Watch more in iWantv or TFC.tv

MANILA - The cap on credit card interest rate to 2 percent per month has "unintended" consequences for card holders in the long run as banks are likely to cut some costs to offset foregone revenue, the Credit Card Association of the Philippines said Monday.

Banks are likely to cut down on added costs such as freebies, reward points and rebates in the long run, Credit Card association of the Philippines executive director Alex Ilagan told ANC.

"In the long run it will be detrimental also for consumers, the banks will try to cut down on their added costs," Ilagan said.

• Bangko Sentral caps credit card interest rates at 2 percent per month
• Credit card interest rate cap 'eases burden' of Filipinos hit by pandemic: BAP

Ilagan said banks could also become "more selective" and could deny credit to the riskier sector, which is the lower income groups, once credit card interest rates are capped.

Existing card holders may also be curtailed in terms of credit card lines and may be forced to borrow from informal lenders, he said.

The Bayanihan to Recover as One, which grants a one-time 60-day grace period for loans, could also affect credit card issuers.

Last quarter, Ilagan said they saw a 1 percent contraction in terms of credit card growth, which usually increases by 3 percent every quarter.

Usage in the second quarter was also reduced by 50 percent compared to 2019 due to the COVID-19 lockdown and behavioral shift as consumers move to online channels, he said.

The Bangko Sentral ng Pilipinas earlier put a 2 percent monthly cap, or 24 percent annually, on credit card interest rates to ensure affordable pricing.