Turkish bank cuts credit card costs in latest COVID-19 step, lira drops

Turkey’s central bank lowered the maximum interest rates that banks can charge on credit card debt in a latest measure to soften the financial impact of the coronavirus pandemic. The lira fell.

Lenders may now charge credit card holders 1.25 percent monthly, down from a previous 1.4 percent, the central bank said in a decision published in the Official Gazette at the weekend. Interest rates on overdue borrowing were reduced to 1.55 percent from 1.7 percent. The bank also decreased charges on foreign currency debt.

Turkey is seeking to combat the impact of COVID-19 on economic activity through a 100-billion lira ($15-billion) package of financial measures. The central bank has also slashed interest rates to single digits to help consumers and businesses meet their debt obligations and to encourage new borrowing. Corporate loans in Turkey carry variable rates of interest. 

The Turkish central bank sought to downplay the economic effects of the spread of the coronavirus at the weekend. Deputy Governor Oğuzhan Özbaş told state-run Anadolu news agency on Sunday that Turkey’s economy would be among the least affected by the pandemic and the bank expected it to recover rapidly once the virus’s spread decelerated.

But the Turkish lira has slid along with other emerging market currencies as concerns among investors for the financial resilience of developing economies intensified.

The lira was down 0.9 percent at 6.51 per dollar as of midday local time in Istanbul, taking losses this year to almost 9 percent.

The Turkish economy was only just recovering from a currency crisis that erupted in the summer of 2018 when the pandemic struck. The lira fell by almost one-third against the dollar that year and a further 11 percent in 2019. 

The government’s target for economic growth in 2020 is 5 percent. It has yet to revise that figure despite a sharp slowdown in activity.

Confirmed cases of the coronavirus in Turkey increased by 1,815 to 9,217 on Sunday, Turkish Health Minister Fahrettin Koca said. Deaths rose by 23 to 131.