CREDIT-cardholders may see their perks such as rebates and reward points decline while their fees rise as a result of higher interest rates, according to the Credit Card Association of the Philippines (CCAP).
In an email to BusinessMirror, CCAP Executive Director Alex G. Ilagan said lesser perks and higher fees are among the most common ways the credit card industry copes with tight monetary policy.
Ilagan added these ways include the introduction of new fees that were not previously charged such as the cost of making paper copies of electronic billing statements.
“However, credit card issuers have also been resorting to other means to improve cost efficiency of their operations without affecting cardholders directly like offering online/electronic card payments and automated chat services in addition to live call center agents which is less expensive to maintain,” Ilagan told the BusinessMirror.
Ilagan explained that the increase in interest rates is something that is happening globally because Central Banks need to curb the rise in inflation and mop up excess liquidity.
This is discouraging consumers from obtaining loans and encouraging them to save. This, unfortunately, reduces money supply or the money in circulation.
“The unintended consequence may be a reduction in investments and consumer spending which will not only dampen the growth of cashless payments but may also result in an economic downturn or a recession,” Ilagan said.
In his speech at the CCAP event, Bankers Association of the Philippines (BAP) President Antonio C. Moncupa Jr. noted that the credit card industry is resilient, especially with credit expansion and the bad debts caused by the pandemic.
Moncupa said in the face of rising interest rates which are expected to increase further, the credit card industry is doing its utmost to innovate and move the country closer to a cashless society.
With this, he said the credit card business will remain to be an important “mainstay” in the provision of digital services in the country.
House Committee on Ways and Means Chairman Jose Sarte Salceda said he also expects the Bangko Sentral ng Pilipinas (BSP) to again raise interest rates by 75 basis points (bps) in its Monetary Board meeting this November. (See story: https://businessmirror.com.ph/2022/10/17/house-panel-seeks-meeting-with-monetary-authorities/.)
In September, the BSP raised interest rates by 50 basis points to 4.25 percent while the interest rates on the overnight deposit and lending facilities were raised to 3.75 percent and 4.75 percent, respectively. (Full story: https://businessmirror.com.ph/2022/09/23/bsp-raises-rates-for-3rd-month-now-4-25/)