February 3, 2023

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BSP adjusts the interest rate cap for credit card transactions

The Monetary Board decided to adjust the caps on credit card transactions by increasing the maximum interest rate, or maximum financing fee, charged on a cardholder’s unpaid outstanding credit card balance by 100 basis points (bps), or from 2 percent to 3.0 percent per month . Meanwhile, the existing cap on the monthly surcharge rate that credit card issuers can levy on consumer loans will remain at a maximum rate of 1 percent. Likewise, the maximum processing fee for claiming cash advances via credit card remains at P200 per transaction.

GNP Gov. Felipe M. Medalla said: “The directive aligns the interest rate cap on credit cards with developments in the macroeconomic environment and cushions the impact of inflationary pressures on banks/credit card issuers’ ability to provide quality credit card services to their customers.”

The credit card transaction caps were introduced by the BSP as a temporary relief measure to ease the financial burden on consumers from the COVID-19 pandemic and to encourage affordable access to credit. When setting the caps, the BSP took into account the prevailing low interest rate environment during the pandemic.

The interest rate cap adjustment takes into account the upward trend in domestic interest rates due to high inflation and BSP’s efforts to counteract this by gradually raising interest rates. It will help banks/credit card issuers recover higher costs associated with efficiently processing consumer transactions, including fast and timely dispute resolution and retaining competent staff. It will also provide funds for long-term investments that will institutionalize process improvements, strengthen cybersecurity and information technology systems, and foster innovation in these financial institutions that will result in better customer experiences.

Given these circumstances, BSP believes that the adjustment to the interest rate cap on revolving purchases is consistent with BSP’s mandate to ensure the appropriateness of credit card fees and charges under Section 4 of the Philippine Credit Card Industry Regulation Law or RA No. 10870. The decision is also in line with BSP’s goal of keeping credit card prices affordable without jeopardizing the long-term viability of banks/credit card issuers’ credit card business.

BSP Governor Medalla added: “The BSP will continue to implement complementary policies that allow consumers to access financial products at lower costs, such as enable responsible access to credit information and protect the rights of financial customers.”

The credit card transaction limits will remain in effect unless amended by the BSP. However, following a six-month review period, the BSP will continue to monitor domestic and external developments that may impact consumers and the credit card industry.