BSP retains ceilings on credit card transactions

The Monetary Board decided to retain the existing ceilings on credit card transactions under Circular No. 1165 dated 19 January 2023.

The maximum interest rate or finance charge on the unpaid outstanding credit card balance of a cardholder remains at 3 percent per month or 36 percent per year.

Similarly, the monthly add-on rates that credit card issuers can charge on installment loans is maintained at a maximum rate of 1 percent.

Meanwhile, the maximum processing fee on the availment of credit card cash advances stays at Php200.00 per transaction. The ceilings on credit card transactions are subject to review following a six-month period.

BSP Governor Eli M. Remolona, Jr. said that “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.”

Credit card receivables posted double-digit growth of 29.0 percent year-on-year (YoY) as of end-May 2023, higher than the 17.1 percent YoY registered a year ago. This was on the back of firm demand for credit cards as evidenced by 34.6 percent YoY growth in credit card billings, compared to the 28.5 percent YoY growth in the previous year.

Amid the expansion in credit card receivables, banks/credit card issuers maintained the quality of their credit card portfolio.

Non-performing credit card receivables as of end-May 2023 was lower at P23.4 billion compared to the P29.3 billion in the previous year.

Ratio of non-performing credit card receivables to credit card receivables also declined to 3.9 percent as of end-May 2023 from 6.3 percent NPL ratio last year.

BSP will continue to pursue strategies to promote digitalization in the financial industry. Through the prudent use of innovation, banks/credit card issuers will be able to improve delivery of their services as well as enhance customer experience at lower operating cost.

Meanwhile, BSP’s ongoing efforts to instill the importance of the responsible use of credit cards as part of financial literacy programs will help consumers make sound personal financial decisions. All these efforts are geared towards ensuring a resilient, dynamic and inclusive financial system.