BSP to Impose Annual Cap of 24% on Credit Card Interest Rates
by Fintech News Philippines November 6, 2020The Bangko Sentral ng Pilipinas (BSP) has imposed an interest rate cap of 2% a month or 24% annually starting 3 November 2020 onwards.
Benjamin Diokno
“Starting on this date, interest or finance charges on unpaid outstanding credit card balance should not exceed 24% annually or two percent per month. The monthly add-on rate for credit card installment loans should not exceed 1% per month; and the processing fee on the availment of credit card cash advances should not exceed P200 per transaction,”
said Benjamin E. Diokno, Governor of BSP.
In line with this, the BSP issued a Frequently Asked Questions (FAQs) on said cap, which was approved under BSP Circular No. 1098 dated 24 September 2020.
Aside from providing illustrative examples on the calculation of interest, finance charges and fees under Circular No. 1098, the FAQs also cite the rationale behind the initiative and the basis for the ceilings.
The policy initiative, which is pursuant to the BSP’s supervisory authority over credit card issuers under the Credit Card Industry Regulation Law, is seen to foster responsible credit card lending in the country.
Rates and fees provided under the circular are subject to review by the BSP every six months. Adjustments or changes, if any, on the ceilings will be carried out based on the said review.
Featured image credit: pexels
