THE BANGKO SENTRAL ng Pilipinas (BSP) said it will review the current cap on interest rates and other charges imposed by credit card companies in January.
This after the Monetary Board agreed last week to maintain the existing ceiling on credit card interest rates and other charges until end of 2022.
The BSP kept the maximum interest rate or finance charge on an unpaid outstanding balance of a credit cardholder at 2% per month or 24% a year. It also set the maximum monthly add-on rate on credit card installment loans at 1%.
A maximum processing fee of P200 per credit card cash advances was also maintained.
“The reasonableness of the ceilings shall be subject to further review in January 2023. The BSP will continue to closely monitor evolving domestic and external developments that will impact the state of credit card financing, sustainability of credit card operations and viability of banks/credit card issuers,” the BSP said.
Keeping the limit on credit card rates and charges may encourage consumers to spend more, economists said.
“This would still support increased demand for credit amid improved consumer sentiment/confidence as the economy further reopened towards greater normalcy… In view of the increasing trend in local and US/global interest rates that increased financing/borrowing costs, the continuation of the cap would lead to faster credit growth,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The central bank imposed the ceiling through Circular 1098 issued in September 2020. The cap took effect on Nov. 3, 2020 in a bid to ease the burden of Filipinos affected by the pandemic.
The rates and fees of credit card transactions are subject to review by the BSP every six months.
“Maintaining credit card charges is likely to temper any unnecessary costs for consumers in this period of high inflation and high interest rate environment. So far, credit growth appears robust despite increasing interest rates as evidenced in bank lending growth,” China Banking Corp. Chief Economist Domini S. Velasquez said. — KBT