BSP maintains ceilings on credit card transactions

·2 min read

THE Monetary Board has maintained the credit card ceilings on credit card transactions under Circular 1098 dated Sept. 24, 2020.

In this regard, the maximum interest rate or finance charge on the unpaid outstanding credit card balance of a cardholder remains at two percent per month or 24 percent per year. Similarly, the monthly add-on rates that credit card issuers can charge on installment loans are retained at a maximum rate of one percent.

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

“The decision is based on a holistic assessment of developments in 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 of consumers through affordable credit card pricing,” Bangko Sentral ng Pilipinas (BSP) Gov. Benjamin Diokno said.

The retention of the existing ceiling is in keeping with the current low interest rate environment. The interest rate on the BSP’s overnight reverse repurchase facility was maintained at two percent, which is the lowest policy rate since the beginning of the pandemic.

Latest credit card business activity data show that the adoption of the ceilings on credit card transactions has not affected the availability of credit card financing to households.

Credit card applications and billings registered an increasing trend with the lifting of the community quarantine restrictions in June 2020.

Similarly, credit card receivables continued to post double-digit growth of 13.5 percent year-on-year as of end-December 2020. These positive outcomes were noted even when banks and other credit card issuers became more selective in their credit card approval process on account of the Covid-19 outbreak and its impact on the paying capacity of financial consumers.

The credit card industry also remains safe and sound.

Based on results of a survey conducted by the BSP, banks and other credit card issuers were able to post net income on their credit card business as of end-December 2020 from increased credit card usage and streamlined operations resulting in lower administrative costs. (PR)