November 13, 2022 | 12:00 am
MANILA, Philippines — Consumers are expected to continue to enjoy low interest rates and fees on their credit card transactions through at least the Christmas holidays after the Bangko Sentral ng Pilipinas (BSP) decided to keep the current cap until the end of year.
The central bank’s Monetary Board decided to keep the cap on interest rates and charges on credit card transactions until the end of December before reviewing it again in January next year.
“No big reason. Only the moment of cap adjustment,” BSP Governor Felipe Medalla told The STAR.
Medalla, who chairs the seven-member Monetary Board, previously said the regulator is finally adjusting the rate cap and other charges after a series of aggressive rate hikes implemented by the BSP to control inflation and stabilize the peso.
The STAR first reported that the BSP was imposing an interest rate of two percent per month and 24 percent per year or a finance charge cap on unpaid credit card balances.
Similarly, the additional monthly fees that credit card issuers could charge on installment loans were set at a maximum rate of one percent, as was the maximum transaction processing fee of P200 on the availability of cash advances. of credit cards.
The BSP formalized the imposition of the cap approved by the Monetary Board through Circular 1098 issued in late September 2020 and the cap became effective on November 3, 2020 to ease the burden on Filipinos affected by the global health crisis. .
Rates and maximum rates are subject to review by the BSP every six months and a new rate was supposed to be in place in early November.
Before the cap was imposed during the height of the global health crisis, the annualized interest rate on credit card receivables averaged 36%.
After cutting key policy rates by 200 basis points that brought the benchmark rate to an all-time low of two percent as part of its COVID-19 response measures in 2020, the BSP has turned aggressive by aggressively raising rates. interest rates at 225 basis points to 4.25 percent this year to control inflation and stabilize the peso.
The central bank is widely expected to deliver another big 75 basis point hike on Thursday after Medalla underscored the need for the BSP’s Monetary Board to match aggressive rate hikes by the US Federal Reserve point for point to maintain the interest rate differential.
Philippine banks and credit card issuers have reported lower profits since caps on credit card charges were imposed.
Preliminary data from the BSP showed that credit card loans rose 26.1% to P507.42 billion at the end of September this year from P402.41 billion at the end of September last year, while consumer loans increased by 20.5% to P965.99 billion from P801.4 billion.
During the nine-month period, total loans disbursed by the big banks grew at a faster pace of 13.4% to P10.49 trillion from the year-ago level of P9.25 trillion, supporting the recovery of economic activity and domestic demand.
From the strict Alert Level 3 in January, when infections surged with the highly transmissible Omicron variant, the National Capital Region and nearby provinces switched to Alert Level 1 from March, as COVID-19 cases steadily decreased.
In the third quarter of the year, the Philippines posted faster-than-expected 7.6 percent gross domestic product (GDP) growth despite skyrocketing inflation and a weak peso. This was slightly higher than the 7.5 percent expansion recorded in the second quarter.
The country is on track to meet the 6.5-7.5 percent GDP growth target set by economic managers, as expansion averaged 7.7 percent for the January-September period.