Turkey limits credit card use for foreign travel

Wednesday, August 2, 2023


Turkey’s banking watchdog restricts credit card use for foreign travel, hurting the tourism sector and curbing currency outflows.

Turkey’s banking watchdog has stopped allowing credit card payments by instalment for foreign travel, such as flights, travel agency fees and accommodation, in a step seen dealing a blow to foreign travel operators.

The move, which hit airline shares and was seen as curbing foreign currency outflows, was one of two measures announced by the BDDK watchdog late on Monday, which it said were among coordinated steps to strengthen financial stability.

Tourism operators say they have been hit in recent years by a cost-of-living crisis and weakness in the lira, which has lost half its value against the dollar since end-2021, with travellers commonly using credit cards to finance trips.

Cem Polatoglu, spokesman of a tour operators’ platform said that almost all of his clients were paying by instalments, noting an average trip for two cost around 50,000 lira ($1,850).

Credit card limitation impacts travel industry

Polatoglu forecast a sharp fall in the numbers going abroad after a surge in spending by Turkish citizens abroad in the first half of the year to $3.17 billion- an 84 per cent increase from the same period in 2022 – with such spending facilitated by credit card outlays.

The credit card move also had an impact on airline share prices, with Turkish Airlines dipping 1.3 per cent and the airline Pegasus dropping 2.3 per cent. Istanbul’s main BIST-100 index was 0.4 per cent lower.

The BDDK also said in a statement late on Monday that it had decided to increase the risk weightings taken into account in calculating capital adequacy standard ratios for consumer loans, personal credit cards and vehicle loans.

Turkish authorities have recently taken steps aimed at reining in chronic high inflation and reducing domestic demand, with the central bank hiking interest rates by 900 basis points in two months alongside other tightening measures.

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