The Market Monitor Minding the Nation's Business
The Credit Card Association of the Philippines (CCAP) is not backing down on its desire to remove the cap on credit card rates, even as the group announced that it will follow up with the Bangko Sentral ng Pilipinas (BSP) the needed action on this request.
CCAP Executive Director Alex Ilagan informed reporters this week that the association submitted a position paper to the BSP last December and they were told that the Monetary Board has already discussed the issue.
But obviously, there is no action yet on their request.
“They should lift the cap. We feel that the market will eventually determine what’s the best rate,” he said. “There’s no decision yet so we’re still waiting for the subsequent meetings. Maybe in the coming months, they might make a decision.”
“That has always been the policy of BSP ever since. We were surprised when during the term of Governor Ben Diokno, they imposed that. In the past, it’s always been market driven. There will be competition… So, we feel that a cap is unnecessary at this point. There’s no more pandemic.”
He added that lifting the ceiling could boost credit card penetration as issuers will be able to charge higher rates to lend to riskier segments.
“That’s natural, because if you offer unsecured credit to a risky segment, then you have to compensate by charging higher,” Mr. Ilagan said.
In August 2023, the BSP retained the interest rate ceiling on unpaid outstanding card balance at 3% per month or 36% a year. The limit on the monthly add-on rate that issuers can charge on installment loans was also maintained at 1%.
The maximum processing fee on the availment of credit card cash advances was likewise retained at P200 per transaction.
The BSP increased the cap by 100 basis points in January 2023 from 2% to match the cumulative rate hikes previously delivered by the Monetary Board to tame elevated inflation. The higher cap was also meant to mitigate the impact of inflation on banks and credit card issuers following the Covid 19 pandemic.