BSP keeps rate cap on credit card transactions

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has maintained the cap on interest rates on all credit card retail purchases and cash advances at 36 percent per year or three percent per month.

BSP Governor Eli Remolona Jr. said the Monetary Board decided to retain the existing ceilings on credit card transactions imposed under Circular 1165 issued in January.

“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,” Remolona said.

Aside from the maximum interest rate or finance charge on the unpaid outstanding credit card balance of a cardholder, the monthly add-on rates that credit card issuers can charge on installment loans was also retained at a maximum rate of one percent.

Likewise, the maximum processing fee on the availment of credit card cash advances stays at P200 per transaction.

The regulator vowed to pursue strategies to promote digitalization in the financial industry.

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

Under its Digital Payments Transformation Roadmap, the BSP aims to shift 50 percent of all retail transactions to electronic channels and increase the number of banked Filipino adults to 70 percent before the end of the year.

As more Filipinos embraced digitalization as an offshoot of the COVID pandemic, the share of digital payments to total retail transactions increased to 42.1 percent in 2022 from 33.3 percent in 2021, while the number of Filipino adults with bank accounts almost doubled to 56 percent in 2021 from 29 percent in 2019.

Meanwhile, BSP’s ongoing efforts to instill the importance of the responsible use of credit cards as part of financial literacy programs will help consumers make sound personal financial decisions.

“All these efforts are geared towards ensuring a resilient, dynamic and inclusive financial system,” it said.

Latest data from the central bank showed that credit card receivables jumped by 29 percent to P599.67 billion in the first five months from P464.78 billion in the same period last year on the back of firm demand for credit cards as evidenced by 34.6 percent year-on-year growth in credit card billings.

Amid the expansion in credit card receivables, banks and issuers maintained the quality of their credit card portfolio with a lower non-performing credit card receivables ratio of 3.9 percent as of end-May this year from 6.9 percent last year.

The BSP said non-performing credit card receivables declined by 20.1 percent to P23.4 billion from a year-ago level of P29.3 billion.