BSP keeps 2% monthly cap on credit card rates

Published November 26, 2021, 3:09 PM

by Lee C. Chipongian

Credit card holders will continue to pay only two percent monthly finance charges on their unpaid outstanding credit card balance, according to the Bangko Sentral ng Pilipinas (BSP).

The BSP announced Friday, Nov. 26, that the two percent ceiling per month or 24 percent per year limit on credit card rates or charges will “remain effective unless revised by the BSP”. As for how long it will keep this limit will depend on the ceiling’s impact on credit card financing and sustainability of credit card operations amid the COVID-19 pandemic, said the BSP.

BSP Governor Benjamin E. Diokno said the decision was “based on a holistic assessment considering the developments in the macroeconomy, the state of credit card financing as well as the safety and soundness of banks and other credit card issuers.”

BSP Governor Benjamin E. Diokno

“It will also continue to help ease financial burden of consumers through affordable credit card pricing,” said Diokno.

The lower credit card rates and charges was first approved in September 2020 under Circular No. 1098 but it was implemented in November of the same year. Aside from the interest rate or finance charge ceilings, the monthly add-on rates that credit card issuers can charge on installment loans has also been retained at a maximum rate of one percent while the maximum processing fee on the availment of credit card cash advances is still P200 per transaction.

Credit card business activity based on monthly card applications, card billings and issued cards continued to improve this year.

According to the BSP, the number of monthly card applications increased by 175.1 percent year-on-year in June to 646,000 from 235,000 applications same time 2020.

Monthly card billings went up by 29.5 percent to P73 billion in June from P56.3 billion last year. The number of credit cards that were issued and outstanding or credit cards-in-force also grew by 8.7 percent to 10.2 million cards from 9.4 million in 2020.

The BSP said credit card receivables however continued to contract but at a decelerating trend. “Notwithstanding this, the asset quality of credit card receivables improved (in the first semester 2021). This was accompanied by non-performing loan coverage ratio, which has been consistently above 100 percent since February 2021, at 108.2 percent as of end-June,” said the BSP. As of September, credit card loans amounted to P402.41 billion, 0.3 percent lower than the previous year’s P403.43 billion.

To ensure affordable credit card pricing, the BSP reviews credit card rates and fees every six months.

Before the imposition of the ceiling in November last year, the average maximum rate that banks are charging credit cardholders is about 36 percent per year while credit card cash advances are charged from P500.