BSP adjusts cap on credit card interest rate to 3% per month

The Bangko Sentral ng Pilipinas (BSP) on Friday announced the adjustment in the interest rate ceiling on credit card transactions.

The BSP said this adjustment will increase the maximum interest rate or finance charge imposed on a cardholder’s unpaid outstanding credit card balance by 100 basis points (bps) or from 2% to 3% per month.

The existing ceiling on the monthly add-on rate that credit card issuers can charge on installment loans is maintained at a maximum rate of 1%, the BSP said.

It said that the maximum processing fee on the availment of credit card cash advances remains at P200 per transaction.

“The policy aligns the credit card interest rate ceiling with developments in the macroeconomy and cushions the impact of inflationary pressure on banks’/credit card issuers’ ability to provide quality credit card services to their clients,” BSP Governor Felipe Medalla said in a statement.

The BSP said the caps on credit card transactions were imposed as a “temporary relief measure” to ease the financial burden of the consumers from COVID-19 pandemic.

In fixing the caps, the BSP said it considered the prevailing low interest rate environment during the pandemic.

“The adjustment in the interest rate ceiling considers the upward trend in domestic interest rates on account of high inflation and BSP’s efforts to counter the same through successive policy rate hikes. It will help banks/credit card issuers cover higher costs related to the efficient handling of consumer transactions, including prompt and timely dispute resolution, as well as the retention of competent personnel,” it said.

“It will also make funding available for long-term investments that will institutionalize process improvements, strengthen cybersecurity and Information Technology systems, and nurture innovation in these financial institutions that will lead to better customer experience,” it added.

However, the BSP said it deems that the adjustment in the interest rate ceiling for revolving purchases is in keeping with the BSP’s mandate to determine the reasonableness of credit card fees and charges under Section 4 of the Philippine Credit Card Industry Regulation Law or R.A. No. 10870.

"The BSP will continue to implement complementary measures that will give consumers access to financial products at lower cost such as the provision of an enabling framework that will foster a level playing field for new market entrants, promote prudent digital innovation, enable responsible access to credit information, and uphold rights of financial consumers,” Medalla said.

“The ceilings on credit card transactions will remain in effect unless revised by the BSP. The BSP, however, will continue to monitor the domestic and external developments that may have an impact on consumers and the credit card industry, following a six-month review period,” he added.—LDF, GMA Integrated News