What is a credit card?
Credit cards allows you to borrow money from the bank so you can make your purchases. If you pay back the money you borrowed within the grace period, you will not be charged any interest. Credit card allows you to make big purchases and you can pay it off in smaller chunks. The credit card statement will help you budget easily. It is also easy to carry the card instead of carrying cash around. Credit card helps you build up your credit score which will help you get credit easily in the future. But, if you are not too careful with the spending, you can be in a bigger debt than you can handle. The ease of using credit may cause you to overspend and the interest rate charged on the credit card is higher making the small debt seem larger over time.
Why should one have a credit card?
A person needs a credit card for the following reasons:
- It is convenient as you will not have to carry a lot of cash on you.
- Your purchases will be recorded under one account and it becomes easier to track.
- It is much safer as they have enhanced security measures.
- The card can be used to make online and offline purchases.
- Credit cards are accepted worldwide and they come in handy when you are travelling.
- You can rely on your credit card at times of emergencies.
- It will help you build your credit.
- You get insurance on the products purchased using the credit card. The warranties may exceed the manufacturer’s warranty at times.
- You can accumulate rewards points and there are other benefits such as discounts, cashback, etc. that are offered when you are signing up for a credit card.
Features of a credit card
Following are the features of a credit card:
- It is an alternative to cash. It is easier to carry and safer.
- You can get to enjoy the credit limit set on your credit card. There are two types of credit limit available, one is normal credit limit which is given by the bank while the credit card is being issued to you, and the other is the revolving credit limit which varies with your financial exposure.
- Cardholder can make payments in the currency of their choice. The currency conversion process is simpler as it removes the financial complexities involved in converting the currency.
- The banks keep a complete record of the transactions you made using your credit card.
- You will be charged annual and additional charges which are collected on an annual basis or when you use the additional benefit.
- Banks offer grace period for you to make the repayment. This ranges from 25-30 days. If you miss the grace period, you will be charged an interest on the outstanding balance.
- There are different types of credit cards issued such as standard cards, prepaid cards, secured cards, virtual cards, student cards, co-branded cards, etc.
- The banks offers credit cards for different categories such as dining, travel, entertainment, gas, grocery, shopping, air miles, etc. Various offers will be presented under each categories.
- Most credit cards offer rewards and incentives for using the credit card. These rewards with be related to the category of credit card you have chosen.
- You can use the card to make online and offline purchases.
Benefits of a credit card
Following are the various benefits of having a credit card:
- You get ease of access to the pre-approved credit.
- You can use it to make purchases and you can pay for it later within the grace period.
- You will not be charged any interest when you are repaying the balance within the grace period.
- You can convert the balance to easy payment plan and save on the interest.
- You get discounts and rebates for specific purchases made using the card.
- You earn rewards on every purchase you make using the credit card.
- You can avail cash advance from the credit card, but it attracts higher interest rate and you must avoid it at all times.
- You can rely on your credit card at times of emergencies.
- You can use it to build your credit score.
- Credit card statements help you to stay on top of your day-to-day spending.
- You get extra protection for the item you purchase using the credit card.
- You are earning rewards, cashback, etc. when you are spending.
- It is a cheaper for short term borrowing as interest is only charged on the outstanding balance and not the total balance.
Credit Card Eligibility
The general eligibility criteria for availing credit cards in Philippines are as follows:
- Applicant must be a Filipino citizen or a Philippine resident.
- The principal cardholder must be aged between 21 – 65 years.
- If the applicant is employed, he must be a regular employee for a minimum of 1 year.
- Self-employed applicants must be profitable for at least 3 years.
- The minimum annual income required is P180,000.
Documents Required to Apply For Credit Card
- You will need the following documents to be able to apply for a credit card:
- Application form
- Photocopies of 2 valid government-issued identification card such as Voter's ID, TIN ID card, SSS ID, Passport, and driver's license.
- Employee applicants will have to submit their most recent payslip, Certificate of Employment, and their Latest Income Tax Return/ BIR stamp.
- Self-employed applicants will have to submit their Copy of DTI or SEC registration, Latest audited financial statements with bank/BIR stamp, and Latest Income Tax Return with bank/BIR stamp.
- Foreign applicants will have to submit their Philippine VISA, Alien certificate of registration stating type of Visa held and their Immigration Certificate of Residence(ICR)
When you are applying for a credit card, you must consider the following:
- You must know credit score: If your credit score is good, you won’t be charged a higher interest rate and you will easily get a credit card.
