BSP maintains a cap on credit card interest rates

Lawrence Agcaoili – The Filipino Star

November 27, 2021 | 00h00

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) has kept the credit card transaction cap at 2% per month or 24% per year to help ease the burden on Filipino consumers as the country continues to recover from the impact of the pandemic.

BSP Governor Benjamin Diokno said the Monetary Council’s decision to maintain the current cap is in line with the current low interest rate environment in the country.

“The Monetary Board’s decision is based on an overall assessment taking into account developments in the macroeconomics, 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 prices for credit cards, ”Diokno said.

The additional monthly rates that credit card issuers could charge on installment loans were withheld at a maximum rate of one percent along with the maximum processing fee of P 200 per transaction on the use of cash advances by. credit card.

The BSP maintained an accommodating monetary policy by keeping interest rates at a historically low level of 2%.

The BSP formalized the imposition of the cap approved by the Monetary Council through Circular 1098 issued in September last year. The cap came into effect on November 3, 2020.

The BSP chief said caps on credit card transactions remain in place unless they are revised by the regulator.

“The BSP will continue to closely monitor the impact of the caps on the state of credit card financing and the sustainability of credit card operations of banks or credit card issuers in the context of the evolving market. COVID-19 pandemic, ”said Diokno.

The latest data showed an improvement in credit card business activity, with the number of monthly requests rising 175% to 646,000 at the end of June, from 235,000 in June last year.

Likewise, monthly card billings also increased 29.5% to P73 billion from P56.3 billion as the number of active credit cards increased 8.7% to 10.2 million from 9.4 million .

Despite the increase in loans from major banks for two consecutive months, credit card loans slipped again 0.3% to 402.07 billion pesos in September this year, from 403.43 billion pesos in the end of September of last year.

In addition to demonstrating prudent lending standards, banks and other credit card issuers were able to record net income on their credit card businesses during the same period through increased use of credit cards, although ” below pre-pandemic levels.

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

On the one hand, Robinsons Bank President and CEO Elfren Antonio Sarte said earlier that banks would continue to help customers by adjusting costs to cope, especially during the time of the pandemic of COVID-19.

“It’s a temporary blow for a lot of us in terms of financial profitability for the credit card, but it doesn’t make the product unprofitable,” Sarte said.

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