Credit cardholders will pay lower credit card dues for the entire year after the Bangko Sentral ng Pilipinas (BSP) extended the two-percent per month or 24 percent per year ceiling on interest rate or finance charge on unpaid outstanding credit card balance.

BSP Governor Benjamin E. Diokno (Credit: BSP photo)

The maximum monthly add-on rate is likewise capped at one percent per month for credit card installment loans while the processing fee on credit card cash advances will also stay fixed at a maximum P200 per transaction.

BSP Governor Benjamin E. Diokno in January already signified that he is open to an extension of the ceilings on credit card rates to help Filipinos better manage their credit card debts during the pandemic.

To ensure affordable credit card pricing, the BSP will be reviewing credit card rates and fees every six months. It was first approved last September 24, 2020 as BSP Circular No. 1098 and implemented on November 3.

Diokno said for now, this is the only relief measure the BSP could give credit cardholders affected by the COVID-19 lockdowns.

“We review the cap every six months (and) at the moment that’s the only measure that we can think of,” he said during his regular virtual “GBED Talks” on Thursday.

“That’s more than enough, I think, at this time,” he said. “This is of course consistent with the low interest rate policy.” For now, the retention of the ceiling is appropriate but future review will determine increasing or decreasing rates and charges — “as the case may be,” said Diokno.

Before the imposition of the ceiling in November last year, the average maximum rate that banks are charging credit cardholders is about 36 percent per year while credit card cash advances are charged from P500.

For now the BSP is maintaining a low interest rate environment with overnight reverse repurchase facility at two percent which is the lowest policy rate even pre-pandemic.

(Bloomberg file photo) Photographer: Simon Dawson

“BSP will continue to closely monitor the impact of the ceilings on credit card financing and sustainability of credit card operations of credit card issuers, especially against the backdrop of the evolving COVID-19 pandemic,” said Diokno.

The latest data on credit card business activity indicate that the adoption of the ceilings on credit card transactions has not affected the availability of credit card financing to households, according to a BSP statement.

In fact credit card applications and billings increased with the easing of the virus outbreak lockdown starting in June last year.

As of end-December 2020, credit card receivables or loans grew by 13.5 percent year-on-year to P417.87 billion. “These positive outcomes were noted even when banks and other credit card issuers became more selective in their credit card approval process on account of the COVID-19 outbreak and its impact on paying capacity of financial consumers,” said the BSP.

By February this year, credit card loans declined by 9.6 percent year-on-year to P405.68 billion.

The BSP noted that the credit card industry is “safe and sound” based on BSP surveys of banks and other credit card issuers which posted earnings on their credit card business last year with increased credit card usage.

Still, credit cards are the most complained about banking products and business. The BSP’s consumer assistance mechanism and its chatbot BOB or BSP Online Buddy, registered some 23,000 complaints in the fourth quarter of 2020, and about 20 percent or 4,600 were credit card complaints. Majority of credit card-related complaints were resolved either by repayments scheme or loan restructuring.

Source: Manila Bulletin (