Credit card debt in PH surged in Q1 due to revenge spending, inflation

MANILA  -Filipino consumers swiped away at their inflation woes and revenge spending habits during the first quarter of the year, causing credit card debt to surge at the fastest pace since the outbreak of COVID-19 pandemic three years ago.

Total card billings jumped 47 percent to P410 billion, according to the Credit Card Association of the Philippines (CCAP), whose members include the country’s major banks.

For the CCAP, this was evidence of a resilient economy but an economist said this was also a sign that Filipinos were being forced to rely on debt as elevated inflation weakens their buying power.

“Inflation is biting and forcing households to resort to consumer credit to get by,” Nicholas Mapa, ING Bank senior economist in the Philippines, told the Inquirer.

“The increase of the cap for credit card rates also impacting users who may be revolving credit,” he said.

He was referring to the Bangko Sentral ng Pilipinas’ decision last January to raise the interest rate limit on credit cards to 3 percent per month from 2 percent, which was implemented at the onset of the COVID-19 pandemic.

BSP raises interest cap on credit card transactions to 3% per month

“As long as cardholders pay on time, it will have no negative impact on either the cardholder or the bank issuer,” CCAP executive director Alex Ilagan said on Monday.

He said industry data from BSP also showed that card delinquency rates were down to 3.26 percent in the fist quarter of 2023 versus 4.03 percent in the same period last year.

Card delinquency refers to the payment of less than the minimum amount of credit card debt for least three billing cycles.

CCAP said the surge in vacations, car loans and online shopping—otherwise known as the postpandemic revenge spending trend—caused the jump in credit card billings.

It also expects personal spending to continue growing despite still elevated consumer spending.

Earlier this month, the Philippine Statistics Authority said the economy expanded by 6.4 percent in the first quarter of 2023. This was slower than previous quarters but better than the 6.2 percent median forecast of private sector economists.

Philippines’ GDP growth above-target at 6.4% in Q1 2023

“While Filipinos’ spending spree keeps the economic engine chugging along, we must bear in mind that a credit card is not ‘free money’,” Ilagan said.

“All transactions charged to a credit card will have to be paid so be a responsible card user and don’t use your credit card beyond your capability to repay the amount at a later date,” he added.

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