Credit card issuers welcome BSP decision to keep higher interest rates
MANILA -The country’s credit card industry group welcomed the recent decision of the Monetary Board to maintain the higher ceiling on card interest rates as billings continued to surge.
The Credit Card Association of the Philippines (CCAP) is the umbrella organization of 17 card issuers.
Monetary authorities last January raised the interest rate limit on credit card debt to 3 percent, or 36 percent per year, from 2 percent or 24 percent annually as the economy further opened up in the aftermath of the global health crisis.
Rising card debts have significantly contributed to industry profits as banks ramped up the issuance of new cards while households tapped added debt during a period of elevated inflation.
Card debt defaults still low
The Bangko Sentral ng Pilipinas (BSP) noted, however, that card debt defaults remained low, thus far.
“We support the BSP’s intention to strike a balance between the interest of cardholders or financial consumers and credit card issuers who are both just starting to recover from the contraction brought about by the COVID-19 global pandemic in the previous years,” CCAP executive director Alex Ilagan said in a statement on Wednesday.
CCAP added it was in close talks with the BSP in assessing the interest rate ceiling, which is reviewed every six months.
“CCAP is involved in doing a holistic review based on key drivers and appreciate this collaboration with the BSP,” Ilagan said.
The BSP said last week that credit card receivables as of May this year jumped 29 percent versus the 17-percent growth recorded during the same period last year.
Credit card demand also surged nearly 35 percent during the period.
“Amid the expansion in credit card receivables, banks/credit card issuers maintained the quality of their credit card portfolio,” the BSP noted.
It said nonperforming credit card receivables as of end-May 2023 was lower by 20 percent to P23.4 billion. The ratio of nonperforming credit card receivables to credit card receivables also declined to 3.9 percent versus 6.3 percent during the same period last year.
