MANILA - The Bangko Sentral ng Pilipinas said Thursday it is capping the interest rate that banks are allowed to charge for credit cards at 24 percent per annum starting Nov. 3.
This translates to an interest rate of 2 percent per month. Other charges meanwhile will be limited to a processing fee of P200 per transaction. The rates will be reviewable every 6 months, the BSP said.
The BSP said the cap should assure credit card users of affordable pricing.
The measure is also consistent with the current low interest rate environment following the BSP's aggressive easing of monetary policy to encourage borrowing and economic activity.
"Based on our data, the average annualized interest rate on credit card receivables ranged from 18 percent to 58 percent from January to June 2020. Based naman sa credit card business report, the average annualized interest rate for all types of credit card holders, both premium and non-premium was 26 percent,” said Veronica Bayangos, Director of the BSP’s Supervisory Policy and Research Department.
Last month BSP Governor Benjamin Diokno said that the high credit card interest rates in the country were "unacceptable."
Credit card rates can increase depending on the repayment habits of the user. Delinquent users are typically charged a higher rate, to encourage prompt payments and avoid the build-up of bad credit card debt.
“We are confident banks will comply and will observe such a limit. Because before we issued this policy, we coordinated with our counterparts with BAP, and they supported this policy. We also coordinated this policy approach with the credit card association of the Philippines,” Bayangos added.
The BSP said the interest rate cap is not expected to hurt the income of banks and credit card issuers.