers' individual credit card and overdraft account debts continued to grow without slowing down. According to the 9-month Fintürk data from the Banking Regulation and Supervision Agency (BRSA), total individual credit card debt increased by 180.2 percent, while overdraft account debt rose by 177.6 percent. The province with the highest increase in overdraft account debt was Hakkari, while the province with the highest increase in individual credit card debt was Diyarbakır.

EASTERN AND SOUTHEASTERN ANATOLIA LEAD IN DEBT GROWTH

BRSA data on individual credit card and overdraft account usage by province reveals that consumers have been unable to hit the brakes. Particularly sharp increases were observed in some provinces. While the total credit card debt across all provinces was 348 billion 206 million 18 thousand liras in the first 9 months of last year, it rose to 975 billion 806 million 521 thousand liras in the first nine months of this year, an increase of 180.24 percent. In the first nine months, individual credit card debt in Diyarbakır increased by 243.12 percent, followed by increases of 238.4 percent in Şanlıurfa, 230.22 percent in Hakkari, 227.9 percent in Kilis, 217.3 percent in Gaziantep, 212.2 percent in Siirt, and 208.7 percent in Mardin. These provinces saw increases of more than 3 times compared to last year. Eastern and Southeastern Anatolian provinces occupy the top 17 spots on the list of provinces where individual credit card debt has multiplied the most.

PROVINCES MOST AFFECTED BY THE EARTHQUAKE ARE AT THE BOTTOM

There is no province where individual credit card debt has not more than doubled. The provinces with the lowest increase in individual credit card debt are those that experienced the major earthquake disaster most deeply. In the first 9 months, individual credit card debt increased by 149.15 percent in Hatay, 158.8 percent in Malatya, and 162.2 percent in Kahramanmaraş compared to the same period last year. Osmaniye, Gaziantep, Şanlıurfa, and Diyarbakır, which were affected by the earthquake disaster, were at the top in terms of individual credit card debt growth.

The total debt of provinces in overdraft accounts, where interest rates have risen significantly, reached 141 billion 24 million 253 thousand liras in the first 9 months of this year. This shows a 177.6 percent increase over the 50 billion 806 million 426 thousand liras of debt in the same period last year. Hakkari took the top spot in overdraft account growth with a 251.7 percent increase, followed by Iğdır with a 222.9 percent rise and Kars with a 219.5 percent increase. In terms of overdraft account growth, the rate of increase in the provinces most affected by the major earthquake disaster in February remained lower compared to others. Increases of 86.3 percent in Malatya, 99 percent in Kahramanmaraş, 103.1 percent in Hatay, and 122.77 percent in Osmaniye were observed.

TAX IS ALSO PAID ON INTEREST RATES

When the policy rate was 8 percent, the maximum contractual interest rate for credit cards was 1.36 percent, the late payment interest rate was 1.66 percent, and the interest rate for overdraft accounts was 1.66 percent. Currently, the policy rate has been raised to 35 percent. As of today, the maximum contractual interest rate for credit cards will be applied at 3.66 percent, the late payment interest rate at 3.96 percent, the contractual interest rate for cash withdrawals or overdraft accounts at 4.42 percent, and the late payment interest rate in this area at 4.72 percent. These are monthly interest rates. When the annual compound interest rate is calculated, the credit card interest rate has risen to an annual compound of 53.93 percent, the late payment interest rate to 59.36 percent, the overdraft account interest rate to 68.03 percent, and the overdraft account late payment interest rate to 73.92 percent. If a payment below the minimum amount is made by the due date specified in the credit card statement, interest is applied to the unpaid portion of the minimum amount starting from the due date. A 15 percent Resource Utilization Support Fund (KKDF) and a 5 percent Banking and Insurance Transaction Tax (BSMV) are collected on the interest rate.

83% OF TURKEY'S CREDIT CARD DEBT

News Source: 12punto