THE Monetary Board has decided to keep the credit card caps on credit card transactions.
The maximum interest rate or financing fee for a cardholder’s unpaid outstanding credit card balance is still two percent per month or 24 percent per year.
The monthly surcharge that credit card issuers can charge for installment loans is also withheld to a maximum of one percent. Meanwhile, the maximum processing fee for using credit card advances remains at P200 per transaction.
âThe decision of the Monetary Board is based on a holistic assessment, taking into account developments in macroeconomics, the status of credit card financing and the security and solidity of banks and other credit card issuers. It will also continue to help ease the financial burden on consumers through affordable credit card prices, “said BSP Governor Benjamin Diokno.
The retention of the existing upper limit corresponds to the current low interest rate environment. In its most recent monetary policy meeting, the Monetary Committee left the overnight reverse repurchase facility at two percent, the lowest policy rate since the pandemic began.
Credit card transactions
The data shows that credit card business activity improved in 2021, as evidenced by the growth in monthly card applications, card bills and cards issued, fueled by an upturn in economic activity.
The number of monthly card applications rose significantly in June 2021 compared to the previous year (June 2021) by 175.1 percent to around 646,000 applications from 235,000 applications in June 2020. The monthly card bills also increased in June 2021 by 29.5 percent compared to the previous year to P 73 billion from P 56 0.3 billion a year ago.
Meanwhile, the number of issued and outstanding or in force credit cards increased year-on-year by 8.7 percent to 10.2 million cards from 9.4 million in the same period.
Credit card receivables saw consecutive monthly contractions in the first half of 2021, albeit on a downward trend. Regardless of this, the asset quality of credit card receivables improved over the same period. This was accompanied by a coverage ratio for non-performing loans that has been consistently above 100 percent since February 2021 and stood at 108.2 percent at the end of June 2021.
In addition to prudent lending standards, banks and other credit card issuers have been able to generate net revenue from their credit card business over the same period from increased credit card usage, albeit below pre-pandemic levels.
In the future, banks and credit card issuers want to offer more competitive credit card products, improve the customer experience and reduce operating costs through digital transformation and process improvements. (PR)