Ebook Factors Affecting the Probability of Credit Card Default and the Intention of Card Use in Turkey
Changes caused by technological advancements have entered all aspects of human life. A technological achievement that has been introduced into daily life is the use of credit cards as a tool for payment. The use of credit cards has increased substantially worldwide in recent years and is replacing currency as a method of payment.
Use of plastic cards as a payment instrument has dramatically increased in Turkey since the second half of 1990s. There are 21 banks that provide credit cards to their costumers; while the number of credit cards in circulation is 10,045,634 in 1999, it reached to 30,438,883 in 2006; the number of pos devices is 1,196,597 in 2006; and the total amount of purchases and cash advance is 88,628 million New Turkish Liras (60,087 million USD) at the end of 2005 (Interbank Card Center, BKM).
For the general economy and the card holders, there are many advantages of using credit card as a payment instrument such as eliminating the risk of lost or stolen, fulfilling the cash need, providing the possibility of purchases and cash withdrawal anywhere in the world, increasing the number of customers for merchants, reducing the need of cash circulation and letting all money transactions are registered into the economical system (BKM). Cohen (2005) stated that the force that affects the economy in the developed countries is now especially the purchases done with credit cards when compared to individual saving which can be also considered to be true for the developing countries. According to Warren and Warren-Tyagi (2003) credit cards provide temporary opportunities for people to continue their life standards when their income is not sufficient. Beside the benefits of using the credit cards; there are negative sides for a card user.
As credit card and other debt spirals at a society level in Turkey, it brings with it many socioeconomic problems such as divorcing, filing for bankruptcy, committing suicide and killings of family members. For instance, while the number of people who did not pay their credit card debt was 11,829 in 2001, it reached to 182,076 in 2006 (TCMB). On the average, almost 836 and 13,985 people did not pay their debts each month and faced legal procedures in 2000 and 2005, respectively. The number of committing suicide related to the credit card debts in 2006 was 75 and 41 of those lost their lives (Consumers Commission, 2006).
Since socioeconomic consequences of credit card debt have become one of the most common problems in the country, the problem has received widespread attention of media, public policy makers, card issuers and holders and consumer protection agencies. Within this context, it is important to know which factors have impact on the probability of default and intention of credit use as a financial solution during economic hardship.
It has been argued that personal attitudes play an important role in indebtedness. A person who has a positive attitude towards credit card use is more likely to have more than one credit card and have a significant amount of debt (Chen and Devaney, 2001; Davies and Lea, 1995; Hayhoe, Leach, and Turner, 1999). From this perspective, it is also important to identify the factors play a role in the formation of intentional behavior towards credit card use.
There are two aims of this study. First, determining the factors affecting the probability of credit card default; and second, determining if the subjective beliefs, the attitude toward behavior and perceived behavior control, and socio-economic and demographic factors have any explanatory power in the formation of behavioral intention of financing the expenses with credit cards. Ordered probit and structural equation models based on TpB model are used to meet these objectives. The following sections of this paper involve literature review, data and method where the data and model were defined, empirical findings and finally summary and conclusions.
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