BSP Implements A 2% Monthly Cap On Credit Card Charges

BSP Implements A 2% Monthly Cap On Credit Card Charges

The Bangko Sentral ng Pilipinas (BSP) announced last Thursday that credit card issuers are no longer allowed to charge more than 2 percent monthly interest on unpaid balances starting November 3, 2020. 

According to Governor Benjamin Diokno, the central bank has approved an annual interest rate ceiling of 24 percent for balances due also for cash advances. Their new regulation also capped the processing fee for cash advances to just ₱200 per transaction. On the other hand, monthly add-on rates for installment loan payments are capped at 1 percent of the transaction amount.

The BSP Governor said that they are doing this to promote “responsible credit card lending,” and it’s just a timely move to take given that the BSP’s policy rates are at an all-time low, with the key yield at 2.25 percent. The current credit card rates are at 26 percent per annum which was already down from a very wide range of 18 to 58 percent annually. Meanwhile, cash advances currently have a monthly fixed-rate or a one-time service fee, whichever is higher. 

Diokno added that 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.

All financial institutions and banks are expected to comply due to the fact that industry groups were supportive of the idea when they were consulted. 

The BSP also added that banks are authorized to collect so-called finance charges for the delayed or incomplete payments of outstanding card balances for every billing date. The maximum finance charge will be subject to review every six months. 



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