BSP maintains the credit card interest rate limit

The Monetary Board has decided to maintain maximum credit card limits on credit card transactions.

The maximum interest rate or finance charge on a cardholder’s credit card outstanding balance remains at two percent per month or 24 percent per year.

Similarly, the additional monthly rate that credit card issuers may charge on installment loans is withheld at a maximum rate of one percent. Meanwhile, the maximum processing fee on using credit card cash advances remains at P200 per transaction.

“The decision of the Monetary Board is based on a holistic assessment that considers the evolution of 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 the financial burden on consumers through affordable credit card prices, ”said BSP Governor Benjamin Diokno.

The maintenance of the existing ceiling is in line with the current low interest rate environment. At its last policy meeting, the Monetary Board kept the overnight reverse buyback facility at two percent, the lowest policy rate since the start of the pandemic.

Credit card transactions

Data shows that business credit card activity improved in 2021, as evidenced by growth in monthly card applications, card billing and issued cards driven by a rebound in economic activity.

The number of monthly card applications increased significantly by 175.1 percent year-on-year (YoY) in June 2021 to about 646,000 applications from 235,000 applications in June 2020. Monthly card billing also grew 29.5 percent YoY in June 2021 to P73 billion from P56. .3 billion a year ago.

Meanwhile, the number of credit cards issued and in circulation or credit cards in force rose 8.7 percent year-on-year to 10.2 million cards from 9.4 million during the same period.

Credit card accounts receivable registered consecutive monthly contractions in the first half of 2021, although with a deceleration trend. However, the asset quality of credit card receivables improved during the same period. This was accompanied by a non-performing loan coverage ratio, which has been consistently above 100 percent since February 2021, at 108.2 percent at the end of June 2021.

In addition to demonstrating prudent lending standards, banks and other credit card issuers were able to record net income in their credit card business during the same period due to increased use of credit cards, albeit below pre-pay levels.

Going forward, banks and credit card issuers intend to offer more competitive credit card products, improve customer experience, and reduce operating costs through digital transformation and process improvement. (PR)

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