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THE
credit-card companies in the country are at each other’s
throats, offering low interest charges on card purchases
that the various banks and financial institutions
cobrand with such well-known card names as Visa and
MasterCard.
According to Bangko Sentral ng Pilipinas (BSP) Governor
Amando Tetangco Jr., credit-card rates have fallen
significantly in recent months, particularly since
January this year. “Interest charges have been falling
since 2006 or 2007, although not as quickly as some
might have wanted,” he told reporters.
Card
charges range from 2.25 percent to 3 percent a month, or
up to 36 percent on annual basis, latest data from the
BSP show.
“Aside
from low-interest charges, some banks give cardholders
no-frills cards and others have options like reward
points,” Tetangco said.
To
distinguish themselves from others, some banks impose
the reduced interest charges only on the outstanding
balance and none for the new purchases. The previous
practice was for the banks to impose charges on almost
the entire amount, making no distinction at all on
whether or not these were old or new purchases, Tetangco
explained.
He said
the card issuers were motivated to drop their interest
charges as domestic interest rates have fallen
significantly, as well.
The
government’s borrowing rate has fallen on the back of
more or less sustainable revenue flows, allowing it to
have a firmer grip on the nation’s budget and,
therefore, its need to borrow.
With
less compulsion to borrow, interest rates have to drop.
The
banks themselves have been driven by the need to
distinguish their products from all others in the
market, and this explains, in part, the drop in interest
charges.
Only a
fraction of the working population, or around 4 million
in all, have credit cards. The number of card issuers
are lower than 20, according to the BSP.
But
because private consumption was the main driver to last
year’s 7.3-percent growth, the upside to credit-card
usage this year and next was seen to grow at a frenetic
pace, as well. |
