The Bangko Sentral ng Pilipinas (BSP) will review in the next days or week whether it will keep or not the current three percent monthly ceiling on credit card interest rate and finance charges or the 36 percent cap per year on unpaid credit card balances.

BSP Deputy Governor Chuchi G. Fonacier said the financial supervision sector (FSS) which she heads, will submit its recommendation to the Monetary Board this month. The seven-person Monetary Board is BSP’s policy-making arm.

The BSP last August 2023 extended for another six months its imposition of the three percent monthly ceiling as one of the pandemic-related relief measures.

The order lapsed in February 2024. BSP has to decide this month if it will maintain the current ceiling, raise it or remove it entirely.

“Many factors are being considered,” according to Fonacier. “It’s a long process before we can finalize (our recommendation),” she added in a text message.

The BSP has previously noted that in deciding to retain the interest rate and finance charge limit, it has observed the increase in credit card receivables and credit card billings.

Since May 2022, the BSP benchmark rate has been increased by 450 basis points (bps) to 6.5 percent. However, the consensus is that BSP will start to cut the benchmark rate after the second quarter this year, therefore it could still decide to maintain the three percent monthly cap for credit card rate and charges.

When the BSP decided to still impose the ceiling last August, BSP Governor Eli M. Remolona Jr. at the time said the three percent cap should strike a balance between providing consumers with access to credit card financing at steady rates while still ensuring the long-term viability of banks and credit card issuers.

Since the BSP reviews the interest rate ceiling from time to time, it is able to monitor and assess if cardholders are coping with the increased payments on their credit card balances.

The ceilings on credit card transactions are temporary relief measures. It was given for cardholders’ reprieve during the pandemic and to allow them affordable access to credit. 

In November 2020, the cap was lower at two percent monthly or 24 percent per year. However on January 2023, the BSP raised this ceiling to three percent.

The BSP continues to limit how credit card issuers are charging cardholders in terms of monthly interest rate and fees on transactions in recognition of financial consumers’ struggle to meet payments on time amid higher interest rates and the increase in banks’ minimum payment dues.

Besides the three percent monthly ceiling, the monthly add-on rates that credit card issuers can charge on installment loans is also restricted to a maximum rate of one percent while the maximum processing fee on the availment of credit card cash advances is P200 per transaction.

As of end-December 2023, big banks’ credit card loans totaled P719.63 billion, up by 29.6 percent year-on-year, based on BSP data.

Credit card receivables which are pending credit card payments as of end-September 2023 was at P656.949 billion, higher than P613.666 billion in the previous quarter.

Total non-performing loans (NPL) for this segment increased to P386.945 billion during the period versus P382.315 billion as of end-June 2023.

Before the imposition of the ceilings in November 2020, the average maximum rate that banks are charging credit cardholders is 36 percent per year while credit card cash advances are charged from P500.