Introduction to Credit Cards
A one of its kind device in the financial market, credit cards have been the most flamboyant product with uses beyond comparison to any other similar offerings in the market today. Also known as plastic money, a credit card is designed with a multitude of uses such as purchasing online and offline, auto bill payments etc. A typical credit card comes with a pre assigned credit line of a certain value and functions on the basis of revolving credit where you charge on the go and make payments on a monthly basis. It also opens up a whole new world of rewards and offers that actually help you save money and get exciting deals with routine transactions.
For those of you alien to the concept of credit cards, it works fairly similar to any other credit products such as a Personal loan or Auto loan. Upon application, the credit card provider (bank) issues a card with a credit limit that is revolving in nature. The cardholder can use the card for permitted transactions such as purchases, cash advances & balance transfers and make a monthly payment either in full or consider the min. payment due. The issuer (bank) bills interest on a daily basis depending on the type of transaction. As long as you’re in good books, the credit card can be used for a lifetime unless specified by the issuer.
Why Should One Have Credit Card?
- Equips you with convenience of carrying a single credit instrument instead of hard cash in your wallet.
- All your purchases and cash advances are recorded under a single account, thereby avoiding the hassles of manually tracking expenses.
- Much safer when compared to conventional ways of paying such as checks and cash. Enhanced security measures such as punching the PIN means lesser burden for you.
- Credit card can be used to settle multiple transactions such as online and offline purchases, cash advances, balance transfers from others cards etc.
- Helps immensely when you’re travelling away from home since millions of establishments accept credit cards worldwide.
- Helps during emergency situations when you do not have money by extending a monetary lifeline.
- Supplementary cards issued under the same account helps in extending the credit to our loved ones.
Also Read Top 10 Credit Cards
Types of Credit Cards in Philippines
Over the last decade or so, the credit card industry has diversified into category based cards which offer specific benefits and rewards on basis of specialization. These cards not only offer sops on the basis of the category, but can also be used for day to day transactions without any hassles.
In Philippines, tens of card providers offer various products based on specific outputs. They are detailed as below.
- Standard Credit Cards: A product that balances all features with no specialization. It offers all standard benefits such as paying for purchases, cash withdrawals, international validity etc.
- Travel Credit Cards: A tailor made card that offers attractive travel benefits when used for travel needs such as flight booking, hotel reservation etc. It can also be used for routine transactions.
- Shopping Credit Cards: A card specifically designed to shower you with discounts and rewards when you shop at specific merchants/products. Cards in this category can also be used for day to day transactions.
- Grocery Credit Cards: A card dedicated for all your grocery purchases. Buy at your favorite grocer and be eligible for discounts and offers along with benefits of a standard credit card.
- Dining & Entertainment Cards: Products that offer you exclusive deals at your favorite restaurants and priority entry to famous gigs along with other rewards in the lifestyle section.
- Airline Miles Cards: A card where you can accumulate air miles for specific purchases and redeem them for rewards and discounts along with standard features and benefits.
- Gas Cards: Cards that earn you exciting reward points for filling up at gas stations. Some of them even offer free fuel of certain value. Products falling under this category can also be used for generic transactions.
- Business Cards: Cards tailor made to answer the credit needs of business executives and entrepreneurs that offers seamless business related benefits.
- Cards for Students: Helps students in building credit right from college. Credit cards offered under this category come with limited benefits and restricted credit limit.
A standard credit card in Philippines comes with an interest rate of 3.5% monthly with an Annual Fee that hovers around P2,500 depending on the type of card. It will be a wise move to look up for resources over the internet on a neutral comparison web portal and compare cards offered by various providers. In most cases, you will be able to make an application online.
Secured Credit Card
Banks and financial institutions also offer secured credit cards which require a collateral for approval. Card members under this category are provided a secured credit facility either to build credit from the scratch or to fix broken credit history. Secured cards come with low credit limits depending on the collateral the applicant is able to provide. Over a period of time, the limit can be increased upon maintaining good track records. Card providers can also convert this card into a regular card on basis of sound usage and prompt repayment.
Features and Benefits of Credit Cards
- As specified earlier, a credit card can be used for both online and offline transactions. Having a card helps immensely when we talk about paying online as it is convenient, secure and hassle free.
- If you’re in urgent need of cash, it also doubles up and as an ATM card which lets you withdraw cash up to the specified limit. This benefit helps in emergency situations or when you’re running out of cash.
- Balances from other cards with high interest charges can be transferred at much lower rates which helps you save money with little frills.
