Rapid increase in individual credit card and overdraft account debt

Credit card and overdraft account expenditures, which the Central Bank, economic management, and the banking sector frequently draw attention to, literally exploded in all provinces last year. According to the report by Şebnem Turhan from Ekonomim, based on the Banking Regulation and Supervision Agency's (BDDK) Fintürk data, the increase in individual credit card and overdraft account usage in provinces at least doubled, while the share of these two expenditure items in total individual loans exceeded 50 percent. This indicates a total growth of 16.5 points compared to 2022. In some provinces, credit card and overdraft account expenditures alone accounted for nearly 65 percent of individual credit debt.

POLICY RATE HIKES ARE NOT BEING REFLECTED

BDDK Fintürk has announced the 2023 banking sector data for the provinces. The data revealed that individual customers achieved a very rapid growth in overdraft account and credit card expenditures. During the period until the May 2023 elections, when a low-interest policy was implemented, credit card and overdraft account interest rates remained well below consumer loan interest rates. Following the hikes made by the new Central Bank to the policy rate after June 2023, overdraft account and credit card interest rates also increased; however, the policy rate hikes made over the last four months are not being reflected in credit card and overdraft account interest rates.

TOTAL OVERDRAFT ACCOUNT EXPENDITURE INCREASED BY 156.6 PERCENT

Based on calculations from Fintürk data, the total increase in overdraft accounts in the provinces in 2023 compared to 2022 was 155.6 percent. When Hatay, Malatya, Adıyaman, and Kahramanmaraş, which were most affected by the earthquake on February 6, 2023, are excluded, the total growth in overdraft accounts in the provinces compared to 2022 rose to 156.6 percent. Due to the losses experienced in the earthquake-stricken provinces, expenditures showed lower rates of increase compared to other provinces. In 2022, when the 4 provinces were excluded, the total overdraft account expenditure was 65 billion liras, while this figure rose to 166.64 billion liras in 2023.

Overdraft account expenditures increased by 2.5 times or more in 49 provinces. The highest increase was seen in Hakkari with 245.5 percent, followed by Yalova with 193.7 percent, Kars with 190.7 percent, Iğdır with 186.3 percent, Ordu with 185.8 percent, and Düzce with 184.9 percent. Among the three major cities, the increase in overdraft accounts was 168.1 percent in Istanbul, 150.31 percent in Ankara, and 166.4 percent in Izmir. Excluding the 4 provinces heavily affected by the earthquake, the lowest increases occurred in Tunceli with 90.2 percent and Osmaniye with 99 percent. The picture is not very different for individual credit card expenditures. Individual credit card expenditures in the provinces increased by a total of 157.2 percent in 2023 compared to 2022, and when the four provinces affected by the earthquake are excluded, the increase reached 163.2 percent. Again, excluding the four provinces most affected by the February 6 earthquake, while total individual credit card expenditures in the provinces were at the level of 436.7 billion liras in 2022, this figure rose to 1 trillion 149.4 billion liras in 2023. The highest increase in individual credit card expenditures occurred in Hakkari with 238.4 percent. Hakkari maintained the top spot it captured with its increase in overdraft accounts in the increase of individual credit card expenditures as well. Şanlıurfa took second place in the increase of individual credit card expenditures with 221.4 percent, followed by Diyarbakır with 221.3 percent, Kilis with 203.2 percent, Siirt with 201.5 percent, and Adana with 199.2 percent. The increase in individual credit card expenditures in the three major cities was calculated as 146.8 percent in Istanbul, 165.8 percent in Ankara, and 156.4 percent in Izmir. Excluding the provinces most affected by the earthquake, the province where individual credit card expenditures increased the least was Konya with 144.4 percent, followed by Istanbul and Bursa with a 153.1 percent increase.

According to the data, in 2023, the increase in individual credit card expenditures showed a growth of 2.5 times or more in nearly 75 provinces.

SHARE WITHIN INDIVIDUAL LOANS INCREASED RAPIDLY

The rapid increase in individual credit card and overdraft expenditures also caused the share of these two groups within individual loans to rise rapidly. While the share of individual credit cards and overdraft accounts in total individual loans was at the level of 33.66 percent in 2022, it rose to 50.2 percent in 2023, increasing by 16.52 points at once. The province where the share of individual credit card and overdraft account expenditures within individual loans increased the most was Mardin with 22 points. In Mardin, the share of individual credit cards and overdraft accounts in the province's individual loans reached 64.24 percent. In Batman, with a 21.2 point increase, the share of individual credit card and KMH debts in the province's individual loan volume rose to 65.21 percent.

In Şanlıurfa, the share reached 61.51 percent with a 20.7 point increase. According to the data, in 18 provinces, the share of individual credit card and KMH debt within that province's individual credit debt was 50 percent or more. The lowest rate was obtained in Istanbul with 48.57 percent. Even in Istanbul, the increase in the ratio of individual credit and KMH debt to the province's total individual credit debt was 14.87 points in 2023.

News Source: 12punto