Credit card debts surge 13% to P137B in 1st semester

MANILA, Philippines—Outstanding credit card debts of consumers in the country grew by a double-digit pace in the first semester as the robust appetite of Filipinos to spend triggered more credit-aided purchases.

The increase in credit spending came as overall consumption in the country continued to significantly fuel the growth of the economy during the period.

Documents from the Bangko Sentral ng Pilipinas showed that credit-card receivables of thrift and universal and commercial banks in the country amounted to P136.59 billion as of the end of the first semester, up nearly 13 percent from P121.2 billion a year ago.

Of the latest figure, P15.06 billion was accounted for by nonperforming debts, or those for which payments have not been made within a specified period. This translated to an 11.03-percent nonperforming loans ratio for credit-card spending (the proportion of nonperforming to the outstanding credit card debts), which was an improvement from the 12.76 percent registered as of June last year.

The decline in the NPL ratio for credit card spending indicated an improvement in payment collection by banks. However, the ratio was higher than the average for all types of consumer loans extended by banks. Data from the BSP showed that the NPL ratio for all consumer loans (which also included auto, housing and personal loans) averaged 6.68 percent as of the end of the first semester.

Moreover, the double-digit NPL ratio for credit-card debts is far from the average for all types of bank loans (which covers both loans to individuals and businesses). Most thrift, and universal and commercial banks in the country maintain their NPL ratio for all types of loans just within the 2-percent territory.

This means that credit card users more often default on their loans compared with other types of borrowers. This also means that individual borrowers are more inclined to default on their bank loans compared with businesses.

Earlier this year the BSP issued a regulation requiring banks to become more transparent in the amount of interest and other charges imposed on credit card users. Banks were told to give them a list, which comes with the monthly bills, of all fees and charges involved in credit card spending.

The BSP issued the regulation in the belief educating consumers on credit card spending would help them become more prudent in using plastic money.