MANILA, Philippines – If you’ve been relying on your credit card recently, you’ll be glad to know that the maximum rate for monthly interest, charge for installment loans, and cash advance fee for credit cards will all be maintained.

Here are the ceilings on credit card transactions set by the Bangko Sentral ng Pilipinas (BSP), which will remain for the next six months:

• Maximum interest rate on unpaid outstanding credit card balance (finance charge) – 3% per month or 36% per year
• Maximum add-on rate for installment loans – 1% per month
• Maximum processing fee for credit card cash advance – P200 per transaction

Essentially, this means that any credit card user, regardless of bank, will only be charged a maximum interest of 3% every month on their unpaid balance. (READ: Filipinos reluctant to use credit products due to ‘utang’ stigma)

“The BSP’s decision to maintain the current ceilings on credit card transactions strikes a balance between providing consumers with access to credit card financing at steady rates and ensuring long-term viability of banks/credit card issuers so that they can continue to provide quality service to their clients,” said BSP Governor Eli Remolona Jr. in a statement on Tuesday, August 22.

The cap on maximum interest rates served to ease the burden on consumers in need of access to credit during the pandemic. With the economy reopening, the BSP had raised the interest rate cap for credit cards on January 20 from the previous 2% to the current 3%.

“We support the BSP’s intention to strike a balance between the interest of cardholders or financial consumers and credit card issuers who are both just starting to recover from the contraction brought about by the COVID-19 global pandemic in the previous years,” Credit Card Association of the Philippines (CCAP) executive director Alex Ilagan said in a statement.

CCAP, composed of 17 credit card issuers, said it continues to assess the interest rate ceilings in collaboration with the BSP through “a holistic review based on key drivers.”

As of May 2023, credit card receivables continued to grow at a strong 29% year-on-year, higher than the 17.1% recorded in the same period in 2022.

Despite the increase in use, credit card issuers have managed to keep the quality of their portfolios, with the non-performing loan ratio for credit card receivables improving to 3.9% as of May 2023 compared to 6.3% last year.

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– Rappler.com