- Routine transactions also help in earning reward points that can be accumulated and exchanged for freebies and rewards from the catalogue.
- The new age credit cards go an extra mile by offering attractive deals such as dining & ticketing to suit your lifestyle needs.
- Discounts and rebates galore at your favorite shopping destinations, restaurants, hotels and resorts for specific purchases.
- The cardholder can also be eligible to receive freebies such as cashbacks, goodies, bonus points/miles, etc upon achieving key milestones such as exceeding the min.transaction value, signing up for the card etc.
- Buy your favorite items above the minimum purchase value and payback in Equated Monthly Installments(EMI). Credit card providers let you convert large value purchases at exclusive rates, thereby helping you save money.
Difference Between Debit and Credit Card
Both these products are quite distinct with the same purpose. Both Debit and Credit cards aim to simplify financial transactions in the form of mobile plastic money. The main difference between them is that debit card provides access to your own money held in the bank account while credit cards give you access to credit provided by the bank. When you use a debit card, money is debited from your savings/checking account.
On the other hand, using a credit card builds a credit (debited from your card account), payable as per the schedule. It works on the concept of “Buy Now, Pay Later”.
|Credit Cards Vs. Debit Cards - Comparison|
The interest charges (known as finance charges in popular parlance) is billed on daily average balance basis and the method of computation varies from bank to bank. The finance charges varies, depending on the type of transaction. There are primarily, three types of rate slabs. Interest charged for retail purchases, interest charged for cash advances and balance transfer interest rate. Generally, a uniform rate is not applicable for all types of transactions. Keep the following points in mind while using a credit card.
- The interest rates depicted by banks are generally on a monthly basis unless specified otherwise.
- Each bank has its own method of computing interest charges, most of them apply on the average of daily balance held in the account.
- The rates are published on various sources such as monthly statements, contract copy, net banking page and so on.
The interest rate for retail transactions range anywhere between 3.00% to 3.50% per month while cash advances also fall in the same range.
The paperwork required to apply for a credit card is quite simple and easy to fulfill. Below is the list of general requirements applicable for most of the banks.
- A copy of an ID issued by a government agency containing photograph and signature of the applicant.
- Latest payslip(s) issued by the employer in case of salaried applicants.
- COE (Certificate of Employment) containing details of compensation issued by the employer for salaried applicants.
- Latest ITR (or W2) with BIR or Bank Stamp along with audited financial statements for self employed applicants.
In addition to the above, there will be bank specific requirements. Visit our credit card section to explore the requirements, credit card wise.
Steps to Ensure Your Application is a Smooth One
By following simple steps, your quest to get a credit card is simplified. To begin with, read about the product features and eligibility before applying and only apply for the card that you would really need and eligible for. Applying for an irrelevant card is not only a waste of time but can also leave a negative remark on your credit report.
To get things right in this area, compare credit cards offered by various banks and apply online to save time. After applying, follow up at regular intervals to make sure you get it on time.
The Role of Credit History in the Application Process
The credit history of an individual has an important say in their ability to get a credit card. The history generally consists of documented past of an individual’s borrowing in the last few years versus repayment information. It is an important document containing all the financial dealing of the borrower with various banks/financial institutions. Therefore, when you apply, the bank will source a copy of your credit history from a credit bureau and assess past borrowings that helps them in making important decisions such as approval and credit to be granted.
Therefore, it's paramount to have a sound credit history along with meeting other criteria such as income.
The Impact of Current Credit Card Debt When you Apply for a New One
When you apply for a new card, background checks are done to ascertain outstanding debt from other credit cards and loans. It helps banks in understanding your borrowing power to help them make key decisions such as granting a card and the extent of credit.
If you’re carrying heaps of debt, it's highly unlikely you’ll be approved for another card since it can be risky for the bank to lend you any further.
Credit Cards for Expats in the Philippines
As an expat with a long term employment contract in the Philippines, you can be eligible to get a credit card. Leading banking institutions such as Metrobank, BDO and Citibank offer credit cards for expats. The requirements and eligibility criteria is slightly enhanced, keeping in mind the residential status of expats.
Expats can be eligible for tailor made offers, depending on their requirements.
Credit Card Reward Points
Almost all credit card providers in the market today extend the benefit of earning reward points on all or certain types of transactions. The reward points or miles in case of airline specific cards carry a certain monetary value that be redeemed for rewards from the catalogue, discounts on purchases, redemption at POS Terminal, as credit on the account and so on. Air miles can be earned and accumulated on flight tickets that can be exchanged for perks on future booking, discounts at hotels, etc.
