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June 22, 2024

BSP maintains caps on credit card charges

Bangko Sentral ng Pilipinas (BSP) announced that it will retain the existing caps on credit card charges, aiming to stimulate consumer spending while ensuring the financial health of lenders.

Bankero and BSP Governor Eli Remolona stated that this decision strikes a balance between providing consumers access to steady-rate credit card financing and guaranteeing the long-term viability of banks and credit card issuers.

Circular 1165, issued earlier in the year, limited interest rates on unpaid credit card balances to 3.0 percent per month or 36 percent annually, set a maximum monthly add-on rate for installment loans at 1.0 percent, and established the highest processing fee for credit card cash advances at P200 per transaction.

The BSP noted that these caps will be subject to review after a six-month period.

As of the end of May, credit card receivables experienced a 29.0 percent year-on-year growth, outpacing the previous year’s 17.1 percent increase. This surge was fueled by strong demand for credit cards, reflected in a 34.6 percent rise in billings, compared to the prior year’s 28.5 percent.

Despite the expansion in credit card receivables, banks and credit card issuers maintained the quality of their credit card portfolios, leading to a decrease in nonperforming receivables from P29.3 billion to P23.4 billion compared to the previous year. The ratio of nonperforming credit card receivables to total credit card receivables also dropped from 6.3 percent to 3.9 percent.

The BSP expressed its continued commitment to promoting digitalization in the financial industry, highlighting that innovation can improve service delivery and enhance customer experience at lower operating costs. The central bank emphasized that initiatives to encourage responsible credit card use would empower consumers to make sound financial choices, all aimed at ensuring a resilient, dynamic, and inclusive financial system.

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