The Bangko Sentral ng Pilipinas (BSP) has raised the maximum monthly add-on rate that banks can charge on credit card instalment loans to 1.5% from 1%, while keeping the 3% monthly cap on credit card finance charges, the central bank said.

It has also increased the maximum one-time processing fee for cash advances to PHP 300 from PHP 200 per transaction.

The BSP issued Circular No. 1242 on 10 November, with the changes set to take effect 15 calendar days after its publication in the Official Gazette or a newspaper of general circulation, according to the Philippine News Agency.

What Changes for Cardholders

Once the circular takes effect, the new ceilings will apply only to new transactions.

Existing instalment loans will retain their agreed terms.

For instalment purchases, banks calculate the monthly add-on charge based on the original purchase amount.

Under the new maximum, a PHP 30,000 purchase paid over 12 months could cost up to PHP 5,400 in add-on charges, compared with PHP 3,600 under the old 1% ceiling.

Cardholders would therefore pay an additional PHP 150 a month.

However, these rates are only ceilings, and card issuers can still offer lower charges, including 0% instalment promotions.

Balancing Protection and Access

According to the BSP, the adjustments aim to balance consumer protection with access to credit while giving card issuers more flexibility to manage rising operating costs.

Introduced in November 2020 as a pandemic relief measure, the original caps limited monthly finance charges to 2%, instalment add-on rates to 1% and cash advance processing fees to PHP 200.

BSP subsequently raised the finance charge cap to 3% in February 2023, having imposed no such limits before the pandemic.

“The BSP regularly reviews the caps on credit card fees and charges,” the central bank said, citing economic conditions, the soundness of financial institutions and consistency with its monetary policy settings.

All credit card fees and charges remain subject to existing consumer protection,