Credit card issuers on Monday welcomed the decision of the Bangko Sentral ng Pilipinas (BSP) to raise the monthly interest rate cap on all transactions to three percent from two percent.
The 17-member Credit Card Association of the Philippines (CCAP) believes the 100-basis point hike in the ceiling on interest rates or finance charges delivered by the central bank’s Monetary Board would boost competition.
“Market-driven rates will help, not only in boosting competition in the industry, but in accelerating financial inclusion and creating a cashless society — which are aligned with the BSP’s goals,” CCAP said in a statement.
The umbrella organization continues to support the BSP’s mandate of maintaining monetary stability and the overall soundness of the Philippine financial system.
It believes the recent move is part of the BSP’s calibrated responses to the present economic situation.
“CCAP backs the BSP in pursuing various options using monetary tools to help many Filipinos, particularly the micro, small and medium enterprises, cope with rising consumer prices; boost consumption and tourism; and ultimately aid in the country’s economic recovery,” it added.
With the pandemic spurring the rapid adoption of consumers of new digital payment technologies, CCAP said credit cards serve as an effective, safe and convenient payment tool that drives and contributes to the overall digitization goal of the country.
Last January 13, the BSP decided to adjust the ceilings on credit card transactions by increasing the maximum interest rate or finance charge imposed on a cardholder’s unpaid outstanding credit card balance.
The regulator also maintained the existing ceiling on the monthly add-on rate that credit card issuers can charge on installment loans at a maximum rate of one percent.
Similarly, the maximum processing fee on the availment of credit card cash advances remains at P200 per transaction.
“The policy aligns the credit card interest rate ceiling with developments in the macroeconomy and cushions the impact of inflationary pressure on banks’ or credit card issuers’ ability to provide quality credit card services to their clients,” BSP Governor Felipe M. Medalla said,
The caps on credit card transactions were imposed by the BSP as a temporary relief measure to ease the financial burden of consumers from the COVID-19 pandemic and promote affordable access to credit. In fixing the caps, the BSP considered the prevailing low interest rate environment during the pandemic.
Last year, the central bank’s Monetary Board raised key policy rates by 350 basis points that brought the overnight reverse repurchase rate to a 14-year high of 5.50 percent form an all-time low of two percent to tame inflation and stabilize the peso.
“The adjustment in the interest rate ceiling considers the upward trend in domestic interest rates on account of high inflation and BSP’s efforts to counter the same through successive policy rate hikes,” the central bank said.