- Choose the type of card you need: There are cards that offer low interest rates or better rewards. Choose the one that suits your lifestyle.
- You must be aware of the charges that will be charged: You must know what the annual fee is, late payment fee, how much rewards you can avail, when your rewards expire, etc.
- You must keep an eye for some features: Certain features that you must keep an eye out for is automatic credit limit increase, no annual fees or late payment fees and missed payment forgiveness.
- You must keep multiple options in hand and compare them: The only sure way for you to make the best choice is to compare the benefits and features being offered by various credit card companies and choose the one that suits your lifestyle.
- BDO Credit Card: BDO is a bank offering full service in the Philippines. It offers the wide range of industry leading products and services such as corporate lending, consumer lending, foreign exchange, deposit, trust and investment, brokering, corporate cash management, remittance, leasing, investment banking, bancassurance, private banking, insurance, rural banking, debit cards, and credit cards. It has the largest distribution network with over 1,000 operating branches and over 3,000 ATMs nationwide. The bank’s balance sheet strength continues to increase and expand. It has won multiple awards from local and international award-giving bodies for product excellence and institutional excellence. Applying for a credit card with BDO is easy and you get great travel deals, promotions, easy pay instalment plans, etc. The credit cards are highly secure.
- BPI Credit Card: BPI is an universal bank that offers a wide range of financial products and services to both their corporate and retail clients. They have consumer lending and banking, insurance, asset management, securities brokerage and distribution, asset management, leasing, foreign exchange, debit and credit cards, corporate and investment banking. There are over 800 BPI branches in Philippines. BPI has close to 3,000 ATMs and cash deposit machines. BPI credit card gives you more financial flexibility. You can get all the rewards, rebates and perks which you can redeem immediately or at a later time. You tend to have greater control over your finances. You can apply for BPI credit cards at the BPI branches or online. There are a wide range of credit cards that you can choose from to suit your lifestyle. With the various options made available to you, you have a greater power over your spending.
- Citibank Credit Card: Citibank is the largest foreign commercial bank in the Philippines in terms of the profitability, assets, and revenue. Citibank offers credit cards, wealth management, insurance, etc. Citibank offers credit cards that fits your lifestyle. You get rebates, travel offers, rewards, cashback, air miles, etc. With the Citibank credit card you can opt for instalment plan, balance transfer, cash advance, cash, credit line increase, etc. You can also take advantage of the exclusive offers such as the airport lounge access and Citi world privileges. The credit cards are highly secure, you have to use the OTP which is usually sent to your mobile number. You can take a credit shield to ensure that your credit balances are settled in case of unforeseen events. You can also take credit card protection to make sure that you will not be held responsible to clear the balance if you haven’t made the purchase. You get an electronic statement of your credit card each month. You will also get alerts via email and SMS.
- Eastwest Bank Credit Card: Eastwest Bank offers a wide range of products such as deposits, loans, debit and credit cards, investment, cash management, etc. It offers credit cards to meet the various lifestyle requirements of their clients. There is a card for those who love to shop and dine. There is a card for those who love to earn rewards. There is a card that offers rebates, a card that rewards drive and a card that offers lower rates for supermarkets, drugstore, gas, etc. Eastwest Bank has a card that meets almost every requirements of their clients.
- Maybank Credit Card: Maybank has over 80 branches all over Philippines. Maybank credit cards offer you financial flexibility. They have a wide range of credit cards that are designed to meet your lifestyle needs. Maybank offers secure online shopping wherein you have to enter your one-time password when you are using the credit card on 3D secure websites. Whenever you use your Maybank credit card you earn rewards and points which can be redeemed through various ways. With the Maybank credit card you get access to easy cash, you can convert the balance to easy instalment, you can transfer the balance from your other credit cards, and you can buy the appliances when you want it and pay for it in a couple of months.
- Metrobank Credit Card: Metrobank is the leading financial conglomerate in the Philippines. It offers a wide range of services to the retail and corporate segment. You can get deposits, loans, credit and debit cards, insurance, etc. Metrobank offers credit cards that has worldwide purchasing convenience. You can choose a card that best suits your lifestyle. There are cards specifically for women. You can also get reloadable prepaid card to use for general purpose.
