The increasing use of digital channels and the high cost of carrying cash due to high inflation have driven greater reliance on debit and personal credit cards (PCC). These cards not only facilitate transactions but also offer borrowing options through cash advances and installment payments, contributing to the rise in card spending. In recent years, the surge in card balances—both in nominal and real terms—has been fueled by inflationary pressures and a notable shift in consumer behavior towards using cards over cash. In this blog post, we analyze the real increase in card balances and find that it is largely driven by individuals' tendencies to use cards instead of cash as a means of payment.
There are approximately 28 million active credit card users, 125 million credit cards and 191 million debit cards in Türkiye, and the total volume of card spending reached TRY 12.8 trillion (Charts 1 and 2). The relative affordability of credit card borrowing due to interest rates remaining below inflation from late 2021 to the third quarter of 2023 spurred this growth. However, factors beyond borrowing costs have also played a role, including the convenience of card payments, increased adoption of contactless payments during the pandemic, and a declining preference for cash.
Interestingly, debit card expenditures, which do not involve borrowing, have seen a higher real increase than credit card spending over the same period, suggesting that the shift to card use is largely driven by a preference for convenience rather than credit (Chart 3).[1] From 2015 onwards, personal credit card spending has doubled in real terms, while debit card spending has nearly tripled, with the majority of this growth occurring after 2021 (100% for credit cards and 80% for debit cards).
The number of credit card transactions has been on an upward trend since the outbreak of the Covid-19 pandemic due to advancements in financial technologies in card payments. While the number of annual credit card transactions was around four billion in the pre-pandemic period, this figure approached ten billion in 2024. In addition, the preference for contactless payment (including debit cards), which accelerated in the pandemic and was backed by the advancement of technological infrastructure in payment systems, is increasing further. In 2015, only two million contactless transactions were made monthly, but now this number exceeds one billion. (Chart 4).
The shift in payment preferences is further reflected in household spending patterns. The share of non-installment credit and debit card spending in total household consumption, the largest item of GDP, has increased significantly in recent years. For example, the share of debit card expenditures in household consumption rose from 6.8% to over 10%, while non-installment credit card expenditures grew from 21% to 34% (Chart 5).
Moreover, approximately three-quarters of personal credit card spending occurs without installment plans, and cash advances account for a relatively small portion of total card spending (Chart 6). This indicates that credit cards are being used more as a convenient payment tool rather than primarily for borrowing. The lower-than-inflation growth rate of currency in circulation further supports this, as more individuals opt for cards over cash in their daily transactions (Chart 7).
In summary, the unprecedented rise in card spending in recent years reflects a significant shift in consumer payment habits driven by inflationary pressures and the convenience of card use over cash. As these patterns continue, it is crucial for policymakers and analysts to consider these behavioral shifts when assessing demand conditions and household debt in the economy. Relying solely on traditional indicators such as credit card use may lead to misinterpretations, as increasing card usage—often independent of borrowing needs—can signal changes in spending behavior rather than fundamental shifts in borrower demand.
[1] It is considered that the following factors have pushed the debit card index values above those for PCC since 2015: the base effect (while monthly debit card expenditures were 15% of credit card expenditures in 2015, they are about one fourth currently), the increased tendency of retired people to use debit cards for shopping, and the stronger tendency of foreigners (tourists or residents) to use debit cards compared to credit cards.