Bangko Sentral ng Pilipinas puts ceiling on credit card charges
The Bangko Sentral ng Pilipinas’ Monetary Board has recently approved the 24% annual interest rate ceiling, or 2% monthly, on all credit card charges.
Based on the circular 1098 of Bangko Sentral ng Pilipinas, interest rates or charges on a cardholder’s unpaid credit card balance should not exceed 2% per month. It also covers credit card installment loans where credit card issuers can only charge monthly add-on rates up to 1%.
However, no other charges shall be imposed on or collected on credit card cash advances except the maximum processing fee of PHP 200per transaction.
This is to alleviate the financial burden during the pandemic.
“The interest rate cap on credit card receivables aims to ease the financial burden of consumers and micro, small and medium enterprises amid a difficult economic environment caused by the COVID-19 pandemic,” said Bangko Sentral ng Pilipinas Governor Benjamin Diokno.
These maximum rates and fees shall be effective on November 3 and shall be subject to review by the BSP every six months.
The order is pursuant to the BSP’s supervisory authority overall credit card issuers under the Credit Card Industry Regulation Law. It is also developed to promote responsible credit card lending in the Philippines.
BSP Governor Diokno also twitted about the announcement made, mentioning aim to keep the country’s low-interest rate.
Yesterday, I announced the ceiling on interest or finance charges for credit card receivables, which should not exceed two percent per month.
This is in keeping with the country’s current low interest rate environment.
— Benjamin Diokno (@GovBenDiokno) September 25, 2020
The interest rate on the BSP’s overnight reverse repurchase (RRP) facility retains at 2.25% which has been the lowest policy rate since the pandemic started.
The order also waives the requirement for credit card issuers to notify the cardholder of the said changes on interest or finance charges at least 90 calendar days before its implementation.