BSP sets 2% monthly cap on credit card charges

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Metro Manila (CNN Philippines, September 24) — Credit card issuers cannot charge more than 2 percent monthly interest on unpaid loans beginning November 3, the Bangko Sentral ng Pilipinas said Thursday.

Governor Benjamin Diokno said the central bank approved an annual interest rate ceiling of 24 percent for balances falling due, as well as for cash advances.

The rules also capped the processing fee for cash advances at ₱200 per transaction. Meanwhile, monthly add-on rates for installment loan payments cannot go beyond 1 percent of the transaction amount.

Diokno said this promotes "responsible credit card lending," and is timely given the fact that the BSP's policy rates are at an all-time low, with the key yield at 2.25 percent.

"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," the BSP chief added.

The BSP said average credit card interest rates are at 26 percent per annum, coming from a wide range of 18-58 percent.

The central bank expects all banks and financial firms to comply, saying industry groups were supportive of the idea when they were consulted.

Currently, banks either charge a monthly fixed rate or a one-time service fee on cash advances, usually whichever is higher.

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, the BSP said.

Separately, the Bayanihan 2 Act provided a 60-day grace period for all loan payments, which must be implemented before December 31.