Credit card rates still pegged at 2% per month

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is likely to keep the cap on credit card transactions at two percent per month or 24 percent per year amid the low-interest rate environment as the country continues to recover from the impact of the pandemic.

Subject to the confirmation of the Monetary Board, the interest rate or finance charge ceiling on unpaid credit card balance approved more than a year ago would likely be retained.

“There’s no change in policy,” BSP Governor Benjamin Diokno said in a text message.

The STAR first reported that the BSP was imposing a two percent per month and 24 percent per year interest rate or finance charge cap on unpaid credit card balance.

Likewise, the monthly add-on rates that credit card issuers can charge on installment loans was retained at a maximum rate of one percent, as well as the maximum P200 per transaction processing fee on the availment of credit card cash advances.

The BSP formalized the imposition of the ceiling approved by the Monetary Board through Circular 1098 issued in late September 2020, and the cap took effect on Nov. 3, 2020, to help Filipinos cope with the impact of the pandemic.

The maximum rates and fees are subject to review by the BSP every six months.

Prior to the imposition of the cap, the annualized interest rate on credit card receivables stood at an average of 36 percent.

Philippine banks and credit card issuers have reported lower earnings since the ceilings were imposed on credit card charges.

The BSP has maintained an accommodative monetary policy stance by keeping interest rates at record lows since November 2020 to help the economic recovery gain more traction.

As part of its heavy lifting and COVID response measures, the central bank slashed interest rates by 200 basis points in 2020, bringing the benchmark rate to an all-time low of two percent.

Latest data from the central bank showed that consumer loans extended by universal and commercial banks rose by 3.6 percent to P867.79 billion in end-March.

Credit card loans booked a strong 12.1 percent increase to P446.06 billion, offsetting the 4.2 percent decline in auto loans to P333.16 billion and 5.5 percent decrease in salary-based general purpose consumption loans to P73.98 billion.

In end-March, credit growth accelerated by 8.9 percent to P9.78 trillion from P8.98 trillion amid the continued reopening of the economy from strict COVID quarantine and lockdown measures.