Bankers back 24% interest rate ceiling for credit cards
The Bankers Association of the Philippines (BAP) welcomed the Bangko Sentral ng Pilipinas’ (BSP) move to set a cap on the annual interest rate of all credit card transactions as the latest policy is seen to ease the burden on both households and businesses amid the COVID-19 crisis.
On Thursday, the BSP’s policy-setting Monetary Board set the limit on the annual interest rate on all credit card transactions at 24% effective November 3, 2020.
In a statement, BAP managing director Benjamin Castillo said it recognizes the importance of the credit card policy reform during this critically difficult period.
“We support this initiative by the Bangko Sentral ng Pilipinas. This will help ease the burden of every household including businesses severely affected by the pandemic,” Castillo said.
The bankers group appreciates the continuing collaboration between the industry and the regulator as we continue to fight the ill-effects of the COVID-19 health crisis, he said.
“The BSP has been decisive and aggressive in their response to ensure a healthy and strong banking industry through its policy rate and reserve requirement reductions,” he added.
In a virtual briefing, BSP Governor Benjamin Diokno said the latest policy also provides that interest rates or finance charges on the unpaid outstanding credit card balance should not exceed 2% per month.
“The interest rate cap on credit card receivables aims to ease the financial burden of consumers and micro, small, and medium enterprises amid a difficult economic environment caused by the COVID-19 pandemic,” Diokno said.
Under the policy, credit card issuers may only charge monthly add-on rates of a maximum of 1% for credit card installment loans.
No other charges or fees may be imposed or collected on credit card cash advances, except for a maximum processing fee of P200 per transaction.
The rates will be subject to review by the BSP every six months, pursuant to the central bank’s supervisory authority over all credit card issuers under the Credit Card Industry Regulation Law.
The new regulation also waives the requirement for credit card issuers to notify the cardholders of the said charges on interest or finance charges at least 90 calendar days before the changes take effect.
The setting of a maximum ceiling on interest or finance charges on credit card transactions is also in keeping with the country’s current low interest rate environment, Diokno said.
At present, the interest rate on the overnight reverse repurchase (RRP) facility remains at 2.25%.
The Monetary Board of the BSP is scheduled to meet again on next Thursday, October 1, to discuss whether or not a change in policy rates is warranted.