CCAP welcomes higher credit card charges

Issuers welcomed the decision of the Bangko Sentral ng Pilipinas (BSP) to raise the ceiling on interest rates and finance charges of all credit card transactions to three percent from two percent.

In a statement, the Credit Card Association of the Philippines (CCAP) said the 100-basis-point hike in the cap on all credit card transactions is part of the central bank’s calibrated responses to the present economic situation.

“CCAP backs the BSP in pursuing various options using monetary tools to help many Filipinos, particularly the micro, small and medium enterprises, cope with rising consumer prices, boost consumption and tourism, and ultimately aid in the country’s economic recovery,” the umbrella organization of 17 credit card issuers said.

According to CCAP, it continues to support the BSP’s mandate of maintaining monetary stability and the overall soundness of the Philippine financial system.

“With the pandemic spurring the rapid adoption of consumers of new virtual payment technologies, credit cards serve as an effective, safe and convenient payment tool that drives and contributes to the overall digitization goal of the country,” it said.

In November 2020, the BSP imposed a two percent per month and 24 percent per annum cap on all credit card transactions to ease the burden of Filipino consumers amid the pandemic.

The central bank maintained the cap despite the aggressive rate hikes delivered by the Monetary Board last year to tame inflation and stabilize the peso.

The BSP matched the aggressive rate hikes delivered by the US Federal Reserve, raising key policy rates by 350 basis points.

This brought the benchmark interest rate to a 14-year high of 5.50 percent from an all-time low of two percent.

“Market-driven rates will help, not only in boosting competition in the industry, but in accelerating financial inclusion and creating a cashless society — which are aligned with the BSP’s goals,” CCAP said.

Industry sources said major players were clamoring for the removal of the cap imposed during the height of the global health crisis.

Last Jan. 13, the BSP issued Resolution 55, raising the maximum interest rate or finance charge imposed on a cardholder’s unpaid outstanding credit card balance by 100 basis points to three percent from two percent per month or 36 percent per annum.

“The policy aligns the credit card interest rate ceiling with developments in the macroeconomy and cushions the impact of inflationary pressure on banks’ and credit card issuers’ ability to provide quality credit card services to their clients,” BSP Governor Felipe Medalla said in a statement issued over the weekend.

Medalla said the maximum processing fee and interest rates or finance charges would be subject to review by the BSP every six months.

According to the BSP, the adjustment in the interest rate ceiling considers the upward trend in domestic interest rates on account of high inflation and BSP’s efforts to counter the same through successive policy rate hikes.

Medalla said the higher cap would help banks and credit card issuers cover higher costs related to the efficient handling of consumer transactions, including prompt and timely dispute resolution, as well as the retention of competent personnel.

According to Medalla, Republic Act 10870 or the Philippine Credit Card Industry Regulation Law allows the regulator to adjust interest rate ceiling for revolving purchases is in keeping with the BSP’s mandate to determine the reasonableness of credit card fees and charges.

With the further reopening of the economy, latest data from the BSP showed credit card loans jumped by 26.5 percent to P539.25 billion in end-November last year from P426.22 billion in end-November 2021.