Credit card users can breathe a sigh of relief after the central bank decided to keep the ceiling on credit card interest rates and finance charges for another six months.

The Bangko Sentral ng Pilipinas (BSP) continues to limit how credit card issuers are charging cardholders in terms of monthly interest rates and fees on transactions in recognition of financial consumers’ struggle to meet payments on time amid higher benchmark rates and the increase in banks’ minimum payment dues.

The BSP announced on Tuesday, Aug. 22, that the Monetary Board, BSP’s policy-making body, has retained the three percent monthly ceiling on credit card interest rates and finance charges, or 36 percent per year.

BSP Governor Eli M. Remolona is hoping that in maintaining the credit card ceiling, it will “strike a balance between providing consumers with access to credit card financing at steady rates and ensuring long-term viability of banks/credit card issuers so that they can continue to provide quality service to their clients.”

The three percent monthly ceiling will be imposed for another six months, or until February 2024. The last circular, dated Jan. 19, 2023, has been updated as of this month.

As such, the maximum interest rate or finance charge on the unpaid outstanding credit card balance of a cardholder is still three percent per month or 36 percent per year.

Meanwhile, the monthly add-on rates that credit card issuers can charge on installment loans remains a maximum rate of one percent while the maximum processing fee on the availment of credit card cash advances is still P200 per transaction.

The BSP noted that in deciding to retain the interest rate and finance charge limit, it has observed that credit card receivables have increased by 29 percent as of end-May this year, higher than the 17.1 percent posted same period in 2022.

Credit card billings also grew by 34.6 percent as of end-March, higher than the 28.5 percent recorded same time last year, due to demand for credit cards.

“Amid the expansion in credit card receivables, banks/credit card issuers maintained the quality of their credit card portfolio,” said the BSP. It referred to the end-May non-performing credit card receivables of P23.4 billion compared to the P29.3 billion in the previous year, which was 3.9 percent in NPL ratio, down from 6.3 percent same time in 2022.

In its statement, the BSP said that with digitalization and the “prudent use of innovation” banks and credit card issuers “will be able to improve delivery of their services as well as enhance customer experience at lower operating cost.”

“BSP’s ongoing efforts to instill the importance of the responsible use of credit cards as part of financial literacy programs will help consumers make sound personal financial decisions,” said the BSP.

Since the BSP reviews the interest rate ceiling every six months, it is able to monitor and assess if cardholders are coping with the increased payments on their credit card balances.

The three percent ceiling on credit card transactions takes effect as soon as the circular is published. It will remain in effect unless revised by the BSP.

The ceilings on credit card transactions are temporary relief measures. It was given for cardholders’ reprieve during the pandemic and to allow them affordable access to credit.

However in 2022, with rising global interest rates that forced the BSP to raise its own benchmark rate by a total 425 basis points (bps) by March 2023 -- which increased the policy rate from two percent to 6.25 percent -- the Monetary Board thought it prudent to review the ceiling in view of the higher rates.