Central Bank Increases Interest Rates for Credit Card Cash Advance Withdrawals and Overdraft Accounts

The Central Bank continues its tightening steps before the interest rate decision to be announced on Thursday. The bank recently increased the interest rate for cash advance withdrawals by credit card from 4.42% to 5%. In addition, the interest on overdraft accounts, also known as additional accounts, increased to 5%.

Within the scope of additional tightening steps, the Central Bank (CBRT) increased the interest rate for cash withdrawals from credit cards and overdraft accounts to a level compatible with the consumer loan interest rate, and took new steps to increase the share of Turkish lira (TL) deposits in the banking system. The Central Bank’s Communiqué on Amending the Communiqué on Maximum Interest Rates to be Applied in Credit Card Transactions was published in the Official Gazette.

Interest rate for cash advance withdrawal increased to 5%

Last week, another tightening step came after some banks reduced the number of credit card cash advance installments and some banks reduced the maturity number of interest-free loans up to ₺10 thousand offered to their new customers.

As part of additional tightening steps, the Central Bank increased the interest rate for cash withdrawals from credit cards and overdraft accounts. Accordingly, the interest rate for cash advance withdrawals by credit card increased from 4.42% to 5%. The interest on banks’ overdraft accounts (overdraft accounts), also known as additional accounts, increased to 5%.

After the Central Bank’s additional tightening steps, deposit and commercial loan interest rates reached the highest level in 22 years. Accordingly, in the week of March 8, the 1-month deposit interest increased from 44.56% to 45.14%. 3-month deposit interest increased from 53.25% to 53.63%. This rate was recorded as the highest level since October 2002. Average commercial loan interest rates reached 55.76% in the week of March 8, reaching a 22-year peak.

In the week of March 1, this rate was at 54.06%. This rate last increased to 54.36% in the week of February 9, reaching the highest level since March 2002. There was a more remarkable increase in loan interest rates. Accordingly, last week, consumer loan interest increased from 60.44% to 63.36%, reaching the highest level in 9 weeks.

Average consumer loan interest rates reached a 22-year peak with 63.42% in the week of January 5. Mortgage loan interest rate is 41.32% and commercial loan interest rate is 55.76%. After the increase in consumer loan interest, the interest rate applied for cash advances remained lower than the consumer loan interest rate. With the change made, this difference was eliminated.

Half of the credit growth came in the last two weeks

Last week, in the news about credit growth, we drew attention to the rapid credit growth experienced in the last two errors. Accordingly, the total credit volume in the banking sector, which has increased by ₺930.6 billion since the beginning of the year, accelerated in March. Total loan volume, which increased by ₺160 billion in the week of March 1, increased by ₺229 billion in the week of March 8. Thus, the credit volume of the banking sector increased to ₺12 trillion 592 billion 620 million last week.

In other words, almost half of the 3-month total growth occurred in these two weeks. The amount of consumer loans increased by ₺17.8 billion to ₺1.6 trillion as of March 8. ₺440.3 billion of the loans in question consisted of housing loans, ₺93.3 billion of vehicle loans and ₺1.1 trillion of consumer loans. With the implementation instruction sent by the Central Bank to the banks, the TL share targets applied to real and legal persons were also updated.

Accordingly, a monthly increase target was introduced for the legal entity TL share of banks. Previously, there was no increase target for the legal entity TL share compared to the previous month, and the level on August 18, 2023 had to be maintained. In addition, the monthly increase targets for the real person TL share, which were determined differently according to banks’ TL share levels, were updated and the commission rate to be applied in case the targets are not met was increased.

All eyes are on the Central Bank’s interest rate decision

The Central Bank will announce its interest rate decision on Thursday. It is eagerly awaited what decision the Central Bank, which has accelerated its tightening steps within the scope of combating inflation, will make. Economists expect the Central Bank to keep the policy rate constant. At the MPC meeting held last month, the policy rate was kept constant at 45%.

According to the CBRT Market Participants Survey, its expectation regarding the policy rate for the end of the current month was 45% and 46.85% for the next 3 months. The policy rate expectation for the next 12 months also increased from 36.62% to 36.96%. According to the survey, the consumer inflation (CPI) increase expectation in March, which was 3.17% last month, increased to 3.43% in this survey period. Last week, Goldman Sachs and Bank of America announced that the Central Bank could increase the interest rate to 50%.

Source: / Prepared by Irem Yildiz

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