An era has ended for credit cards... Major decline in cash withdrawals

Regulations targeting credit cards have proven effective. With the rise in interest rates, many people have reduced their use of cash advances from credit cards.

Compared to the first quarter, these withdrawals decreased by 50.11 percent, and the real decline was calculated at 54 percent.

Following an increase in the tendency to withdraw cash from credit cards and overdraft accounts in the first quarter, the interest rate applied to overdraft accounts and credit card cash advances was set at 5 percent as of March 16.

This rate remained lower than the interest rates on consumer loans, and the default interest rate was increased to 5.3 percent. These measures led to a significant decrease in cash withdrawals made from credit cards.

According to data from the Interbank Card Center (BKM), cash withdrawals made via credit cards, which stood at 182.9 billion liras in the first quarter of last year, showed a significant increase in the first quarter of this year.

Cash withdrawals, which stood at 116.15 billion lira in January and 121.25 billion lira in February, fell to 89.33 billion lira by mid-March due to the impact of interest rate hikes.

This change revealed an increase of 78.65 percent in the first quarter of the year compared to the same period last year, and 21.6 percent compared to the last quarter of the previous year.

Total cash withdrawals made from credit cards reached 326.74 billion liras in the first quarter of the year.

When adjusted for the 15.06 percent increase in consumer inflation, the real increase in this period was determined to be 5.68 percent.

In the second quarter, cash advances from credit cards continued to decline sharply. 52 billion liras were withdrawn in May, and 58.5 billion liras in June.

This situation showed that total credit card cash advances fell to 162.99 billion liras in the second quarter.

Cash withdrawals made via credit cards in the second quarter decreased by 50.11 percent compared to the first quarter.

When adjusted for the 8.4 percent consumer inflation between the two quarters, the real decline stood at 54 percent.

While this decline has led to a significant reduction in cash withdrawals made via credit cards, the expected loss of momentum in credit card shopping expenditures has not been achieved.

The maximum contractual interest rate applicable to credit cards has been set at 4.25 percent, while the default interest rate has been set at 4.55 percent.

In the first quarter of the year, shopping expenditures made with credit cards rose to 2 trillion 565 billion 490 million liras, a figure representing an 18.4 percent increase compared to the last quarter of the year, with the real increase, adjusted for inflation, announced at 2.90 percent.

REJECTION OF CREDIT LIMIT UPDATE REQUESTS

On the other hand, it has been learned that many banks are not responding positively to credit limit update requests. A large number of banks have begun to demand income documentation from customers who wish to update their limits.