- PNB Credit Card: PNB has a wide range of financial products and services to offer to both their corporate and retail clients. It offers credit cards to meet the various lifestyle requirements of their clients. The clients can earn rewards and points which can be easily redeemed. There are various travel offers, dining and shopping offers that will benefit the cardholders. Cardholder can also get discounts at certain places. He or she must keep an eye out for the promotions offered by PNB from time to time. With PNB credit cards, you can fulfil your life’s best promises by traveling more, trying out new cuisines, etc.
All banks in the Philippines charge an interest rate on the credit card. The interest is charged on daily average balance basis and this is computed differently by the different banks. The rates depends on the type of transaction. The interest for retail purchases is different from that for cash advances and balance transfers. The interest rate varies between 3 – 3.5% per month.
Apart from the interest rate you will be charged the following fees:
- Annual fee.
- Transaction fee for transfer, cash advance, and foreign transaction.
- Penalty fee for over-the-limit transaction, late payment, returned payment, etc.
- Minimum interest charge.
Following are the various types of credit cards offered in Philippines:
- Standard Credit Cards: These cards have no specialisation and standard benefits are offered. You can pay for purchases make withdrawals and the card will be valid internationally.
- Prepaid Credit Cards: Prepaid credit cards are preloaded with funds and can be used as normal credit cards. The card works differently from a normal credit card as instead of you buying something with the borrowed funds, you are buying with the funds that you have already paid for.
- Virtual Credit Cards: There are banks that give you virtual credit card numbers which will be a random card number associated with your actual credit card. This helps you further protect your transaction and the number will be set to expire in a year from its creation date.
- Secured Credit Cards: Secured credit cards are secured with a cash deposit made with the bank. This is the best option for those who have no credit history or a bad credit history. The banks will instantly provide a secured credit card as they can dig into your cash deposit if you fail to make payments.
- Student Credit Cards: These cards helps the students build credit history when they are in college. The benefits offered are limited and the credit limit is restricted to a certain level.
- Co-Branded Credit Cards: These cards are sponsored by bank and the retail merchant. The type can be issued more cheaply. It is designed to give the issuing bank access to the retailer’s customer base.
Following are the various categories of credit cards offered wherein you get exclusive deals for in the Philippines:
- Dining credit cards: You get exclusive deals at your favourite restaurants and you will get priority entry etc.
- Entertainment credit cards: You get priority entry for the gigs and movie screening and discount with entertainment credit cards.
- Gas credit cards: You can earn reward points for filling at the gas stations. Some cards offer free fuel for a certain value as well.
- Grocery credit cards: These cards are dedicated to you grocery purchases. If it is a co-branded cards, you will get additional discounts and benefits.
- Insurance credit cards: Your purchases made using this card will be further insured against theft, damage, etc.
- Premium credit cards: These cards are exclusively for the high spenders. The benefits offered are exclusive and tailor made to meet the needs of the customer.
- Shopping credit cards: This card offers you discounts and rewards when you shop for specific products and at a specific retail stores.
- Travel credit cards: This card is tailor made for the travellers. Various travel benefits are offered when you book your tickets or make hotel reservations with the card.
- Utility credit cards: You earn rewards when you pay for your utility bills using the credit card.
- Cashback credit cards: These cards pay you every time you spend on them. But, the cashback will be subject to a limit.
- Air miles credit cards: This card lets you accumulate air miles. The air miles can be earned on specific purchases only and you can redeem them for rewards and discounts along with other standard features and benefits available on your credit card.
Credit history is the record of the borrower’s repayment of debts.
Credit report is the record of the borrower’s credit history collected from various sources such as banks, credit card companies, government, and collection agencies.
Credit score is a 3 digit score given to the person based on the credit history.
The credit history, credit report, and the credit score is accessed and becomes a determining factor when approving or rejecting the credit card application. Therefore, you must have a good credit score and for which you must have a good credit history by making payments on time and not missing any payments or having any delay in the payments.
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Credit card cash advances are short term loans that you can take against your credit card. There is usually a limit on how much cash advance you can take. You can go to an ATM and you can use your credit card to get cash. You cannot rely on your credit card to provide you with cash at the times of emergencies.
