Credit card receivables up 23% to P106B

The Bangko Sentral ng Pilipinas (BSP) reported a continued increase in credit card receivables in the third quarter of the year, with past due accounts also rising as more users of plastic money struggled with their personal debt.

The BSP said in its latest report on credit card receivables that as of the end of September this year, the receivables (CCRs) of universal/commercial banks (U/KBs) and thrift banks (TBs), inclusive of credit card subsidiaries, amounted to P106 billion, up 22.6 percent from a year ago level.

The figure was also 3.9 percent higher than the total CCRs in the second quarter.

As a result of the increase in total CCRs, the BSP said the ratio of CCRs to the total loan portfolio of banks rose to 5.5 percent from 5.4 percent in the second quarter and last year’s 4.7-percent ratio.

According to BSP Governor Amando M. Tetangco Jr., U/KBs accounted for the bulk of total CCRs at 79.9 percent. Credit card and TB subsidiaries of U/KBs distantly followed at 15.3 percent while the non-U/KB affiliated TBs held the remaining 4.8 percent. 

On the other hand, Tetangco said the proportion of past due CCRs to total CCRs ratio went up to 14.3 percent from 13.8 percent in the second quarter.

Tetangco explained that the increase in the CCR ratio happened because the 7.7 percent growth in past due CCRs to P15.2 billion outmatched the expansion in total CCRs.

Year-on-year, however, Tetangco said the third quarter ratio of past-due CCRs to total CCRs actually improved from 19.3 percent in the third quarter of 2006.

Tetangco said the P15.2 billion past due CCRs accounted for 10.4 percent of total non-performing loans of both U/KBs and TBs, up from 9.3 percent in the second quarter and from nine percent a year ago.

Credit card use became even more widespread this year, picking up the momentum from the 20.3 percent annual growth reported by the industry in 2006.

These numbers mean that more credit card holders are having difficulties settling their credit card payments and these delinquent holders are habitual, with past due accounts lasting over six months and more.

As interest rates continued to slide, the BSP has indicated that credit card issuers should cap their annual rates at 18 to 20 percent or risk legislative intervention amid consumer lobby to make credit card loans cheaper.

The BSP expressed concern that credit card rates are failing to adjust to market forces to the detriment of consumers using plastic currency, saying there was a disjoint between prevailing interest rates and the effective rates on credit card loans.

On the average, consumers end up paying a compounded interest rate of 35-40 percent a year, including the basic interest rate, fees and charges.

Tetangco said credit card issuers should either take the initiative to reduce the cost to consumers or wait for Congress to step in and legislate.