A breakup of the earning potential is provided in the fine print that you get in the welcome kit along with the card. This information will also be available on the webpage under the cards section of card provider’s web portal.
Promo Offers on Credit Cards
As an educated card user, you must be familiar with ongoing promos from banks for your credit card. The promotional offers is your gateway that answers your lifestyle related needs. From shopping deals to priority reservation at your favorite restaurant, card providers offer exciting deals under limited promo options. Details of the promo will be available on the monthly statement or under relevant section on the website.
Credit Card Promos
1) Experience Luxury at the Sofitel Philippine Plaza by Metrobank
|Runtime||1 November 2015 to 30 September 2016|
|Particulars||Customers can procure exciting offers when they dine at The Sofitel Philippine Plaza in Manila by using their Metrobank Visa card.|
|Participating Credit Cards||Metrobank Visa Credit Card, Metrobank Visa Debit Card, Metrobank Visa Prepaid Card|
Click Here for More Promos Offered by Metrobank Credit Card.
2) Fairmont Makati Deal by BPI
|Promo Period||February 1st to December 30th, 2016|
|Participating Credit Cards||Classic, Blue MasterCard, Petron-BPI MasterCard, Gold MasterCard, WorldPerks MasterCard, SkyMiles Platinum MasterCard, Edge/Mini-Edge MasterCard, Corporate Classic, Corporate MasterCard, Amore Visa & Amore Visa Platinum.|
|Particulars||Get a discount of up to 50% on lunch at dinner buffet by using your BPI credit card to pay the bill.|
Click Here for More Promos Offered by BPI Credit Card.
3) Zalora’s Trendiest Outfits offers by Citibank
|Runtime||1st January, 2016 to 31st December, 2016|
|Particulars||Use your Citibank Card for a minimum purchase of P500 from Zalora and avail a discount of 12%.|
|Use the promo code CITIZAL12 to avail this promo deal.|
|Eligibility||You should be a principal or supplementary Citi cardholder and your credit card should be issued by the Philippine branch of Citibank, N.A.|
|Your Citi credit cards should be active and have a good credit record.|
|You should not be prohibited under Gifts, Anti-bribery and Corruption Laws, rules and policies, disqualifying you from this promo.|
Click Here for More Promos Offered by Citibank Credit Card.
4) Experience Glamorous Deals with Dolce Vita Loves by Eastwest Bank
|Runtime||18 December 2015 to 30 November 2016|
|Particulars||Customers can enjoy discounts of a maximum of 30% on lenses and stylish eyewear along with a free eye exam.|
|Participating Credit Cards||Dolce Vita Titanium MasterCard and Dolce Vita MasterCard|
Click Here for More Promos Offered by Eastwest Bank Credit Card.
Other Credit Card Promos are :
- BDO Credit Card Promos
- HSBC Credit Card Promos
- PNB Credit Card Promos
- RCBC Credit Card Promos
- Maybank Credit Card Promos
Credit Cards for OFW
Home grown and well as international banks in the Philippines offer a range of savings, investment and credit products to Filipinos working abroad. Overseas Filipino Workers or OFWs as popularly known, are eligible to apply for credit cards as well. Issuers let OFWs apply for a range of credit card under its portfolio, mostly on a secured arrangement such as on the basis of balance held in Savings/Checking account or Time Deposits.
Depending on the channel offered by the issuer, an OFW can apply for a credit card either online or offline at the designated branch. Be sure to check the eligibility criteria before making an application for a credit card. You may be required onshore to submit the documentation/sign the application and to facilitate other related paperwork.
Do's and Dont's
Using plastic money comes with great responsibility coupled with strict monetary discipline. Credit cards are considered as one of the most formidable financial product that can make or break your personal credit. Excessive usage can also result in excessive burden on self and your loved ones. As long as you control and monitor your spends, credit cards can be your friends when you need. Irregular payments, excessive spends and other factors can result in bad experience. Here is a list of do’s and don't's for credit cards.
|Make Payments on Time||Watch monthly statements closely and ensure your payment covers min. payment due and the balance in full to avoid excessive interest charges.|
|Monitor the Statements||Check all charges and report any unknown transactions/charges to the bank. Irrelevent fees should also be disputed.|
|Use Wisely||Need we say more. Use only when required. You can cash on savings/debit cards if you have the backing to fund the requirement.|
|Report Fraudulent Transactions Without Delay||In the wake of increasing credit card frauds, you must immediately report to bank, purchases that you do not recognise and get them settled at the earliest.|
|Go Overlimit||Use resources such as online banking and mobile apps to know the balance and ensure the purchase value does not exceed the credit limit.|
|Make Frequent Cash Advances||Withdrawing cash frequently results in excessive financial burden as interest charges are higher for this type of transaction.|
|Get Too Many Add On Cards||Signing up for many Add On(Supplementary) can lead to mismanagement of the account.|
More on Credit Card Management Tips.
