BSP retains 24% interest rate ceiling on credit card transactions

The Bangko Sentral ng Pilipinas’ policy-setting Monetary Board has maintained the 24% interest rate per year cap on all credit card transactions, the central bank said Tuesday.

In a statement, the BSP said “the maximum interest rate or finance charge on the unpaid outstanding credit card balance of a cardholder remains at 2% per month or 24% per year.”

The credit card interest rates ceilings are pursuant under the BSP’s Circular No. 1098 dated September 24, 2020.

The central bank also retained the monthly add-on rates that credit card issuers can charge on installment loans at a maximum rate of 1%.

Likewise, the maximum processing fee on the availment of credit card cash advances stays at P200.00 per transaction, it said.

“The decision of the Monetary Board will continue to help ease the financial burden of consumers through affordable credit card pricing amid the ongoing COVID-19 pandemic. It will also allow the BSP to assess the impact of the improvement in macroeconomic fundamentals and easing of mobility restrictions on the performance of the credit card industry,” said BSP Governor Benjamin Diokno.

The BSP noted that latest credit card business activity data show that the demand for credit cards became moderate in the second half of 2021 as customers shifted toward alternative digital products.

In particular, the central bank reported that the number of credit cards that were issued and outstanding managed to grow by a modest 0.3% to 10.3 million while monthly card billings increased by 33.9% year-on-year to P100.6 billion as of December 2021.

With the resumption of business activities and easing of mobility restrictions, credit card receivables grew by 4.9% year-on-year in December 2021, albeit at a slower trend compared to last year, the BSP said.

The central bank said that credit card issuers or banks were also able to maintain the asset quality of their credit card portfolios through intensified remediation and workout arrangements.

Notably, the non-performing loan (NPL) ratio of the credit card industry registered a declining trend and stood at 6.8% in December 2021 compared to the 8.9% NPL ratio recorded a year ago, according to the BSP.

“This was accompanied by consistent recording of NPL coverage ratios at above 100% which stood at 109.5% as of December 2021. In addition to demonstrating prudent lending standards, banks/credit card issuers posted higher net income on their credit card operations of P18.5 billion for the year 2021 compared to a year ago,” it said.

“This was, however, still lower than levels recorded by the industry before the COVID-19 pandemic,“ it added.

Moving forward, the BSP said the credit card industry intends to further reduce operating costs through digital transformation and process improvements as well as maintain prudent lending standards.

The central bank added it will closely monitor evolving domestic and external developments that will impact the state of credit card financing, sustainability of credit card operations and viability of banks/credit card issuers. —Ted Cordero/KG, GMA News