Credit cards in the Philippines remain one of the most popular bank products, both locally and internationally.
It is a great tool for managing finances as long as you know how to use it responsibly.
For some, having a credit card is a liability, but this is not always the case. Swipe wisely, and you will see the leverage of having this powerful card in your hands.
What are credit and creditworthiness?
Credit refers to the ability of a person or organization to borrow money or access other financial resources based on the expectation that the funds will be repaid in the future, typically with interest. It also refers to the borrowing ability of an individual or organization.
Creditworthiness is often determined by a credit score, a numerical representation of an individual's or organization's credit history and current credit standing. A good credit score typically allows for easier and more favorable borrowing terms.
What is a credit card?
A credit card is a small plastic card issued by a financial institution, such as a bank or credit union, that allows the cardholder to borrow money or make purchases on credit.
Credit cards typically have a credit limit. It refers to the maximum amount of money that can be borrowed or charged to the card and a minimum payment that must be made each month to keep the account in good standing.
Moreover, credit cards also often come with associated fees, such as annual fees, balance transfer fees, and interest charges on unpaid balances. They also come with rewards, cashback, discounts, and points that can be used to purchase various things.
How does a credit card work?
A credit card works by allowing the cardholder to borrow money or make purchases on credit up to a certain credit limit. When a purchase is made using a credit card, the card issuer extends credit to the cardholder, allowing them to pay later.
The cardholder must complete a minimum monthly payment to the issuer, which typically includes interest charges on any unpaid balance. The cardholder will also have to pay an annual percentage rate (APR) on top of the purchases. The APR is the cost of borrowing money, expressed as a percentage of the amount borrowed.
The card issuer will also report the cardholder's credit activity to credit bureaus, which helps determine the cardholder's credit score. If the cardholder makes all their payments on time and does not exceed their credit limit, it can help to improve their credit score.
In summary, a credit card allows the cardholder to borrow or make purchases on credit, expecting the borrowed funds to be repaid with interest. Cardholders must pay back the borrowed amount and interest on time. Credit card usage also affects credit scores.
How does credit card billing work?
Every transaction is recorded on the cardholder's account when a credit card is used to purchase. At the end of each billing period, typically a month, the card issuer sends the cardholder a statement that lists all of the transactions made during the billing period. The report also shows the due date, the total amount owed, and the minimum payment that must be made.
The cardholder has several options for paying the bill:
They can pay the full balance, the total amount due for the billing period, by the due date. They can pay the minimum payment, a lower amount typically calculated as a percentage of the total balance owed. However, this will accrue interest on the unpaid balance.
They can make a partial payment, any amount between the minimum price and the full balance due.
It's important to note that if the cardholder only makes the minimum payment, they will only be paying off a small portion of their debt, and the rest will be carried over to the next month, with interest added. This can lead to a high-interest debt cycle if the cardholder must pay off the balance in full each month.
Also, the cardholder can set up automatic payments for the credit card bill so that the amount is automatically deducted from their bank account on the due date. This ensures the invoice is paid on time, avoiding late fees and protecting credit score.
In summary, credit card billing states the end of each billing period, which shows all the transactions made, the total amount due, the minimum payment, and the due date. The cardholder can pay the full balance, minimum, and partial payment. Late fees are applied if the payment is not made on time. Automatic payments can be set up to avoid late fees and protect credit scores.
Common Credit Card Features
Here are some common features that you may find on credit cards:
- Credit limit: The maximum amount of money that can be borrowed or charged to the card.
- Interest rate: The rate at which interest is charged on unpaid balances.
- Rewards: Many credit cards offer rewards such as cashback, points, or miles that can be redeemed for various products or services.
- Sign-up bonuses: Some credit cards offer a sign-up bonus for new cardholders, such as a certain number of points or cashback after a certain amount of spending within the first few months.
- Annual fee: Some credit cards charge a yearly fee to use the card, while others do not.
- Balance transfer: Some credit cards allow cardholders to transfer balances from other credit cards to their card, which can be useful for consolidating debt.
- Cash advance: Some credit cards allow cardholders to withdraw cash using the card, but this usually comes with a higher interest rate.
- Foreign transaction fee: Some credit cards charge a fee for transactions made outside the cardholder's country, which can be as high as 3%.
- Credit score requirement: Some credit cards require a minimum credit score to be approved.
- Fraud protection: Credit cards have features that protect the cardholder from unauthorized transactions.
- Contactless payments: Most recent credit cards come with a contactless payments feature, allowing the cardholder to make payments by holding the card near a payment terminal.
- Mobile payments: Some credit card companies now allow their cardholders to make payments using their mobile phone through mobile payment apps such as Apple Pay, Google Pay, and Samsung Pay.
- Online account management: Many credit card issuers now offer online account management, where cardholders can view their account balances and transaction history and make payments online.
The Pros and Cons of Having a Credit Card
Here are some pros and cons of having a credit card:
- Convenience: Credit cards are widely accepted as a form of payment, making it easy to make purchases online and in person.
