BSP maintains 24% cap on annual credit card interest

The Monetary Board has maintained the cap on the annual interest rate on all credit card transactions at 24%, the Bangko Sentral ng Pilipinas (BSP) announced Thursday.

In a virtual briefing, BSP Governor Benjamin Diokno said the maximum interest rate or finance charge on the unpaid outstanding credit card balance remains at 2% per month or 24% per year; the monthly add-on rates at 1%; and the maximum processing fee at P200.00 per transaction as announced in September.

"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," said Diokno.

"It will also continue to help ease financial burden of consumers through affordable credit card pricing," he added.

The latest data shows that the adoption of the ceilings on transactions has not affected the availability of credit card financing to households, as applications and billings grew with the lifting of the quarantine restrictions in June 2020.

Credit card receivables posted a 13.5% growth year-on-year growth as of end-December 2020, even as banks and other credit card issuers became more selective in their approval process on account of the COVID-19 pandemic.

The BSP said credit card issuers were able to post net income on their businesses as of end-2020, driven by increased usage and streamlined operations that lowered administrative costs.

"The BSP will continue to closely monitor the impact of the ceilings on the state of credit card financing and sustainability of credit card operations of banks or credit card issuers, especially against the backdrop of the evolving COVID-19 pandemic," the central bank said.

"The BSP will undertake another review of the ceiling rates on credit card transactions after six months," it added.

Policy rates are currently at record lows -- the overnight reverse repurchase facility at 2.00%, overnight deposit at 1.5%, and overnight lending facility at 2.5%.

Rates were slashed by 200 basis points in 2020—25 basis points in February; 50 basis points each in March, April, and June; and another 25 basis points in November.—AOL, GMA News