The Monetary Board opted to keep the credit card transaction limitations in place under Circular No. 1098, issued September 24, 2020.
The Bangko Sentral ng Pilipinas (BSP) said in a statement that the maximum interest rate or finance charge on a cardholder’s unpaid outstanding credit card debt remains at 2% per month or 24% per year. Similarly, the maximum monthly add-on rate that credit card issuers may charge on installment loans has been kept at 1%. In the meanwhile, the maximum processing charge for credit card cash advances remains P200.00 per transaction.
“The decision of the Monetary Board is based on a holistic assessment considering the developments in the macroeconomy, the state of credit card financing as well as the safety and soundness of banks and other credit card issuers. It will also continue to help ease the financial burden of consumers through affordable credit card pricing,” according to BSP Governor Benjamin E. Diokno.
The retention of the existing ceiling is in line with the current low-interest-rate environment. In its latest policy meeting, the Monetary Board maintained the overnight reverse repurchase facility at 2.0 percent, the lowest policy rate since the beginning of the pandemic.
Data show that credit card business activity improved in 2021 as demonstrated by the growth in monthly card applications, card billings, and issued cards buoyed by an uptick in economic activity. The number of monthly card applications significantly rose by 175.1 percent year-on-year (YoY) in June 2021 to around 646,000 applications from 235,000 applications in June 2020.
Monthly card billings also grew by 29.5 percent YoY in June 2021 to P73.0 billion from P56.3 billion a year ago. Meanwhile, the number of credit cards that were issued and outstanding or credit cards-in-force increased 8.7 percent YoY to 10.2 million cards from 9.4 million over the same period.
Credit card receivables posted consecutive monthly contractions in the first semester of 2021, albeit at a decelerating trend. Notwithstanding this, the asset quality of credit card receivables improved during the same period. This was accompanied by a non-performing loan coverage ratio, which has been consistently above 100 percent since February 2021, at 108.2 percent as of end-June 2021. In addition to demonstrating prudent lending standards, banks and other credit card issuers were able to post net income on their credit card business during the same period from increased credit card usage, albeit below pre-pandemic levels.
Moving forward, banks and credit card issuers intend to offer more competitive credit card products, improve customer experience and reduce operating costs through digital transformation and process improvement.
The ceilings on credit card transactions remain effective unless revised by the BSP. The BSP will continue to closely monitor the impact of the ceilings on the state of credit card financing and the sustainability of credit card operations of banks/credit card issuers against the backdrop of the evolving COVID-19 pandemic.