PHOTO
A logo of the Bangko Sentral ng Pilipinas (Central Bank of the Philippines) is seen at their headquarters in Manila, Philippines April 28, 2016. Romeo Ranoco, Reuters Image for illustrative purpose. Image for illustrative purpose
The decision of the Bangko Sentral ng Pilipinas (BSP) to maintain the rate cap on credit card transactions will benefit both the borrowers and the industry amid the aggressive rate hikes delivered by the central bank, according to banks and credit card issuers.
Alex Ilagan, executive director of the Credit Card Association of the Philippines (CCAP), said the umbrella organization of 17 credit card issuers backed the decision of the BSP to maintain the interest rate cap on credit card transactions.
'We support the BSP's intention to strike a balance between the interest of cardholders or financial consumers and credit card issuers who are both just starting to recover from the contraction brought about by the COVID global pandemic in the previous years,' Ilagan said in a statement.
Ilagan said the industry has been collaborating with the BSP in assessing the interest rate ceilings that are up for review after six months.
'CCAP is involved in doing a holistic review based on key drivers and appreciate this collaboration with the BSP,' he said.
The regulator decided to retain the maximum interest rate or finance charge on the unpaid outstanding credit card balance of a cardholder imposed under Circular 1165 issued in January at three percent per month or 36 percent per year.
Likewise, the monthly add-on rates that credit card issuers can charge on installment loans is maintained at a maximum rate of one percent, while the maximum processing fee on the availment of credit card cash advances is still at P200 per transaction.
'The BSP's decision to maintain the current ceilings on credit card transactions strikes a balance between providing consumers with access to credit card financing at steady rates and ensuring long-term viability of banks/credit card issuers so that they can continue to provide quality service to their clients,' BSP Governor Eli Remolona Jr. said.
The BSP raised key policy rates by 425 basis points between May last year to March this year to tame inflation and stabilize the peso. This paved the way for the increase in the interest rate cap on credit card transactions to three percent per month or 36 percent per annum from two percent per month or 24 percent per year.
Despite the higher cap, credit card receivables jumped by 29 percent to P599.67 billion in the first five months from P464.78 billion in the same period last year on the back of firm demand for credit cards, as evidenced by the 34.6 percent year-on-year growth in credit card billings.
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