- Building credit: Responsible use of a credit card can help to build a positive credit history and improve a credit score, making it easier to borrow money in the future.
- Rewards: Many credit cards offer rewards such as cashback, points, or miles that can be redeemed for various products or services.
- Emergency funds: Credit cards can provide emergency funds in case of unexpected expenses.
- Purchase protection: Some credit cards have protection features that protect against theft, damage, or loss of purchases made with the card.
- High-interest debt: If cardholders only make the minimum payments, they can accumulate high-interest debt, which can be difficult to pay off.
- Fees: Some credit cards come with an annual, balance transfer, and cash advance fees.
- The temptation to spend: The ease of using a credit card can lead to impulse buying and overspending.
- Credit score: Late payments or exceeding credit limits can negatively impact a credit score.
- Fraud: The risk of credit card fraud is always present, and cardholders should be vigilant in protecting their card information.
In conclusion, credit cards can be a valuable financial tool when used responsibly, but they can also lead to financial problems when not used carefully. It's important to understand the terms and fees associated with a credit card and to use it responsibly by making payments on time, keeping track of spending, and ensuring that it does not exceed the credit limit.
15 Best Credits Cards in the Philippines
1. Citi Cash Back Card
With the Citi Cash Back Card, you can receive 0.2% cash back on all other purchases and up to a 6% reward on grocery purchases.
It also has various repayment options and breaks up large purchases into smaller installments with the Citi PayLite function. If you're short on cash, the Citi Speed Cash option can come in helpful.
2. BDO Visa Classic Card
One of the most widely used credit cards in the Philippines is the BDO Visa Classic Card. This traditional Visa credit card has a low monthly fee of P150 and an annual fee of P1,800. Enjoy all the wonderful perks that come with obtaining a Visa because it offers the following advantages:
- Earn 2 peso points for every P1,000 qualified to spend
- The free membership fee for the first year
- Visa perks and discounts
- Secure online shopping
- Easy installment plans
- Balance transfer and EasyPay options
- Worldwide acceptance
- 24-hour customer support
- 0% interest installment
- BDO deals, discounts, and freebies
3. UnionBank Miles+ Platinum Visa Card
The Unionbank Miles+ Platinum Visa Card, one of the finest credit cards for travelers in the Philippines, will give you 1 point for every P25 you spend on everyday purchases and 1.5 points for every P25 you spend on travel-related purchases. You will also have unrestricted access to the Club Manila Lounge (NAIA T1) and the Pacific Lounge (NAIA T3). Quite cool!
4. Security Bank Complete Cashback
The Security Bank Complete Cashback credit card is ideal for you if you like to receive cashback every time you use your credit card. Using your credit card to pay for groceries, gas, utilities, restaurants, and shopping, you'll receive 5% cashback up to P12,000 yearly. Here are the benefits:
- Year-round cashback
- 5-tiered rebates
- Worldwide acceptance
- Exclusive promos
- SeaOil Rebate
- Free annual fee waived on the first year
- Marhaba Lounge Access at NAIA T1 and T3 (subject to fees per visit)
5. RCBC Bankard Gold Card
Since the RCBC Bankard Gold Card's point system never expires, it is intended to be used as frequently as possible. It is also best for traveling Filipinos because of the following perks:
- Unlimited earning potential for rewards and accumulated points never expire
- Free travel insurance and cheap access to airport lounges
- 0% installment for purchases abroad
6. Metrobank World Mastercard
This World Mastercard is one of the best credit cards for Metrobank customers. It has a credit limit that virtually knows no bounds, giving you more purchasing power whenever you need it. It also qualifies you for two additional cards, automatic purchase protection, and travel wards.
7. HSBC Red MasterCard
The HSBC Red Mastercard gives you four times as many bonus points on domestic and international purchases and transactions. It is also one of the best HSBC cards, next to Gold Visa.
8. AUB Easy MasterCard
The best features of the AUB Easy MasterCard include accommodating payment terms and a lifetime waived annual membership.
9. Bank of Commerce Gold MasterCard
For mall visitors, the Bank of Commerce Gold MasterCard offers discounts and rewards specifically for mall-based businesses. So, here you go! It’s the best card for a shopping spree!
10. PNB-PAL Mabuhay Miles World Mastercard
One of the most prominent and rewarding credit cards in the Philippines is PNB-PAL Mabuhay Miles World Mastercard. Its low point-to-mile conversion (1 point = 1 mile) is an intriguing benefit for frequent travelers.
11. BPI Amore Cashback Card
The BPI Amore Cashback Card is ideal for frugal spenders looking for low-interest rates. It also comes with other perks that cardholders can enjoy, such as cashback, unlimited access to Ayala Malls' customer lounges, and buy-now-pay-later transactions.
12. PSBank Credit Mastercard
One of the best cards for those who don’t own one. It also offers waived annual fees for life and a 0% installment program.
