Billing Settlement Payment (BSP) adjusts the interest rate cap on credit card transactions

The Monetary Board decided to amend the caps on credit card transactions by increasing the maximum interest rate or financing fee charged on a cardholder’s outstanding credit card balance by 100 basis points (bps) or from 2% to 3.0% per month. Meanwhile, the current cap on the monthly surcharge that credit card issuers can charge for installment loans is maintained at a maximum of 1 percent. Likewise, the maximum processing fee on availing credit card cash advances remains at P200 per transaction.

“The policy aligns the credit card interest rate cap with developments in the macro economy and helps the impact of inflationary pressures on the ability of banks/credit card issuers to provide high-quality credit card services to their customers,” said Felipe Medalla, Governor of the Savings and Credit Bank.

The caps on credit card transactions were imposed by the BSP as a temporary measure to ease the financial burden on consumers from the COVID-19 pandemic and to promote access to affordable credit. In determining the caps, the Facility Bank took into account the low interest rate environment prevailing during the pandemic.

The adjustment in the interest rate ceiling takes into account the upward trend in domestic interest rates on account of high inflation and the efforts of the Bills Settlement Payment (BSP) to counter this through successive increases in policy rates. It will help banks/credit card issuers cover the high costs associated with the efficient handling of consumer transactions, including prompt and timely dispute resolution, as well as the retention of competent staff. It will also provide financing for long-term investments that will institutionalize process improvements, strengthen cyber security and IT systems, and foster innovation in these financial institutions that will lead to a better customer experience.

In the circumstances, the BSP finds that the adjustment in the interest rate ceiling for revolving purchases is consistent with the BSP mandate to determine the reasonableness of credit card fees and charges under Section 4 of the Philippine Credit Card Industry Regulatory Act or RA No. . 10870. The resolution is also consistent with the Billing Settlement Payment (BSP) goal of keeping credit card rates affordable without endangering the long-term continuity of credit card operations of banks/credit card issuers.

Midala, Governor of the Bank of Special Facilities (BSP), added: “BSP will continue to implement complementary measures that will give consumers access to financial products at a lower cost, such as providing an enabling framework that will promote a level playing field for new entrants to the market. Fostering prudent digital innovation, enabling responsible access to credit information, and upholding the rights of financial consumers.”

Maximum limits for credit card transactions will remain in effect unless they are reviewed by the Billing Settlement Payment (BSP). However, BSP will continue to monitor domestic and overseas developments that may have an impact on consumers and the credit card industry, after a six-month review period.

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