The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas, approved an annual interest rate ceiling of 24 percent on all credit card transactions effective Nov. 3 this year.
BSP Governor Benjamin Diokno said in an online briefing Thursday under the new policy, interest rates or finance charges on unpaid outstanding credit card balance of a cardholder should not exceed 2 percent per month.
“The interest rate cap on credit card receivables aims to ease the financial burden of consumers and micro, small and medium enterprises amid a difficult economic environment caused by the COVID-19 pandemic,” Diokno said.
The new issuance prescribes a separate interest rate ceiling for credit card installment loans. For these transactions, credit card issuers may only charge monthly add-on rates up to a maximum of one percent.
Meanwhile, no other charge or fee may be imposed or collected on credit card cash advances except for a maximum processing fee of P200 per transaction. The maximum rates and fees would also take effect on Nov. 3 and would be subject to review by the BSP every six months.
Diokno said the reform initiative was pursuant to the BSP’s supervisory authority over all credit card issuers under the Credit Card Industry Regulation Law. It is also seen to promote responsible credit card lending in the country.
“Amid the rising use of electronic platforms for payments, the issuance will enable credit cardholders to settle financial transactions under more affordable pricing terms,” said Diokno.
The setting of a maximum ceiling on interest or finance charges on credit card transactions is also in keeping with the country’s current low interest rate environment. The interest rate on the BSP’s overnight reverse repurchase facility remains at 2.25 percent, the lowest policy rate since the beginning of the pandemic.
The new regulation also waives the requirement for credit card issuers to notify the cardholder of the said changes on interest or finance charges at least 90 calendar days before such changes take effect.