BSP maintains ceilings on credit card transactions

The Monetary Board decided to maintain the ceilings on credit card transactions under Circular No. 1098 dated 24 September 2020.

The maximum interest rate or finance charge on the unpaid outstanding credit card balance of a cardholder remains at 2 percent per month or 24 percent per year.

Similarly, the monthly add-on rates that credit card issuers can charge on installment loans is retained 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.

BSP Governor Benjamin E. Diokno said that “the decision of the Monetary Board will continue to help ease the financial burden of consumers through affordable credit card pricing amid the ongoing COVID-19 pandemic. It will also allow the BSP to assess the impact of the improvement in macroeconomic fundamentals and easing of mobility restrictions on the performance of the credit card industry.”

Latest credit card business activity data show that the demand for credit cards moderated in the second half of 2021 as customers shifted towards alternative digital products.

Nonetheless, the number of credit cards that were issued and outstanding managed to grow by a modest 0.3 percent to 10.3 million while monthly card billings increased by 33.9 percent YoY to P100.6 billion in December 2021.

With the resumption of business activities and easing of mobility restrictions, credit card receivables grew by 4.9 percent year-on-year in December 2021, albeit at a slower trend compared to last year.

Banks/credit card issuers were also able to maintain the asset quality of their credit card portfolios through intensified remediation and workout arrangements.

The non-performing loan (NPL) ratio of the credit card industry registered a declining trend and stood at 6.8 percent in December 2021 compared to the 8.9 percent NPL ratio recorded a year ago.

This was accompanied by consistent recording of NPL coverage ratios at above 100 percent which stood at 109.5 percent as of December 2021.

In addition to demonstrating prudent lending standards, banks/credit card issuers posted higher net income on their credit card operations of P18.5 billion for the year 2021 compared to a year ago. This was, however, still lower than levels recorded by the industry before the COVID-19 pandemic.

Moving forward, the credit card industry intends to further reduce operating costs through digital transformation and process improvements as well as maintain prudent lending standards.

The ceilings on credit card transactions remain in effect unless revised by the BSP. The BSP, however, will closely monitor evolving domestic and external developments that will impact the state of credit card financing, sustainability of credit card operations and viability of banks/credit card issuers.