BSP okays credit card interest rate cap of 3%

January 23, 2023 - Monday 3:01 PM by Romeo Braceros Jr

The Monetary Board agreed to increase the maximum interest rate or financing charge imposed on a cardholder's unpaid outstanding credit card debt by 100 basis points (bps), or from two percent to three percent per month, to alter the ceilings on credit card transactions.

The current one percent cap on the monthly add-on rate credit card issuers can impose on installment loans is kept in place. 

The highest processing cost for using a credit card cash advance is still 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’/credit card issuers’ ability to provide quality credit card services to their clients,” Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said.

The BSP put limits on credit card transactions as a temporary solution to help consumers who were struggling financially because of the COVID-19 outbreak and to encourage easy access to credit. 

The BSP considered the low-interest rate environment that prevailed during the pandemic while setting the restrictions.

The increase in domestic interest rates caused by high inflation and BSP's efforts to combat it through repeated policy rate hikes are considered when the interest rate ceiling is adjusted.

It would assist financial institutions and credit card companies in covering the more significant expenses associated with the effective management of consumer transactions, including rapid and timely dispute resolution and the retention of qualified people.

Additionally, it will provide funds for long-term initiatives that institutionalize process changes, reinforce cybersecurity and IT systems, and foster innovation within these financial institutions that will improve consumer experiences.