- Word of Caution for Credit Card Users
- Credit Card Expiration Dates
- Best credit cards for starters in 2016
- How to Tackle Credit Card Issues
- Credit Card for OFW (Overseas Filipino Workers)
- Credit Card Management Tips
- More Credit Cards with No Annual Fee
- How to Get Easy Approval of Credit Card
- Secured Credit Cards in Philippines
- Credit Cards For Overseas Spending
- Rewards vs Cashback Credit Cards
- Credit Card Guide
- Best Travel Credit Cards for Travellers
- Best Air Miles Credit Cards
- Credit Report Philippines
- Secured Credit Card Vs Unsecured Credit Card
- 0 Installment Plans
- Credit Card Cash Advance – Do's and Dont's
- How to Avoid Credit Card Debt
- Credit Cards for Expats in Philippines
- What is Credit Card Float
- Basic Credit Card Fees
- Credit Card Reward Points - Boon or Bane
- Credit Card Balance Transfer
- Safe Use of Credit Cards while Shopping Online
- Credit Card Debt and its Consequences
- Credit Card Minimum Amount Due - Do's and Dont's
- Global Filipino Card
- How to pay off credit card debt
- Top 10 Credit Cards
News About Credit Cards
Credit cards add to the economy of Philippines
The usage of Visa credit cards between 2011 and 2015 has added a great deal to the economy of Philippines. The cards have added 3460 jobs and has also shown an economic growth of P4.6 billion over that particular period of time. This has happened as the rich individuals of Philippines are carrying out more online transactions.
In the year 2015, a study showed that 46% of the payments were made by the premium cards issued by Visa in Philippines. According to a latest report, out of the entire spending 4.68% is for fuel and petrol, 6.8% for restaurants and eateries, 13.8% for the supermarkets, 18.66% for travel and 18.70% for retail.
25th July 2016
Banks to Enable EMV on Credit Cards
BSP (Bangko Sentral sg Pilipinas) has said that banks in Philippines that issue credit cards will be enabling the EMV (Europay, MasterCard and Visa) feature on all cards before January 1, 2017. 76% Visa cards in the country already have this feature enabled. This migration to EMV means addition of new technology for financial institutions and merchants. They will also have to abide by the new liability rules. Consumers, on the other hand, will have to learn the new payment process and activate new cards. The switch to EMV might cost banks at least $1.5 million without subsidy.
19th July 2016
Philippines Credit Card Industry Regulation Bill up for Approval
The bill for the regulation of Philippines credit card industry has been proposed to be supervised by BSP (Bangko Sentral ng Pilipinas) and is currently awaiting the approval and signature of the President, Benigno Aquino III before becoming a law.
It will be known as the Philippine Credit Card Industry Regulation Act. It will govern and supervise credit card acquirers, issuers and credit card transactions and will mandate the supervision of BSP. BSP is also likely to prohibit or limit the annual membership fees and charges on credit cards.
Credit Card companies that are not presently under the supervision of BSP will be provided with sufficient time determined by the Monetary Board to adhere to the regulations. BSP will not only impose administrative sanctions on credit card issuers but also have the authority to suspend or cancel the issuance of credit cards by credit card issuers.
27th June 2016
BSP’s New Model to Help with Credit Debt
The Bangko Sentral Pilipinas (BSP) in association with the Credit Card Association of the Philippines (CCAP) and the BDO Unibank have jointly released a new model to help customers with their credit card debt restructuring.
Known as the Inter-Bank Debt Relief Program (IDRP), this program can be used by credit card defaulters to get on track with their payments by enrolling in the program. The bank’s part of the program will study the cardholder’s debt repaying capacity and accordingly delineate a period (usually 10 years) towards repayment of the debt amount. The program will charge cardholders 1.5% as interest each month, which could be lowered on a case-by-case basis.
All credit cards owned by the cardholder would be cancelled and rebates would be forfeited as part of enrolment in the program.
