The interest rate on credit card transactions is still capped at 2% per month

As the adoption of credit cards among Filipino consumers continued, the Monetary Board decided to keep the maximum limits on interest rates and finance charges unchanged, to help ease the financial burden on users.

According to Circular No. 1098 of Bangko Sentral ng Pilipinas (BSP) dated September 24, 2020, the maximum interest rate or finance charge on the outstanding balance of a cardholder’s credit card is fixed at 2 percent per month or 24 percent per year.

Holistic assessment

The additional monthly rate that credit card issuers can charge for installment loans was also kept at a maximum rate of 1 percent.

Additionally, 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 developments in the macroeconomy, the state of credit card financing, as well as the safety and soundness of banks and other credit card issuers,” said the BSP Governor Benjamin E. Diokno in a statement.

“It will also continue to help ease the financial burden on consumers through affordable credit card prices,” Diokno said.

Increase in applications

He added that the retention of the existing ceiling was in line with the current low interest rate environment.

At its latest policy meeting, the Monetary Board kept the overnight reverse buyback facility at 2 percent, the lowest policy interest rate since the start of the pandemic in early 2020.

According to the BSP, the number of monthly card applications skyrocketed 175 percent year-on-year in June 2021 to around 646,000 applications from 235,000 applications in the same month last year.

In the same comparative months, card billing increased 29.5 percent year-on-year to P73 billion from P56.3 billion.

As of last June, there were a total of 10.2 million credit cards, both valid and newly issued, representing a 9 percent increase from 9.4 million cards in the same month of 2020.

The BSP also said that credit card accounts receivable had contracted monthly in the first half, albeit with a slowing trend.

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