Credit card users get lift as BSP keeps rate cap

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MANILA  -Bank regulators maintained the interest cap on credit card transactions at 3 percent per month or 36 percent per year, at least through the next six months, amid a balancing act between encouraging consumption by borrowers and making business sustainable for lenders.

The cap was raised to the current level last January from 2 percent per month or 24 percent per year, which the Bangko Sentral ng Pilipinas (BSP) back then said was needed to help consumers when they were enduring the brunt of the COVID-19 pandemic.

At the same time, the central bank continued to keep the ceiling on the monthly add-on rate that credit card issuers can charge on installment loans at one percent.

Similarly, the maximum processing fee on the availment of credit card cash advances remains at P200 per transaction.

For temporary relief

These limits on borrowers’ burden from credit card transactions were imposed by the BSP as a temporary relief measure to ease the financial burden of consumers from the COVID-19 pandemic and promote affordable access to credit.

More recently, weaker household consumption was partly blamed for the slower-than-expected growth of Philippine gross domestic product in the second quarter this year. This was pegged at 4.3 percent against a widely expected 6 percent.

Rising receivables

“The BSP’s decision to maintain the current ceilings on credit card transactions strikes a balance between providing consumers with access to credit card financing at steady rates and ensuring long-term viability of banks [or] credit card issuers so that they can continue to provide quality service to their clients,” BSP Governor Eli Remolona Jr. said in a statement.

BSP data show that credit card receivables surged by 29 percent to about P600 billion as of the end of May 2023, faster than the 17.1 percent posted at the same period a year ago.

The BSP attributed this to firm demand for credit cards, as billings jumped 34.6 percent growth, outgrowing the 28.5 percent recorded in the previous year.

Meanwhile, nonperforming credit card receivables as of the end of May was lower at P23.4 billion compared to the P29.3 billion a year earlier.

Also, the ratio of nonperforming credit card receivables to credit card receivables declined to 3.9 percent at end-May from 6.3 percent nonperforming loans ratio previously. INQ