Use credit cards ‘for payments, not loans’: Turkish Deputy PM

ANKARA - Hürriyet Daily News

Deputy Prime Minister Ali Babacan speaks at a press meeting before his departure from Ankara’s airport for the G-20 Meeting in Moscow. The government aims to reduce bank costs in commercial credits, he says. AA photo

Credit cards should not be used for loans but rather for payment purposes, Turkish Deputy Prime Minister Ali Babacan said on July 19, following up on the prime minister’s recent appeal to citizens to stop using credit cards.

Ali Babacan said credit cards were the most expensive way of borrowing and that they had been working for the responsible use of credit cards, during a press conference before his departure from Ankara’s Esenboğa International Airport for the G-20 Meeting in Moscow.

Prime Minister Recep Tayyip Erdoğan publicly slammed banks for collecting large sums of money from the “poor.” “Those credit cards: Don’t have them. If everybody spends as much as they [banks] want, they would not even be able to earn that income. They could never be satiated,” Erdoğan said on July 16.

However, Babacan stated that credit cards had been distributed on the streets in the past. “But now, without a letter of application, such a thing is impossible. Credit cards should not be used for loans but for payment purposes”, he said.

Babacan stated that the “omnibus bill,” which was approved by the parliament, would enable the Central Bank to put limits on commercial credit cards.

Central Bank to be able to limit interest of card

“During our work, we noticed that very short-term commercial credits have very high monthly interest rates like 5-6 percent, then we authorized the Central Bank and it launched a limit immediately by using its authority,” said Babacan, adding that the second subject was the interest of commercial credits, which are usually used by craftsmen. He said that after the omnibus bill was approved by the president, the Central Bank would be authorized to put a limit on the interest of credit cards. “We believe that these two steps will lead to a decrease in the average interest for commercial credit,” he said. The omnibus bill was expected to be sent to President Abdullah Gül on July 19.

He also added that the possible measures for reducing bank costs in commercial credits would be on the agenda of the Financial Stability Committee next week.

Recalling the statement of the Central Bank about the interest rates increase on July 15, he indicated that after the statement, the foreign exchange market recorded more than $1 billion inflow of foreign currency.

Meanwhile, Minister of Customs and Trade Hayati Yazıcı said on July 18 during a press meeting that there were 56 million credit cards and 95 million debit cards registered in Turkey according to official data for May. Yazıcı stated that 23 percent of banks’ loans were made by the consumers. He said credit cards accounted for the major part of consumer loans, adding that their cost was high.