Taking a cash advance is expensive. . If you are withdrawing P300 and the cash advance fee is 4%, you will be paying P12 to just get the money. There is a good chance that you will also be charged an ATM fees. The cash advance is expensive as it charges a very high interest rate. The interest charged is higher than the regular interest rate and the interest starts building up from the day you take the advance. There is no grace period available for the cash advance. You will have to repay the amount at the earliest to avoid the high interest rate charges.
Know about Do’s and Dont’s - Credit Card Cash Advance
There are different ways through which you can make the credit card payments. You can:
- Make the payment online via the credit card provider’s website.
- You can also make the payment online from your savings account.
- You can make payments at the bank itself.
- You can also give your bank a standing instruction to make payments on your behalf before the due date.
Credit card balance transfer is when you are paying off the balances on your existing card by transferring them to another credit card account. There is usually a balance transfer fee charged. After the transfer you will have either 0% interest charged or a lower interest rate charged for the months that have been agreed upon to clear out the balance in full. This is useful when you want to clear out your credit card balances. You can also transfer if you are currently getting charged a higher interest rate.
Know More about Credit Card Balance Transfer
Credit card promotions usually range for a certain short period of time. This is usually done to attract new customers and retain the old ones. The promotions are usually valid only to certain cards offered by the bank and there is an expiry date for the promotions. You can make the most of these promotions as they will cater to the various categories. You could get a certain percentage discount at your favourite restaurant or on your airline tickets or at any retail stores.
Check Out Credit Card Promotions
OFW stands for Overseas Filipino Workers. OFW are eligible to apply for credit cards and the issuers let them apply for a wide range of credit cards. The credit cards offered are mostly secured, the OFW will have to have a savings or a checking account or a time deposit. The OFW can apply for a credit card online or offline. Before the OFW sends in the application, he or she must check if they are meeting all the eligibility criteria and then submit the application form along with all the required documents.
Know More about Credit Cards for OFW
Debit and credit cards are ways to access money without you having to carry cash around or your cheque book. Debit cards are a digitized version of cheque books. Credit cards on the other hand offer a line of credit. It is connected to the financial institution that issues the card and when you use the credit card, the issuer pays the merchant and you owe the card issuer the money. Debit cards are free whereas credit cards charge an annual fee. There is a possibility that you will overspend on your credit card, but on your debit card you can spend only the balance you have.
Check Out Credit Cards vs. Debit Card - Comparison
Having a credit card is a great responsibility and you must have strict monetary discipline. Excessive use of the credit card can result in excessive burden.
- Make the payments on time. Check your monthly statement to ensure that you are paying the minimum amount due. If you want to avoid the interest charges then you will have to pay in full.
- You must monitor your monthly statement to ensure that there aren’t any fraudulent transactions or charges reported.
- Use your credit card only when required. Use your savings if you are making a big purchase. If you don’t have the funds to buy it, then you must consider saving for it instead.
- If you notice that there are fraudulent transactions, you must report to the bank immediately.
- You must never go over limit. The ideal debt to burden ratio is 30%. Try and stay within those limits.
- Do not withdraw cash from your credit card. It is a novelty that must not be used at any cost. The interest charged is higher and there is no grace period for the cash advance either.
- Do not get too many cards. You may lose track of which cards have been paid and which haven’t and there is a higher possibility of you missing your payments.
Credit Cards FAQ's
- What are credit cards?
Credit cards allows you to borrow money from the bank so you can make your purchases. If you pay back the money you borrowed within the grace period, you will not be charged any interest.
- What are the different types of credit cards offered?
The different types of credit cards offered are Standard Credit Cards, Prepaid Credit Cards, Virtual Credit Cards, Secured Credit Cards, Student Credit Cards, and Co-Branded Credit Cards.
- What are the different categories of credit cards offered?
The different categories of credit cards offered are Dining credit cards, Entertainment credit cards, Gas credit cards, Grocery credit cards, Insurance credit cards, Premium credit cards, Shopping credit cards, Travel credit cards, Utility credit cards, Cashback credit cards, and Air miles credit cards.
- What are the additional benefits of credit cards offered in Philippines?
The additional benefits of credit cards offered in Philippines is that they allow Cash advance, credit card balance transfer, and they also offer credit card for Overseas Filipino Worker.
- What are the various fees that will be charged on your credit card?
You will be charged Annual fee, transaction fee for transfer, cash advance, and foreign transaction, Minimum interest charge, penalty fee for over-the-limit transaction, late payment, returned payment, etc.
- BDO Credit Card
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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