BSP maintains cap on credit card charges amid pandemic

MANILA, Philippines — The Bangko Sentral ng Pilipinas is keeping the ceilings on credit card transactions in a bid to ease financial burden of consumers as the economy recovers from the pandemic.

This means that interest rates or finance charges on credit card transactions will be steady at 2% per month, or 24% annually, the BSP said in a statement on Thursday. The monthly add-on charge on installment loans was likewise kept at 1%.

The BSP also maintained the maximum processing fee that credit card issuers can charge for cash advances at P200 per transaction.

“The decision of the Monetary Board will continue to help ease the financial burden of consumers through affordable credit card pricing amid the ongoing COVID-19 pandemic," BSP Governor Benjamin Diokno said.

"It will also allow the BSP to assess the impact of the improvement in macroeconomic fundamentals and easing of mobility restrictions on the performance of the credit card industry," Diokno added.

The ceilings on credit card transactions stay put unless the BSP revises it.

Central bank data showed demand for credit cards eased in the second half of 2021, with credit cards issued and outstanding only inching up 0.3% to 10.3 million during the period. The BSP attributed the softer demand to consumers increasingly turning to alternative digital products.

With interest rates at record-low last year, the cap on credit card transactions squeezed the net interest margins of some banks. According to the BSP, banks and credit card issuers netted P18.5 billion from their credit card operations in 2021, higher than the preceding year but still below pre-pandemic levels.

But the ceilings nevertheless provided a big relief to pandemic-hit borrowers which, in turn, also helped the credit card industry stay afloat. Soured debts held by the credit card industry accounted for 6.8% of their total loan portfolio in 2021, lower compared to the 8.9% ratio registered at the height of the pandemic in 2020.

At the same time, credit card receivables rose 4.9% year-on-year in December last year, indicating that consumers are swiping their cards more frequently as easing virus curbs replenish lost household incomes.

The BSP noted the credit card industry is eyeing to streamline its revenue streams by cutting back on operating costs through digital transformation.