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Philippines: Higher credit card rates take effect
MANILA, Philippines — Banks have started imposing higher interest rates on credit card transactions after the Bangko Sentral ng Pilipinas (BSP) increased the ceiling amid a series of aggressive rate hikes to tame inflation and stabilize the peso.
However, BDO Unibank Inc. has decided to move the effectivity of the higher three percent monthly interest rate on credit card transactions to March 12 instead of Feb. 10.
The BSP issued Circular 1165 stating that the higher ceiling on credit card transactions of three percent from two percent will take effect 15 days after publication either in the Official Gazette or in any newspaper.
“Instead of the Feb. 10, 2023 effectivity as provided by BSP Circular 1165 adjusting the credit card monthly interest rate to three percent, BDO will provide additional reprieve by extending the adjustment date to March 12, 2023,” BDO said in an advisory.
The country’s largest bank, owned by the family of the late retail and banking magnate Henry Sy, encourages customers to convert their transactions or outstanding balances through the bank’s low interest rate installment offers.
BDO said that existing rates would still apply to all BDO credit card unpaid outstanding balances before March 12 statement date.
For installment transactions, the bank said interest rate for monthly due remains at one percent maximum.
Likewise, Ayala-led Bank of the Philippine Islands (BPI) said the higher finance charge of nominal interest rate of three percent would take effect on March 13.
BPI said that a higher three percent cash advance finance charge or nominal interest rate would also take effect on March 13.
On the other hand, some banks, including Metropolitan Bank & Trust Co. (Metrobank) and China Banking Corp. started imposing the higher interest rate on credit card charges on Feb. 10.
“The monthly finance charge will increase from two to three percent. The new interest rate will apply to all unpaid balances and cash advance transactions posted to your account. The maximum monthly add-on rate of one percent for Metrobank Balance Transfer, Cash2Go, and Balance Conversion, will remain the same,” Metrobank said in an advisory.
On Jan. 13, the BSP issued Resolution 5513 raising the maximum interest rate or finance charge imposed on a cardholder’s unpaid outstanding credit card balance by 100 basis points to three percent from two percent per month or 36 percent from 24 percent per annum.
On the other hand, the existing ceiling on the monthly add-on rate that credit card issuers can charge on installment loans was maintained at a maximum rate of one percent.
Similarly, the maximum processing fee on the availment of credit card cash advances remained at P200 per transaction.
“The policy aligns the credit card interest rate ceiling with developments in the macroeconomy and cushions the impact of inflationary pressure on banks’ and credit card issuers’ ability to provide quality credit card services to their clients,” BSP Governor Felipe Medalla earlier said.
The regulator reviews the maximum processing fee and interest rates or finance charges every six months.
The BSP imposed a cap on all credit card transactions in November 2020 as a temporary relief measure to ease the financial burden of consumers from the COVID-19 pandemic and promote affordable access to credit.
The BSP has so far raised key policy rates by 400 basis points, bringing the benchmark interest rate to a 16-year high of six percent from an all-time low of two percent.
According to the BSP, the higher cap will help banks and credit card issuers cover higher costs related to the efficient handling of consumer transactions, including prompt and timely dispute resolution as well as the retention of competent personnel.
“It will also make funding available for long-term investments that will institutionalize process improvements, strengthen cybersecurity and information technology systems, and nurture innovation in these financial institutions that will lead to better customer experience,” the BSP chief said.
Latest data from the central bank showed credit card loans jumped by 26.3 percent to P554.31 billion last year from P438.81 billion in 2021.
Source: https://www.philstar.com/business/2023/02/23/2246882/higher-credit-card-rates-take-effect