RAISING the cap on credit card charges to account for rising interest rates will only benefit banks and hurt consumers, a lawmaker said in Tuesday.
“It’s just going to pad bank profits. Why we would want to adjust 24% per-annum interest rates upward, as if that’s not high enough, is beyond me,” Albay Rep. Jose Ma. Clemente S. Salceda, chairman of the House Committee on Ways and Means, said in a statement.
Mr. Salceda made the statement in response to reports that Bangko Sentral ng Pilipinas (BSP) Felipe M. Medalla said the central bank is reviewing the ceilings on credit card charges as interest rates continue to rise.
He said the net profits of the country’s biggest banks have increased by 12% to 72%, and raising the cap on credit card charges will only benefit them and hurt the middle class.
“I urge Governor Medalla and the Monetary Board to reconsider its efforts to review and possibly increase the rates,” he said.
Mr. Salceda said if the cap is raised, the annual rate will be among the highest in the southeast Asian region.
“In Thailand, the cap is 18% per annum. It’s 17.5% in Malaysia. It’s 28% in Singapore. And Indonesia has the same cap as we do,” Mr. Salceda said.
The BSP in November 2020 imposed a maximum interest rate on unpaid outstanding credit card balance of 2% per month or 24% per year to help consumers amid the coronavirus pandemic.
The cap for the monthly add-on rate that credit card issuers can charge on installment loans was also kept at 1%, while the maximum processing fee for credit card cash advances will remain at P200 per transaction.
These ceilings have been retained as of June this year. The BSP’s policy-setting Monetary Board reviews them every six months.
The BSP has hiked borrowing costs by a cumulative 225 basis points since May to fight rising inflation, bringing its policy rate to 4.25%.
Nicholas Antonio T. Mapa, ING Bank N.V. Manila senior economist, said consumer spending has remained robust despite high inflation due to low charges on credit card transactions.
“If BSP adjusts the cap, then we could see a similar slowdown in purchases, and thus a similar slowdown in economic activity related to industries that cater to credit cards, which are essentially consumer goods and services,” Mr. Mapa said in an e-mail.
“With a higher price cap, we may see credit card loan growth soften as consumers may shift to cheaper digital alternatives such as e-wallets and online banking,” China Banking Corp. Chief Economist Domini S. Velasquez said in a separate e-mail. — Kyanna Angela Bulan