Surge in loan and credit card costs amidst interest rate hike
Existing borrowers and credit card debtors are now burdened with higher repayment obligations because of a significant increase in interest rates. After the recent policy decision, the policy interest rate has skyrocketed to 35% from its previous level of 8.5% before the elections.
The policy shift has resulted in higher credit card and commercial loan interest rates. The benchmark interest rate has reached 3.16% monthly (46.1% annually compounded), and credit card default rates have risen to 3.71% monthly (55.9% annually compounded).
The interest rate for cash withdrawals on credit cards has risen from 4.02% to 4.47% monthly, resulting in an annual rate of 70.3%. Card member merchant commission rates have been increased from 3.16% to 3.61% monthly (54% annual compounded).
The upper limit of interest rates in commercial lending has increased from 69.3% to 83% with a multiplier of 1.8. Likewise, the cap for interest rates on export and investment loans has been raised from 53.9% annually to 64.5%. The interest cap on consumer loans over 70,000 TL has been raised from 77% to 92.2%.
The economic administration plans to revise credit card installment plans to curb high inflation. The signal for this move was given in the ‘2024 Presidential Annual Program’ published in today’s issue of the Official Gazette. Monetary policy tools will continue to be vigorously used to reduce inflation, while fiscal and revenue policies will be coordinated.
According to the program, measures will be implemented to prevent consumption increases that fuel inflation. This includes additional measures concerning the number of installments for shopping and cash withdrawals using credit cards, showing a tighter grip on consumer credit and spending in response to the economic challenges.