September 25, 2020 | 12:35 am [ bworldonline.com ]
Credit card issuers can no longer charge interest rates of more than 2% a month or a total of 24% a year on unpaid outstanding credit card balances starting Nov. 3, 2020, the central bank said. — REUTERS
By Luz Wendy T. Noble, Reporter
THE central bank approved an annual interest rate ceiling of 24% for all credit card transactions starting Nov. 3.
This means credit card issuers can only charge interest rates of up to two percent a month on unpaid outstanding credit card balances.
“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,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said in an online briefing on Thursday.
The BSP also set the limit for monthly add-on rates for credit card installment loans at one percent.
Credit card issuers also cannot impose other charges on credit card cash advances except for a maximum processing fee of P200 per transaction, the central bank said.
“Based on our data, average annualized interest rate for credit card receivables range from 18% to 58% from January to June 2020,” BSP Director for Supervisory Policy and Research Department Veronica B. Bayangos said in the same briefing.
“Based on the credit card business activity report, the average annualized interest rate for both premium and non-premium as of June 2020 was around 26%,” Ms. Bayangos added.
The cap on credit card charges takes effect on Nov. 3, but will be reviewed by the BSP every six months.
“We are confident that the banks will comply. Because before we issued this policy, we coordinated with our counterparts in the Bankers Association of the Philippines and they supported this policy,” Ms. Bayangos said.
“We also coordinated this policy approach with the Credit Card Association of the Philippines so we do not expect any non-compliance from this policy approach,” she added.
The central bank also said the maximum ceiling on interest or finance charges on credit card transactions is in line with the current low interest rate environment. The BSP’s overnight reverse repurchase facility is at a low of 2.25%.
Under the Republic Act. No. 10870 or the Philippine Credit Card Industry Regulation Law, the BSP has the supervisory authority over all credit card issuers.
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