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Friday, March 29, 2024

Bangko Sentral maintains interest ceilings on credit card transactions

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The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas, said Friday it maintained the interest rate ceilings on credit card transactions under Circular No. 1098 issued in September 2020 partly to ease the financial burden of the public amid the pandemic.

The maximum interest rate or finance charge on unpaid outstanding credit card balance of a cardholder remains at 2 percent per month or 24 percent per year. The monthly add-on rates that credit card issuers can charge on installment loans were retained at a maximum of 1 percent.

Meanwhile, the maximum processing fee on the availment of credit card cash advances would stay at P200 per transaction.

“The decision of the Monetary Board is based on a holistic assessment considering the developments in the macroeconomy, the state of credit card financing as well as the safety and soundness of banks and other credit card issuers. It will also continue to help ease financial burden of consumers through affordable credit card pricing,” BSP Governor Benjamin Diokno, who is also the board chairman, said in a statement.

He said the retention of the ceiling was in line with the low-interest rate environment. In its latest policy meeting, the Monetary Board maintained the overnight reverse repurchase facility at 2 percent, the lowest since the beginning of the pandemic. 

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Data showed that credit card business activity improved in 2021 as demonstrated by the growth in monthly card applications, card billings and issued cards buoyed by an uptick in economic activity.

The number of monthly card applications surged by 175.1 percent year-on-year in June 2021 to around 646,000 applications from 235,000 applications in June 2020. Monthly card billings also grew by 29.5 percent year-on-year in June to P73.0 billion from P56.3 billion a year ago.

Meanwhile, the number of credit cards that were issued and outstanding or credit cards-in-force increased 8.7 percent to 10.2 million cards from 9.4 million over the same period last year.

Credit card receivables posted consecutive monthly contractions in the first semester, although it was on a decelerating trend. The asset quality of credit card receivables improved during the same period.

This was accompanied by non-performing loan coverage ratio, which was consistently above 100 percent since February at 108.2 percent as of end-June 2021.

Banks and other credit card issuers were able to post net income on their credit card business during the same period from increased credit card usage, albeit below pre-pandemic levels.

The ceilings on credit card transactions would remain effective unless revised by the BSP. The BSP said it would continue to closely monitor the impact of the ceilings on the state of credit card financing and sustainability of credit card operations of banks/credit card issuers against the backdrop of the evolving COVID-19 pandemic. 

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