BSP maintains cap on credit card fees until the end of the year

Laurent Agcaoili – The Star of the Philippines

November 13, 2022 | 00:00

MANILA, Philippines — Consumers are expected to continue to enjoy low interest rates and fees on their credit card transactions at least through the Christmas holidays after Bangko Sentral ng Pilipinas (BSP) decided to maintain the current cap until ‘at the end of the year.

The central bank’s Monetary Board has decided to keep the cap on interest rates and fees on credit card transactions until the end of December before reviewing them in January next year.

“No big reason. Just the timing of the cap adjustment, BSP Governor Felipe Medalla told The STAR.

Medalla, who chairs the seven-member Monetary Council, said earlier that the regulator was finally adjusting the rate cap and other charges after a series of aggressive rate hikes imposed by the BSP to tame inflation and stabilize the economy. peso.

The STAR first reported that the BSP imposes an interest rate or finance charge cap of 2% per month and 24% per annum on the outstanding credit card balance.

Similarly, additional monthly rates that credit card issuers could charge on installment loans were set at a maximum rate of 1%, as well as a maximum processing fee of P200 per transaction on the use of advances funds on credit card.

BSP formalized the imposition of the Monetary Board-approved cap through Circular 1098 issued in late September 2020 and the cap came into effect on November 3, 2020 to ease the burden on Filipinos affected by the global health crisis.

The maximum rates and charges are subject to review by BSP every six months and a new rate was expected to be in place by early November.

Before the cap was imposed at the height of the global health crisis, the annualized interest rate on credit card receivables averaged 36%.

After cutting policy rates by 200 basis points, bringing the benchmark rate down to a historic low of 2% as part of its COVID-19 response measures in 2020, the BSP turned hawkish by aggressively raising interest rates by 225 basis points to 4.25% this year to control inflation and stabilize the peso.

The central bank is widely expected to deliver another huge 75 basis point hike on Thursday after Medalla highlighted the need for the BSP Monetary Council to match the Federal Reserve’s aggressive rate hikes point by point. US in order to maintain the interest rate differential.

Philippine banks and credit card issuers have reported lower revenues since caps were imposed on credit card fees.

Preliminary data from the BSP showed credit card lending jumped 26.1 percent to 507.42 billion pesos at the end of September this year, from 402.41 billion pesos at the end of September. last year, consumer loans increased by 20.5% to 965.99 billion pesos against 801.4. billion.

During the nine-month period, total loans disbursed by major banks grew at a faster rate of 13.4% to reach 10.49 trillion pesos compared to a level of 9.25 trillion pesos a year ago. a year, supporting the recovery of economic activity and domestic demand.

From strict Alert Level 3 in January as infections surged with the highly transmissible variant of Omicron, the National Capital Region and neighboring provinces moved to Alert Level 1 in March as COVID cases -19 were steadily decreasing.

In the third quarter of the year, the Philippines recorded gross domestic product (GDP) growth of 7.6% faster than expected despite soaring inflation and a weak peso. This figure was slightly higher than the 7.5% expansion recorded in the second quarter.

The country is on track to meet the GDP growth target of 6.5-7.5% set by economic managers, with expansion averaging 7.7% for the January-September period.

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