America’s painfully slow economic decline is partly fueled by almost $1 trillion of revolving credit card debt, an albatross our imperial credit card companies are all too happy to export. Most of the world’s 3.76 billion credit cards already circulate abroad, “handed out to unsophisticated consumers — as they often are in shopping malls, factories and university campuses in middle-income developing countries.”
“Industry experts” worry that the 100 million credit card users in China and Turkey may not be able to pay off their debts.
At the upscale Akmerkez mall in Istanbul, the siren call of credit is everywhere. Advertisements posted in the doorways of stores promise bonus points if shoppers pay with a preferred card. Big-ticket items like refrigerators can be paid for over several months, provided the purchase is made with plastic.
Turkey’s two biggest card issuers, Yapi Kredi and Garanti, have branches in the shopping mall, with agents busily processing applications. In the anything-goes era before the 2006 law, banks handed out applications to families as they shopped. Cards were issued with only cursory credit checks.
That is how Halim Uzel got his first taste of American-style credit. In 1999, two salesmen from a Turkish bank turned up on the floor of the textile factory where he worked, hawking cards. He showed them identification and his cellphone, filled out a one-page form, and in three weeks received a Visa and a MasterCard in the mail.
By 2001, Mr. Uzel was deep in debt. Earning the equivalent of $4,360 a year, he had nearly $6,000 in unpaid balances on five credit cards. Seven years later, after borrowing from family, friends and even his boss to meet payments, he finally paid off his cards.
“My best years as a young man have been wasted,” said Mr. Uzel, 32, fingering a set of worry beads. “I haven’t had a social life for 10 years. I’ve given the last penny in my pocket to the banks.”
Turkey instituted modest reforms in 2006, long after credit cards trashed South Korea’s economy.
For Turkey or any fast-growing market, the chilling example of a credit culture run amok is South Korea. Frenzied competition in a deregulated market led to the issuance of 148 million credit cards in a country of 49 million people.
Korean banks and industrial conglomerates showered consumers, even high school students, with free, unsolicited cards. They put little effort into credit checks and competed to offer ever bigger cash advances.
As consumers took advances on new cards to pay old ones, debt ballooned. In 2003, with default rates soaring to 28 percent, the industry collapsed. The government had to intervene to rescue issuers; the largest was taken over by banks.
Americans still haven’t figured out how to responsibly use credit cards, and many “industry experts” look at the little wallet weevils as the next subprime meltdown. At least consumer advocate Nazim Kaya is betting that personal responsibility will save the day: “We can’t blame American hegemony for this. We should learn to use credit cards properly.”