Credit card transaction ceilings retained by BSP

By Niña Myka Pauline Arceo | The Manila Times
August 23, 2023

CURRENT caps on credit card charges will be retained to encourage consumer spending and at the same time allow lenders to remain viable, the Bangko Sentral ng Pilipinas (BSP) said on Tuesday.

“The BSP’s decision to maintain the current ceilings on credit card transactions strikes a balance between providing consumers with access to credit card financing at steady rates and ensuring the long-term viability of banks/credit card issuers so that they can continue to provide quality service to their clients,” central bank Governor Eli Remolona said in a statement.

Circular 1165 issued on January 19 of this year capped interest rates on unpaid credit card balances at 3.0 percent per month or 36 percent annually. The maximum monthly add-on rate for installment loans was also set at 1.0 percent, and the highest processing fee for credit card cash advances was pegged at P200 per transaction.

“The ceilings on credit card transactions are subject to review following a six-month period,” the BSP noted.

The central bank said that as of end-May, credit card receivables had grown by 29.0 percent year on year, surpassing the previous year’s 17.1-percent increase.

The growth was said to have been fueled by strong demand for credit cards, indicated by a 34.6-percent rise in billings, compared to 28.5 percent in the previous year.

Amid the expansion in credit card receivables, banks and credit card issuers maintained the quality of their credit card portfolios, with nonperforming receivables decreasing to P23.4 billion from the year-earlier P29.3 billion.

The ratio of nonperforming credit card receivables to total credit card receivables decreased to 3.9 percent from the 6.3 percent.

“BSP will continue to pursue strategies to promote digitalization in the financial industry,” the central bank said.

“Through the prudent use of innovation, banks/credit card issuers will be able to improve the delivery of their services as well as enhance customer experience at lower operating costs.” The BSP added that continued initiatives to emphasize the responsible use of credit cards would help consumers make prudent financial choices.

“All these efforts are geared toward ensuring a resilient, dynamic and inclusive financial system,” the central bank said.