The rules and regulations pertaining to enrolment were also released at the program’s launch.
21st June 2016
Travelers receive warning for credit card cross currency charges
BSP (Bangko Sentral ng Pilipinas) has given a reminder to the people of Philippines to be extremely careful while using their credit cards overseas. The commodity price is in a different currency and not in Pesos when they purchase something overseas. Thus, they will have to pay high charge for cross currency.
The commodity might cost one thousand Pesos more as there are several channels that the transaction goes through to purchase the commodity. The charge is generally even more if the buyer asks the store to charge in Pesos only.
17th June 2016
BDO Acquires the Credit Card Business of SB Cards Corp
The wholly owned subsidiary of Security Bank Corp, SB Cards Corp had earlier sold its exclusive issuer and acquirer of DCI (Diners Club International) credit cards in the Philippines rights to BDO (Banco de Oro Unibank Inc.). However, BDO Unibank Inc has now acquired the credit card business of SB Cards Corp for an undisclosed amount. After obtaining the necessary approvals, the transaction is expected to be completed within 2 to 3 months.
Ma. Cristina Tingson who is the Security Bank Cards President has said that this strategic move was made in order to focus on their existing card issuing business with their main credit card which happens to be MasterCard. MasterCard is now their main credit offering and it will be actively strengthened and expanded for their customers. The decision was made keeping in mind that their card business remains an integral cog in their Retail Banking sector and is also the crucial driver of their overall growth strategy.
14th June 2016
Banks in Philippines hoping to restructure credit card receivables
Major banks in Philippines are planning a debt relief program for restructuring the credit card receivables worth P167.4 billion. This is being done for the financially distressed and highly indebted customers.
Jesus Angelo Gomez, the president of CCAP (Credit Card Association of the Philippines) stated that banks are hoping to migrate a huge chunk of credit card receivables to the IDRP (Inter-Bank Debt Relief Program). He also added that 1.39 percent of the total credit card receivables (P 2.32 billion) are placed in the restructuring programs by the banks. According to Gomez, the Inter-Bank Debt Relief Program was established to help the customers in understanding the right way of using credit cards.
The repayment term can be extended to 10 years under this program if it is a severe case of indebtedness. The interest rate will also be 1.5 percent every month in that case.
10th June 2016
FDI inflows increased by almost 60 percent in March
Foreign Direct Investments increased in March by almost more than half. FDI is the source for capital and jobs for Filipinos and it has logged an inflow of USD 364 million. Last year in March it was USD 229 million. Compared to this year, there is an increase of 59.1 percent. February had recorded USD 342 million. Since February, there has been an increase of 6 percent.
The capital inflows came in bulk from Taiwan, Hong Kong, the United States and Singapore. Net capital placements have been used for food and accommodation service, manufacturing, real estate, financial insurance, etc.
10th June 2016
CCAP and BSP to Help Credit Card Customers Deal with Debt
CCAP (Credit Card Association) and BSP (Bangko Sentral sg Pilipinas) has recently launched IDRP, an Interbank Debt Restructuring Program to help credit cardholders who are in debts. This program has been developed to help customers deal with their debts and start using credit responsibly again. IDRP plans to offer low rates of interest, affordable terms and it aims to reduce the monthly amortization of customers to make sure they can pay their outstanding balance. This program will allow customers in severe debts to repay the balance in a period of 10 years. The interest rate will be 1.5 percent per month or even lower depending on the debt-to-income ratio of the customers. To get help, cardholders have to contact the bank that has issued their credit card and submit certain documents, which will prove that they need financial help. Credit cards will be cancelled once a cardholder signs up for IDRP.
9th June 2016
Credit Increase by 15% in March – BSP
Money Supply in the Philippines has increased 12.7% in April on sustained demand for credit compared to a year ago as per Bangko Sentral ng Pilipinas. Data from BSP showed that domestic liquidity or money supply has reached Php8.6 trillion as of April end. Domestic claims increased 18.4% as credits to the private sector grew at a faster pace. This sustained expansion of M3 during the month has indicated that the money supply is sufficient to support the economic growth.
Net foreign assets in terms of pesos increased 8% in April. BSP’s net foreign assets position also continued to expand on account of substantial foreign exchange inflows mainly from overseas Filipinos remittances and business process outsourcing receipts. On the downside, the net foreign assets of banks saw a decline due to banks’ foreign assets expanding at a slower pace compared to those of foreign liabilities.
02nd June 2016