Intense competition brings down credit card and loan interest rates
Intense competition between credit card issuers and loan agencies have brought down interest rates on credit card loans but regulators said they are not satisfied with promotional loan and credit card rates and wanted to see longer-lasting results and adjustments. The Bangko Sentral ng Pilipinas (BSP) said it is closing in on a consensus with credit card and loan companies on how to bring down the cost of credit card loans and put rates in line with declining benchmark rates.
The BSP said that credit card rates have declined somewhat but the drop was largely related to promotional offers that issuers use to entice credit card subscribers and people to avail low rate loans. There is a lot of promotional campaigns going on that effectively brought down the rates, basically, they’re poaching each other’s customers."
As a result, some credit cards offer rates as low as 0.75 percent a month which would bring the annual interest rates to nine percent, down from the average of 35 to 40 percent and cash loan rates from the usual 2.5% to 1.25% to 0.99% and lower depending on the loan term. Credit card issuers have brought their monthly interest rate on credit card loans to 2.25 to three percent per month, down from the usual three to four percent per month of loan.
The BSP is still talking to the Credit Card Association of the Philippines (CCAP) to determine whether there is a room for bringing the rates down further and for longer term loan. Under existing BSP rules, the Bangko Sentral ng Pilipinas (BSP) has the power and authority to cap interest rates on credit card loans at a level that it deemed appropriate depending on market conditions. And right now loan rates for housing loan, personal loan, mortgage loans, loan refinancing, equity loan and business credit line loans rates are nearing an all time low.