Credit card instalments: A non-exploitative way to raise global economy?

Abstract

The history of Turkish credit cardinstalmentscan be traced back tothelate 1990s when certain nonprocedural–if not fraudulent–point-of-sale level transactions forced banks to launch an instalment feature for their credit cards. Paying ininstalmentsis the most popular form of credit card purchase in Turkey.Forty per centof total transactions are for instalment purchases. As a consumer makes a purchase in instalments bytheircredit card, the price is split into multiple payments,or instalments. Thoseinstalmentsare charged to the consumer’s credit card automatically every 30 days until the full price has been covered.While theMasterCard Instalmentsprogram, which launched in 2016, enables consumers to split transactions across equal monthlyinstalmentswith an interest, the Turkish credit cardsoffer no interest point-of-sale instalment options. This makes higher-priced purchases, such as white goods, electronics,airlinetickets, schooling fees and so on, more attainable and manageable for consumers.The Central Bank of the Republic of Turkey(CBRT) according to its macroprudential policies restricted the number of maximum instalments for credit card purchases in 2015. Yet,CBRThad to loosen those restrictions after the economic collapse caused by the pandemic. The increasing number of instalments for credit card purchases has enabled consumers to access to the big-ticket items, which in turn has paved the way for a multiplier effect in the Turkish economy. This paper seeks for an alternative, yet a non-exploitative way to raise global economy by an interest-free credit facility, i.e. credit card instalments.