BSP retains maximum 3% per month interest rate on credit card transactions

The Bangko Sentral ng Pilipinas (BSP) has retained the prevailing 3% interest rate ceiling on credit card transactions in a bid to balance consumers’ need for credit access and ensuring viability of banks.

In a statement on Tuesday, the BSP said its policy-setting Monetary Board decided to retain the existing ceilings on credit card transactions under Circular No. 1165 dated January 19, 2023.

This means the maximum interest rate or finance charge on the unpaid outstanding credit card balance of a cardholder remains at 3% per month or 36% per year, according to the central bank.

“The BSP’s decision to maintain the current ceilings on credit card transactions strikes a balance between providing consumers with access to credit card financing at steady rates and ensuring long-term viability of banks/credit card issuers so that they can continue to provide quality service to their clients,” said BSP Governor Eli Remolona Jr.

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

On the other hand, the maximum processing fee on the availment of credit card cash advances also stays at P200.00 per transaction.

The central bank said the ceilings on credit card transactions are subject to review following a six-month period.

The BSP added it will continue to pursue strategies to promote digitalization in the financial industry.

“Through the prudent use of innovation, banks/credit card issuers will be able to improve delivery of their services as well as enhance customer experience at lower operating cost,” it said.

“The BSP’s ongoing efforts to instill the importance of the responsible use of credit cards as part of financial literacy programs will help consumers make sound personal financial decisions. All these efforts are geared towards ensuring a resilient, dynamic and inclusive financial system,” it added.

Credit card receivables saw a double-digit growth of 29% as of end-May 2023, higher than the 17.1% growth seen a year earlier on the back of firm demand for credit cards amid the 34.6% growth in credit card billings, which is above the 28.5% growth seen in the previous year.

“Amid the expansion in credit card receivables, banks/credit card issuers maintained the quality of their credit card portfolio,” the BSP said.

Non-performing credit card receivables as of end-May 2023 was lower at P23.4 billion compared to the P29.3 billion in the previous year, it said.

Meanwhile, the ratio of non-performing credit card receivables to credit card receivables declined to 3.9% as of end- May 2023 from 6.3% ratio last year.—AOL, GMA Integrated News