BSP maintains 2% interest rate cap on credit cards

The Monetary Board, the governing body of the Bangko Sentral ng Pilipinas, said on Tuesday it was maintaining the cap on interest rates on credit card transactions to help ease people’s financial burden amid the pandemic. persistence of COVID-19.

BSP Governor Benjamin Diokno said in a statement that the Monetary Council decided to maintain the caps on credit card transactions under Circular No. 1098 of September 24, 2020.

The maximum interest rate or finance charge on a cardholder’s outstanding credit card balance remains at 2% per month or 24% per year. Additional monthly rates that credit card issuers may charge on installment loans are withheld at a maximum rate of 1%.

The maximum processing fee on the use of credit card cash advances remains at P200 per transaction.

“The Monetary Board’s decision will continue to help ease the financial burden on consumers through affordable credit card pricing amid the ongoing COVID-19 pandemic,” Diokno said.

“It will also allow BSP to assess the impact of improving macroeconomic fundamentals and easing mobility restrictions on the performance of the credit card industry,” he said.

The latest credit card business activity data shows that demand for credit cards moderated in the second half of 2021 as customers shifted to alternative digital products.

The number of credit cards rose 0.3% to 10.3 million, while monthly card billings increased 33.9% year-on-year to 100.6 billion pesos in December 2021.

Credit card receivables increased by 4.9% year-on-year in December 2021.

Banks and credit card issuers have also been able to maintain the asset quality of their credit card portfolios through intensified corrective and restructuring measures.

The credit card industry’s non-performing loan ratio trended down to 6.8% in December 2021, from an NPL ratio of 8.9% recorded a year ago.

This was accompanied by a consistent record of NPL coverage ratios above 100%, which stood at 109.5% in December 2021.

Banks/credit card issuers posted higher net income on their credit card transactions of 18.5 billion pesos in 2021, compared to the 2020 level. This figure, however, was lower than the levels recorded by the industry before the COVID-19 pandemic.

The credit card industry intends to further reduce operating costs through digital transformation and process improvements and maintaining prudent lending standards.

Limits on credit card transactions remain in effect unless revised by the BSP. BSP said it will closely monitor domestic and external developments that impact the state of credit card funding, the sustainability of credit card operations, and the viability of bank/card issuers. credit.