BSP maintains credit card interest rate cap

THE Monetary Council has decided to maintain the credit card limits on credit card transactions.

The maximum interest rate or finance charge on a cardholder’s outstanding credit card balance remains at two percent per month or 24 percent per year.

Likewise, the monthly mark-up rate that credit card issuers can charge on installment loans is withheld at a maximum rate of one percent. During this time, the maximum processing fee on the use of credit card cash advances remains at P200 per transaction.

“The Monetary Board’s decision is based on an overall assessment taking into account developments in the macroeconomics, the state of credit card financing as well as the safety and soundness of banks and other credit card issuers. It will also continue to help ease the financial burden on consumers through affordable prices for credit cards, ”said BSP Governor Benjamin Diokno.

Maintaining the existing ceiling is in line with the current low interest rate environment. At its last policy meeting, the Monetary Council kept the overnight repo facility at 2%, the lowest policy rate since the start of the pandemic.

Credit card transactions

Data shows that credit card business activity improved in 2021, as evidenced by growth in monthly card applications, card billings and cards issued, supported by a recovery in economic activity.

The number of monthly card requests increased significantly by 175.1% year-on-year in June 2021 to reach approximately 646,000 requests compared to 235,000 requests in June 2020. Monthly card billings also increased by 29.5% year-on-year annual in June 2021 to 73 billion pesos against 56 0.3 billion a year ago.

Meanwhile, the number of issued and outstanding credit cards or in force credit cards increased 8.7% year-on-year to 10.2 million cards, from 9.4 million during the same period.

Credit card receivables posted consecutive monthly contractions in the first half of 2021, albeit on a decelerating trend. Despite this, the asset quality of credit card receivables improved over the same period. This was accompanied by a non-performing loan coverage ratio, which has been consistently above 100% since February 2021, to 108.2% at the end of June 2021.

In addition to demonstrating prudent lending standards, banks and other credit card issuers were able to record net income on their credit card businesses during the same period through increased use of credit cards, although ‘lower than pre-pandemic levels.

Going forward, banks and credit card issuers intend to offer more competitive credit card products, improve customer experience, and lower operating costs through digital transformation. and process improvement. (RP)

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