Philippines keeps credit card finance charge cap, raises ceilings for installment loans and cash advances

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Philippines adjusts card fee rules

Highlights

Bangko Sentral ng Pilipinas retains the 3% monthly finance charge cap on unpaid credit card balances, but raises installment loan add-on rates to 1.5% and cash advance processing fees to P300 per transaction.
The new rate and fee ceilings will apply to credit card transactions made 15 days after official publication, while earlier loans retain existing terms.
BSP data show credit card receivables in the banking system rose 24.95% year on year to P1.294 trillion as of June, with nonperforming loans at 5.28%.

Updated caps take effect after publication

As reported by BusinessWorld, citing the Bangko Sentral ng Pilipinas, a circular signed by Governor Eli M. Remolona, Jr. on Nov. 10 keeps the maximum interest or finance charge on unpaid credit card balances at 3% per month, or 36% annually.

The central bank says the 3% monthly cap remains in place to continue protecting credit card customers. At the same time, it raises the allowable monthly add-on rate for credit card installment loans to 1.5% from 1%, and increases the maximum one-time processing fee for cash advances to P300 per transaction from P200.

The BSP says the adjustments are intended to balance consumer protection with continued access to credit, while giving card issuers more flexibility as operating costs rise. The latest rate and fee changes apply only to transactions made after the circular takes effect, which is 15 days after publication in the Official Gazette or a newspaper of general circulation.

Existing credit card installment loans entered into before the circular takes effect remain subject to previously agreed terms and conditions. The circular also states that the maximum processing fee and interest rates or finance charges are subject to periodic review by the central bank.

Consumer lending grows as policy tightens

Rate caps on credit card charges were first introduced in November 2020, when the central bank set the finance charge ceiling at 2% per month and also imposed the 1% monthly cap for installment payments and the P200 cash advance processing fee during the coronavirus pandemic. In February 2023, the BSP raised the maximum interest rate on unpaid outstanding credit card balances to 3%, while no caps had been in place before the pandemic.

The BSP says its reviews of credit card fees and charges take into account overall economic conditions, the soundness of banks and other financial institutions, and consistency with monetary policy settings. The central bank begins raising benchmark interest rates in April amid accelerating inflation and broader price pressures linked to Middle East war-driven energy shocks.

In October, the BSP delivers a larger-than-expected 50-basis-point increase that brings its target reverse repurchase rate to 5.5%, a near two-year high. It has now lifted key borrowing costs by a cumulative 125 basis points.

Latest BSP data show credit card receivables in the Philippine banking system rise 24.95% year on year to P1.294 trillion as of June from P1.036 trillion. Of that total, 5.28%, or P68.37 billion, are nonperforming, while for universal and commercial banks, annual growth in credit card loans slows to 22.8% as of September, with credit card receivables still accounting for the bulk of consumer loans.

We have also looked at Philippine bond reforms aimed at boosting liquidity and broadening the investor base.

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