Banking watchdog to tighten credit card use

ANKARA / ISTANBUL

The single-limit rule will be the case for all of the credit cards of the card holder. If card holders earn 3,000 Turkish Liras a month, their first credit card’s limit will not be allowed to exceed 6,000 liras in the first year. DAILY NEWS photo, Hasan ALTINIŞIK

Turkey’s banking watchdog (BDDK) has announced new regulations which will bring about a series of stricter rules on the use of credit cards, just after Turkish Deputy Prime Minister Ali Babacan launched the government’s economic outlook for the mid-term, giving many details of the new rules. 

The card limit for people applying for a credit card will not be permitted to exceed twice the amount of their monthly income in the first year of ownership; then, the limit will increase up to a maximum of four-fold of the income in the following years, according to the new rules.

All of these limits will be applicable to all banks. The single-limit rule will be the case for all of the credit
cards of the card holder. If card holders earn 3,000 Turkish Liras a month, their first credit card’s limit will not be allowed to exceed 6,000 liras in the first year, but can increase up to 12,000 liras in the following years. If their credit card’s limit from a bank is around three-fold of their income in the following years, their new card’s limit from other banks will not be permitted to exceed one-fold of their income in total. 

People who cannot submit income certificates are able to apply for a credit card, but their limits cannot exceed 1,000 liras, according to the new rules. 

The rules on announcement of income do not affect existing card-holders and they do not need to submit their income certificates to their banks. They, however, need to do this when they ask for a raise in their card limits. Their limits cannot exceed four-fold of their incomes as well. 

Minimum payments on the rise

Minimum payments on credit card debts will also increase, according to the new regulations. In this vein, persons whose credit card limits are up to 15,000 liras will pay 30 percent of their debt as a minimum payment rather than the 25 percent, as of January 2014. And the card-holders whose limit is between 15,000 and 20,000 liras will pay 35 percent of their debt rather than 30 percent. No changes were made for cards which have over a 20,000-lira limit. The holders of such cards will continue to pay 40 percent of their debts in minimum payment. 

Some dramatic changes have also been made in the rules regarding the cases of people unable to pay their debts. According to the former rules, when they could not pay their minimum payment three times, their card would be barred from using the “cash advance” feature until they had paid off all debt. Now, if people cannot pay their minimum payment three times successively, their card will be temporarily closed both to “cash advance” and spending. Such cards will not be reopened until all of the debts are paid. 

Turkey’s economy administration said they were trying to offset the uncontrolled use of loans and credit cards in the domestic market and to decrease household debt levels. 

“We have given great importance to the latest and forthcoming limits on credit cards and consumer loans,” said Babacan late on Oct. 8 during a meeting when he announced the new economic outlook. 
He said they were aware of some negative effects of the latest regulations on banks’ payments of balance. 

“The BDDK considered these effects, but the loans exceed the total deposits. We need to be careful here,” he said. 

Meanwhile, the loan volume of Turkey’s banks increased up to 1 trillion liras this September from approximately 535 billion liras in 2010.