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Manila Bulletin devider Business devider BSP approves higher 3% cap on credit card rate

BSP approves higher 3% cap on credit card rate

Published Jan 13, 2023 03:50 pm

The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas (BSP), approved today, Friday, Jan. 13, the monthly interest rate ceiling on credit cards to three percent from two percent.

The BSP circular has been signed and awaiting approval for an official press release, according to central bank officials. The circular will take affect 15 days after its publication.

The three percent monthly cap or 36 percent per year means cardholders will be paying higher credit card payments. Since November 2020, credit card rates had been pegged at two percent per month or 24 percent annually.

The BSP’s policy-making arm, the Monetary Board, chaired by BSP Governor Felipe M. Medalla, has initially deferred its decision to raise the credit card rate and charges in November last year to allow the market to get used to the idea that the ceiling will be increased this month.

Manila Bulletin reported on Wednesday, Jan. 11, that the BSP was reviewing the proposal to increase to three percent the monthly maximum interest rate or finance charge on unpaid credit card balances.

Medalla has repeatedly said that adjusting the ceilings was necessary because benchmark interest rates have gone up by 350 basis points (bps) since May 19 until Dec. 15, 2022.

The temporary policy that allowed credit cardholders to pay no higher than two percent interest rate per month or 24 percent per year was one of BSP’s pandemic relief measures. It was first implemented in November 2020 under Circular No. 1098. At the time, the BSP policy rate was still a flat two percent.

However last year, on Nov. 15, the BSP decided to keep the two percent monthly cap on credit card rates until the end of this month to allow the public more time to prepare for the planned adjustment.

The BSP deferred any adjustment in the ceilings because it was still closely monitoring “evolving domestic and external developments that will impact the state of credit card financing, sustainability of credit card operations and viability of banks/credit card issuers.”

Besides the ceiling on credit card rates and charges, the November 2020 circular also imposes a limit on the monthly add-on rates that credit card issuers can charge on installment loans, which is a maximum rate of one percent.

The maximum processing fee on the availment of credit card cash advances, meantime, is P200 per transaction. Before the pandemic, credit card cash advances are charged P500 per transaction.

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