13. BDO Diners Club Premiere
You can earn one mile for every P30 charged to your credit card using this card. You can earn one mile for every P30 charged to your credit card. You can earn one mile for every P30 charged to your credit card.
14. UnionBank Lazada Card
Do you ever want to go shopping but are strapped for cash? The UnionBank Lazada Card is now available to help! Check out those items in your cart now!
15. Chinabank World Mastercard
You can benefit from first-rate concierge services with a Chinabank World Mastercard credit card. Additionally, you can receive a free SM Prestige membership with this card, providing you access to the program's features and advantages.
Frequently Asked Questions (FAQs)
1. Should I get a credit card?
Whether or not you should get a credit card depends on your financial situation and goals. Here are some things to consider:
- Credit cards can be useful for building credit history and improving your credit score, as long as you use them responsibly and pay off the balance in full each month.
- A credit card may only be good if you spend less or need help sticking to a budget.
- Having a credit card can be helpful in emergencies or for making large purchases you can't afford to pay for all at once.
- You should only apply for credit cards you're likely to be approved for, and be aware that each application may result in a hard inquiry on your credit report, which can temporarily lower your credit score.
Getting a credit card should be based on your financial situation and goals. It's important to consider your spending habits, budget, and ability to pay off the balance on time before making a decision.
2. Why is credit card Important?
Credit cards can be important for several reasons:
- Building credit history: Using a credit card responsibly and making payments on time can help build a positive credit history, making it easier to qualify for loans or other forms of credit in the future.
- Emergency funds: Credit cards can be useful for handling unexpected expenses or financial emergencies as long as you have the means to pay off the balance.
- Convenience: Credit cards offer a convenient purchase method without carrying cash. They can also be useful for online shopping and when traveling.
- Rewards and benefits: Many credit cards offer rewards or other benefits such as cashback, points, travel miles, or discounts on certain purchases.
- Protection: Credit cards can protect against fraud and unauthorized charges. Many credit card issuers offer purchase protection, covering lost, stolen, or damaged items within a certain period.
- Building credit score: A good credit score is important for many life events, such as getting a mortgage, car loan, or even a job. Building a good credit score takes time, and credit card usage is one of the ways to make it.
3. Can credit cards withdraw cash?
Credit cards can be used to withdraw cash, but this feature is typically referred to as a "cash advance" and usually comes with additional fees and higher interest rates. Also, cash advances often have a higher interest rate than the purchase rate, and interest starts accruing from the day of the advance.
When you withdraw cash using your credit card, you borrow money from the credit card issuer. The cash advance limit is usually lower than the credit limit and may not be disclosed on the credit card statement.
Cash advances can be convenient in certain situations, such as when you need cash quickly, but they can also be a source of financial trouble if not used responsibly. It's important to be aware of the fees, interest rates, and other terms associated with cash advances before using this feature.
Suppose you're in a tough financial situation. In that case, it might be better to consider other options like borrowing from a bank, friend, or family member before considering a cash advance. Paying off the cash advance balance as soon as possible is recommended to avoid high-interest charges.
4. Will credit card companies forgive the debt?
Credit card companies sometimes forgive or partially forgive a debt. This is typically referred to as a "debt settlement" or "debt forgiveness," and it is not a common practice. Credit card companies usually only consider forgiving a debt if the borrower is in severe financial hardship and cannot make payments.
5. Will credit card rates go up?
Credit card interest rates can fluctuate based on various factors, including the Federal Reserve's interest rate policy, the economy's overall state, and the cardholder's creditworthiness.
6. Will credit card companies sue you?
Credit card companies can sue cardholders for unpaid debt, but it's not common. Most credit card companies would rather work out a payment plan or debt settlement with the borrower before resorting to legal action.
In conclusion, credit cards can be a useful financial tool when used responsibly. They can help build a credit history, provide a convenient way to make purchases, and offer rewards and benefits. However, it's important to be aware of the fees, interest rates, and other terms associated with credit cards and to use them responsibly.
When considering a credit card, it's important to evaluate your financial situation and goals and to only apply for cards you're likely to be approved for. It's also important to understand how interest and fees are calculated and to always pay off the balance in full each month to avoid interest charges.
If you're struggling to make payments, it's important to contact the credit card company as soon as possible to discuss your options. You can negotiate a payment plan or debt settlement. Still, if you cannot make payments, it's best to seek professional help from credit counseling agencies or attorneys before the situation escalates to legal action.
Ultimately, credit cards can be a valuable tool when used responsibly, but they can also be a source of financial trouble if not used carefully. It's important to be informed and make responsible decisions when using them.
Ultimate Guide to Franchising
Avoiding Scams, Making Smart Investments, and Better Decisions
The franchise industry is booming, and entrepreneurs are wondering about how this sector works. This ebook aims to help aspiring franchisees achieve their business goals.Learn more
Disclaimer: Franchise Market Philippines strives to provide relevant and accurate information in all its articles. However, some information in our articles may differ or might be outdated from what you can see or read directly from the establishments' or businesses’ websites. Please get in touch with us directly for any discrepancies.