2% cap on credit card charges starts

Published November 4, 2020, 6:00 AM

by Lee C. Chipongian

Credit card users will have lower billing statements after November 3 with the adoption of ceilings on interest rate, finance charges and fees on all credit card transactions.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno ( Bloomberg )

“Starting on this date, interest or finance charges on unpaid outstanding credit card balance should not exceed 24 percent annually or two percent per month,” said Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno on Tuesday. “The monthly add-on rate for credit card installment loans should not exceed one percent per month and the processing fee on the availment of credit card cash advances should not exceed P200 per transaction,” he added.

Diokno’s statement yesterday was also a reminder for banks to follow the new BSP rule as approved under BSP Circular No. 1098 last September 24.

The BSP has provided helpful FAQs to explain the rationale of imposing the ceilings with illustrative examples on the calculation of interest, finance charges and fees.

Visa Inc. and Mastercard Inc. credit cards. (Bloomberg file)

“The policy initiative, which is pursuant to the BSP’s supervisory authority over credit card issuers under the Credit Card Industry Regulation Law, is seen to foster responsible credit card lending in the country,” said the BSP.

The BSP will be reviewing credit card rates and fees every six months.

Early on, the banking community as represented by the Bankers Association of the Philippines has assured the BSP that they will comply with the new rules on credit card rates and fees to “help ease the burden of every household including businesses severely affected by the pandemic”.

From January to June, the average annualized interest rate on credit card receivables range from 18 percent to 58 percent, according to central bank numbers. Based on the credit card business activity report, the average annualized interest rate for all types of cardholders both for premium and non-premium as of June this year was around 26 percent.

The BSP said it will be monitoring banks’ credit card interest rates and fees after the November 3 effectivity date.

As of end-August, credit card receivables or loans totaled P405.78 billion, up by 24 percent from P326.91 billion same time in 2019.