Interest rate on credit card transactions still capped at 2% per month

As credit card adoption continued among Filipino consumers, the Monetary Board decided to keep unchanged the ceilings on interest rates and finance charges, to help ease the financial burden on users.

Under Bangko Sentral ng Pilipinas (BSP) Circular No. 1098 dated Sept. 24, 2020, the maximum interest rate or finance charge on unpaid outstanding credit card balance of a cardholder is pegged at 2 percent per month or 24 percent per year.

Holistic assessment

The monthly add-on rate that credit card issuers can charge on installment loans was likewise retained at a maximum rate of 1 percent.

Further, the maximum processing fee on the availment of credit card cash advances stays 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,” BSP Governor Benjamin E. Diokno said in a statement.

“It will also continue to help ease the financial burden of consumers through affordable credit card pricing,” Diokno said.

Rise in applications

He added the retention of the existing ceiling was in line with the current low-interest rate environment.

In its last policy meeting, the Monetary Board maintained the overnight reverse repurchase facility at 2 percent, the lowest policy interest rate since the beginning of the pandemic in early 2020.

According to the BSP, the number of monthly card applications ballooned by 175 percent year-on-year in June 2021 to around 646,000 applications from 235,000 applications in the same month last year.

In the same comparative months, card billings jumped by 29.5 percent year-on-year to P73 billion from P56.3 billion.

As of last June, there were a total of 10.2 million credit cards, both valid and newly issued, which was an increase of 9 percent from 9.4 million cards in the same month of 2020.

The BSP also said credit card receivables had contracted monthly in the first semester, albeit on a slowing trend.