Credit card receivables jump 16.54%

The popularity of plastic currency continued to spread in 2007 with the banking sector reporting a 16.54-percent annual increase in credit card receivables.

Data from the Bangko Sentral ng Pilipinas (BSP) show that as of end-December 2007, credit card receivables (CCRs) of universal/commercial banks (U/KBs) and thrift banks (TBs), inclusive of credit card subsidiaries, amounted to P116.1 billion.

The BSP said this was up 9.5 percent from the third quarter of 2007 and by 16.5 percent from last year.

According to BSP, the CCRs of the banking sector accounted for 5.4 percent of their total loan portfolio, which was actually lower than 5.5 percent in the fourth quarter of 2007 although higher than the 5.2 percent ratio recorded at the end of 2006.

The BSP said U/KBs accounted for the bulk of the total CCRs at 80.1 percent. Credit card and TB subsidiaries of U/KBs distantly followed at 15.2 percent while the non-U/KB affiliated TBs accounted for the remaining 4.7 percent.

Because of the rise in the subsidiary base of the credit card industry as a whole, the BSP said the proportion of past due receivables actually eased to 14.2 percent of total receivables.

In the third quarter of 2007, the proportion stood slightly higher at 14.3 percent.

Looking closer, however, Tetangco said the amount of past due receivables actually increased by 8.7 percent, indicating that more credit card holders were finding it difficult to manage their use of plastic currency.

Tetangco said the ratio only appeared to improve because the increase in past due CCRs was outpaced by the expansion in total CCRs.

As a result, the past due ratio in 2007 was still better than the 16.4-percent ratio recorded at the end of 2006.

Tetangco said that based on BSP data, the P16.5 billion past due CCRs accounted for 12.5 percent (up from 10.4 percent last quarter and 9.9 percent last year) of the total non-performing loans (NPL) of both U/KBs and TBs.

The ratio of past due CCRs to TLP was maintained at 0.8 percent from last quarter but slightly eased from last year’s 0.9 percent ratio.

Credit card use became even more widespread last 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 warned credit card issuers to 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 were failing to adjust to market forces to the detriment of consumers using plastic currency, pointing out that there is a big gap 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.