Is a Credit Card for Me?
Should I apply if I do not have one yet?
At only 1.9%, Philippines has a low credit card ownership especially when compared with neighbouring countries in the region and the world median. This low number in the uptake may mean that Filipinos are experiencing barriers in owning and using credit cards. These barriers may not necessarily be economic in nature, so it pays to break any misconceptions about credit cards. We hope that by presenting the pros and cons of owning a card and where you can find more information, you can make an informed decision of whether you are ready to apply for it if you do not have one yet.
There are advantages to owning a credit card when used and managed well.
A credit card can be a tool to beat inflation especially at a time when consumer prices are rapidly rising. You can use your credit card to purchase non-perishable items that you will be using for the next few weeks and months. When the credit card bill arrives the next month and you pay it in full, you effectively save the difference in prices of these goods.
Credit cards allow you to spread costs. You can buy big-ticket items that you normally could not afford if you were going to make the purchase with cash. Some credit cards allow you to make purchases with 0% interest spread over a few months! You can distribute the bulk amount to manageable installment periods.
Credit cards offer convenience as they are widely accepted internationally and for online transactions. This means that you can shop anywhere in the world! You can use your credit card to purchase from both domestic and foreign shops, and websites. Due to the global pandemic, many businesses have started migrating to e-commerce platforms where credit card is among if not the most common way of payment.
Credit cards in the Philippines offer wide choices of benefits. Credit card issuers have partnered with numerous businesses in the Philippines to offer perks to cardholders. The benefits include cash back or rebates, free travel insurance, air miles, reward points, or product/service discounts. All you need is to shop around for the best credit card for you. There are also credit cards that have low or zero annual fees.
There are disadvantages to owning a credit card that new card owners should be aware of.
Card users can get deep into debt when they lack self-discipline and lack the understanding that a credit card is not free money. It is money that needs to be paid back. Owning a credit card means you have to pay your dues on or before the set deadline. If you fail to do so, you will be charged extra fees. If monthly bills remain unpaid, the interests pile up and make it harder to pay off in the long-term. Credit card should not be considered an ability to buy anything you want with just an impulsive swipe! If you are doubting your level of self-control, it may be best to skip getting a credit card.
Bad credit card behaviour can harm your credit score. Making payments on time can help build a good credit score and the reverse is also true. Not paying credit card bills in time does not only incur you interest fees but can also hurt your chances of taking out loans in the future.
Credit card fraud is real and fraudsters do not even need to hold the card in person. Your credit card may be used to make unauthorized purchases under your name so it pays to know about credit card fraud and how to prevent it.
Where to go for information about credit cards?
The Credit Card Association of the Philippines (CCAP) website is a great resource for topics relating to credit cards in the Philippines.
Am I eligible for a credit card?
The requirements and procedure to apply for a credit card varies from one issuer to another but below are the common eligibility requirements for first-time credit card applicants.
Age - must be at least 21 years of age
Gross annual income - Basic credit cards require at least Php 120,000 to Php 250,000 annual income.
Contact number - must have an active contact number.
Valid TIN or Taxpayer Identification Number
Employment Status: You must have at least a year of regular employment or one to two years of self-employed business operations.
Which credit card is for me?
Choosing the right credit card may be confusing so here are guide questions you might want to ask yourself to guide you in your selection process.
How much annual fees are you willing to pay?
How much interest rate can you afford?
How much is the late payment penalty fee you deem fair?
Are rewards programs a priority for you?
Which expenses will I use a credit card for?
Remember that if you use your credit card well, it can be a great tool to help you manage your finances better. I hope this article has helped you decide whether owning a credit card is for you!