The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas, raised the ceiling on monthly finance charges imposed on a cardholder’s unpaid outstanding credit card balance by 100 basis points from 2 percent to 3 percent.
It maintained the ceiling on the monthly add-on rate that credit card issuers can charge on installment loans at 1 percent. The maximum processing fee on the availment of credit card cash advances will remain at P200 per transaction, it said.
“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 and MB chairman Felipe Medalla said over the weekend.
The BSP imposed the caps on credit card transactions as a temporary relief measure to ease the financial burden of consumers from the COVID-19 pandemic and promote affordable access to credit. In fixing the caps, the BSP 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 the BSP’s efforts to counter the same through successive policy rate hikes.
Monetary officials said this would help banks/credit card issuers cover higher costs related to the efficient handling of consumer transactions, including prompt and timely dispute resolution and the retention of competent personnel.
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.
The BSP said given these circumstances, the adjustment in the interest rate ceiling for revolving purchases is in keeping with its mandate to determine the reasonableness of credit card fees and charges under Section 4 of the Philippine Credit Card Industry Regulation Law or Republic Act No. 10870.
It said the decision is also consistent with the BSP’s objective of keeping credit card pricing affordable without jeopardizing the long-term viability of the credit card operations of banks/credit card issuers.
“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 said it would 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.