BSP yet to finalize credit card cap review

MANILA, Philippines — The Bangko Sentral ng Pilipinas has yet to finalize its decision on whether to keep, raise or lower the current three percent interest rate cap on credit card transactions, a top BSP official said.

BSP Deputy Governor Chuchi Fonacier said the central bank’s Financial Supervision Sector (FSS) has already submitted an initial recommendation to the Monetary Board on whether to adjust the maximum interest rate imposed on a cardholder’s unpaid outstanding credit card balance.

“The (Monetary Board) required some additional information and that’s what we are gathering currently. We intend to resubmit again to the Monetary Board,” Fonacier said.

She said when the Monetary Board asked for additional information, the data was not readily available inside the BSP.

“We need to get it from other sources. But hopefully, we can resubmit within the month,” Fonacier said.

The central bank last kept the interest rate ceiling in August 2023. The maximum interest rate on unpaid outstanding card balance of a cardholder is currently at three percent per month or 36 percent a year.

Meanwhile, the existing ceiling on the monthly add-on rate that credit card issuers can charge on installment loans is at one percent. The maximum processing fee on the availment of credit card cash advances is also at P200 for each transaction.

Fonacier said once the Monetary Board is satisfied with the additional information it is requesting, it will proceed to decide whether to keep, hike or lower the current credit card ceiling.

She said the BSP remains data-dependent in its policy-making decisions.

The BSP, which reviews the interest rate ceilings on credit card transactions every six months, supervises credit card issuers and acquirers under Republic Act 10870 or the Philippine Credit Card Industry Regulation Law.

The regulator also determines the rationality of fees and charges, and allows the regulator to adjust interest rate ceiling for revolving purchases.

In January 2023, the Monetary Board hiked the credit card cap by 100 basis points from two percent previously. This was meant to reflect the BSP’s policy tightening and to mitigate the impact of inflationary pressures on banks and credit card issuers.

The BSP has emerged as the most aggressive central bank in the region after raising key policy rates by 450 basis points from May 2022 to October 2023, bringing the benchmark interest rate to a near 17-year high of 6.50 percent from an all-time low of two percent.

Credit card loans jumped by 30 percent to P744.7 billion in March from P572.87 billion in the same period a year ago.

This translated to a 25.4-percent increase in consumer loans to P1.32 trillion in March despite the high interest rate environment.