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Cap on credit card interest rate, fees takes effect Nov. 3: BSP

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ABS-CBN News

<div class="embed-wrap"><figure data-feedback="fb:likes,fb:comments"><img src="https://sa.kapamilya.com/absnews/abscbnnews/media/2017/generic/credit-card-2017-071917.jpg"/></figure></div><p>MANILA<strong> (UPDATE) </strong>- The cap on credit card interest rates, finance charges and fees takes effect Nov. 3 Tuesday, the Bangko Sentral ng Pilipinas said. </p><p>“Starting on this date, interest or finance charges on unpaid outstanding credit card balance should not exceed 24 percent annually or two percent per month; the monthly add-on rate for credit card installment loans should not exceed 1 percent per month; and the processing fee on the availment of credit card cash advances should not exceed P200 per transaction,” SAID BSP Governor Benjamin E. Diokno </p><p>According to the BSP’s <a href="https://www.bsp.gov.ph/Regulations/Issuances/2020/m082.pdf">FAQ</a> on the directive, the interest rate cap is meant to promote responsible credit card lending in the country.</p><figure class="op-interactive"><iframe height="315" src="https://www.youtube.com/embed/VKFiXCroOiI?enablejsapi=1" width="560"></iframe></figure><div class="iwantbar">Watch more in <a href="//www.iwantv.com.ph/">iWantv</a> or <a href="//tfc.tv/">TFC.tv</a></div><p>Rates and fees are subject to review by the BSP every six months. </p><p>The BSP said credit card interest or finance charges in the Philippines are relatively high compared to its ASEAN neighbors, the BSP said. </p><p>Malaysia and Thailand, also have an existing interest rate ceiling on credit card loans, the central bank noted. </p><p>The cap on interest aims to ease the financial burden of consumers, including micro, small- and medium business enterprises amid the challenges caused by the COVID-19 pandemic, it said.</p><p>The maximum annual interest rate of 24 percent, or 2 percent monthly, as well as the maximum monthly add-on rate of 1 percent for credit card installment loans, generally approximate the interest or finance charges currently imposed by the industry, according to the BSP. </p><p>“The ceiling on interest rate is also in keeping with the country&#x27;s current low interest rate environment,” the BSP said. </p><p>The central bank has kept its policy rate, which banks use to price loans, at a <a href="https://news.abs-cbn.com/business/12/29/10/bsp-keeps-policy-rate-record-low">record low</a> of 2.25 percent. This is meant to encourage consumers and enterprises to borrow more money from banks for consumption and business expansion, and thus stimulate the economy. </p><p>It has also reduced the required reserve for banks, allowing them to lend more money to clients. Despite this, banks remain <a href="https://news.abs-cbn.com/business/10/29/20/banks-keeping-lending-tight-despite-record-low-interest-rates-bsp">reluctant</a> to lend due to worries that borrowers might not be able to repay what they owe given the impact of the pandemic. </p>

<p>Credit card companies may charge interest or finance charge up to only 24 percent yearly, or a monthly interest rate of up to 2 percent on all transactions.</p>

Credit card companies may charge interest or finance charge up to only 24 percent yearly, or a monthly interest rate of up to 2 percent on all transactions.