The Bangko Sentral ng Pilipinas has opted to maintain the cap on interest rates for credit card transactions, as stipulated in Monetary Board Circular No. 1098 dated September 24, 2020.
This means the maximum interest rate or finance charge on the unpaid outstanding credit card balance of a cardholder remains at 2 percent per month or 24 percent per year.Similarly, the monthly add-on rates that credit card issuers can charge on installment loans is retained at a maximum rate of 1 percent. Meanwhile, the maximum processing fee on the availment of credit card cash advances stays at P200 per transaction.
“The decision is based on a holistic assessment of developments in the macroeconomy, the state of credit card financing as well as the safety and soundness of banks and other credit card issuers. It will also continue to help ease financial burden of consumers through affordable credit card pricing.” BSP Governor Benjamin Diokno added.
The retention of the existing ceiling is in keeping with the current low-interest rate environment fostered by the BSP. The interest rate on the BSP’s overnight reverse repurchase facility was maintained at 2.0 percent, which is the lowest policy rate since the beginning of the coronavirus pandemic.
The credit card industry also remains safe and sound. Based on results of a survey conducted by the BSP, banks and other credit card issuers were able to post net income on their credit card business as of end-December 2020 from increased credit card usage and streamlined operations resulting in lower administrative costs. Credit card companies also adopted a more prudent stance by increasing provisions for credit losses on credit card loan accounts in anticipation of rise in non-performing credit card loans. The BSP expects that the operationalization of the Financial Institutions Strategic Transfer Act will help temper further rise in non-performing credit card loans this year. SOVEREIGNPH