BSP keeps 3% interest rate ceiling on credit card transactions

The Bangko Sentral ng Pilipinas’ (BSP) policy-setting Monetary Board has kept the 3% interest rate ceiling on credit card transactions unchanged.

“The BSP’s decision to maintain the current ceilings on credit card transactions strikes a balance between providing consumers with access to credit card financing at steady rates and ensuring long-term viability of banks/credit card issuers so that they can continue to provide quality service to their clients,” BSP Governor Eli M. Remolona, Jr. said in a statement on Tuesday.

The maximum interest rate on unpaid outstanding card balance of a cardholder was maintained at 3% per month or 36% a year.

Meanwhile, the monthly add-on rate that credit card users can charge on installment loans is still at 1%.

The maximum processing fee for credit card cash advances will remain at PHP 200 for each transaction. 

The BSP will review the ceilings on credit card transactions after six months.

The move followed the earlier decision of the Monetary Board in January, where it hiked the credit card cap to 3% from 2% previously. This was meant to reflect the BSP’s policy tightening and to mitigate the impact of inflationary pressures on banks and credit card issuers. 

The BSP hiked its benchmark interest rate by 425 basis points to a near 16-year high of 6.25% from May 2022 to March 2023.   

Under the Republic Act (RA) No. 10870 or the Philippine Credit Card Industry Regulation Law, the BSP has supervisory authority over all credit card issuers.

As of end-May, credit card receivables grew by 29% annually, higher than the 17.1% year-on-year growth registered a year ago.

Credit card billings surged by 34.6% as of end-March, from the 28.5% growth a year ago, reflecting the firm demand for credit cards, the BSP said.

Banks and credit card issuers also maintained the quality of their credit card portfolio amid the expansion in receivables.

Nonperforming credit card receivables reached PHP 23.4 billion as of end-May, lower than PHP 29.3 billion in the previous year.   

The ratio of nonperforming credit card receivables to credit card receivables also declined to 3.9% as of end-May from 6.3% as of end-2022.

According to the central bank, it will continue to pursue strategies in promoting digitalization in the financial industry.   

“Through the prudent use of innovation, banks/credit card issuers will be able to improve delivery of their services as well as enhance customer experience at lower operating cost,” it said.   

The BSP will also continue to highlight the importance of responsible credit card usage in its financial literacy programs. This will help consumers make appropriate personal financial decisions.   

“All these efforts are geared towards ensuring a resilient, dynamic and inclusive financial system,” the BSP said. — Keisha B. Ta-asan