Interest rate for credit card transactions still limited to 2% per month



As the acceptance of credit cards by Filipino consumers continued, the Monetary Board decided to keep the caps on interest rates and funding fees unchanged in order to ease the financial burden on users.

According to Circular No. 1098 of Bangko Sentral ng Pilipinas (BSP) dated September 24, 2020, the maximum interest rate or funding fee for a cardholder’s unpaid outstanding credit card balance is set at 2 percent per month or 24 percent per year.

Holistic assessment

The monthly surcharge that credit card issuers can charge for installment loans has also been retained at a maximum of 1 percent.

In addition, the maximum processing fee for using credit card cash advances is P200 per transaction.

“The decision of the Monetary Board is based on a holistic assessment, taking into account developments in the macroeconomic economy, the state of credit card financing and the security and solidity of banks and other credit card issuers,” said BSP Governor Benjamin E. Diokno in a statement.

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

Increase in applications

He added that keeping the existing cap was in line with the current low interest rate environment.

In its last monetary policy meeting, the Monetary Committee kept the overnight reverse repurchase facility at 2 percent, the lowest policy rate since the pandemic began in early 2020.

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

In the same comparison months, card bills jumped 29.5 percent year-on-year to 73 billion pesos from 56.3 billion pesos.

In June there were a total of 10.2 million valid and newly issued credit cards, an increase of 9 percent compared to 9.4 million cards in the same month of 2020.

The BSP also said credit card claims had shrunk on a monthly basis for the first half of the year, albeit with a slowing trend.

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