• Secured Credit Card Vs Unsecured Credit Card

    The world of credit cards has been redefining the way we buy and transact over the last decade or so. What used to be an instrument primarily meant for making routine offline purchases has now increased its manifold in terms of its utilities. All major banks and financial institutions in the country offer a range of category based as well as cards for general use.

    If you’re aspiring to apply for a credit card in the Philippines, the most visible determinant of your qualification is your credit history followed by your income and other factors. Applicants who do not have previous credit will be provided a card to build credit, mostly on the basis of provision of security. Otherwise, most of the cards are offered on an unsecured basis. In our efforts to bring to you, the most comprehensive information pertaining to the world of financial products, let's discuss different types of credit card offerings in the Philippines, based on the security requirement. Before we get there, a brief about the most prominent factor that determines the kind of card you’re likely to be offered, Credit History.

    Credit History

    This is a collation of all your current and past financial commitments, specially credit products sourced from banks or financial institutions such as loans. It is a comprehensive list of all the credit that you’ve availed so far, its value and most importantly, a detailed repayment history. This is generally in the form a report known as the credit report that provides an overall view your creditworthiness. The credit report is either provided by designated credit bureaus or sourced by internal record keeping within the bank’s systems.

    It helps banks to instantly check the applicant’s credit and helps them in making key decisions such as approval, grant of quantum of credit etc. To stay afloat in the loan market, one needs to ensure timely payments and no defaults to be eligible for the best offers in the future. Based on your eligibility and past credit, you may be offered a Secured or an Unsecured credit card. Let's discuss the features and benefits of these two types of cards available in the Philippines.

    Secured Credit Card Philippines

    A card offered to you purely on the basis of provision of a security amount. Based on secured amount, the customer is offered a credit limit that is revolving in nature. This type of plastic money is usually offered to either customers with no credit history or to the ones who are trying to build a credit after a pitfall.

    Features & Benefits

    • Works akin to a regular credit card with availability of all standard benefits that are otherwise available to an unsecured card.
    • Card is open to both online and offline purchases along with option to make cash advances(if provided by the issuer).
    • Since it is issued on the basis of a monetary collateral, it can be obtained easily with simple documentation.
    • The applicant can secure the card by means of Time Deposit or monies held in the bank account.
    • The interest rates offered are highly competitive and on par with their unsecured counterparts.
    • Option to convert this into a regular card after a brief period of prompt monthly bill payments, thereby releasing the secured amount for use.
    How It Works?

    Based on the security amount, you will be assigned a credit limit which can utilized to make purchases, both online and offline. On the basis of the billing cycle, you’re required to make a min. payment, a small percentage of the outstanding balance. One can also choose to either make a higher payment or pay off the balance in full. The card is valid internationally as banks partner with international agencies such as Visa and MasterCard.

    Unsecured Credit Card Philippines

    This is a card that is offered to you purely on the basis of predominant factors such as the income and credit history of the individual as no monetary collateral is required to secure the assigned credit. Of the two types of cards, this is the most popular and widely availed card with features and benefits that are a benchmark for the secured counterparts.

    Features & Benefits

    • This card can be used not only for making purchases(online and offline), but also a wide range of other types of transactions such as cash advances, EMI based purchases, charges and so on.
    • Based on the checks and balances made during the application process, the card member is assigned a credit limit that is revolving in nature. The credit can be reused on the basis of the debits-payments made to the card account.
    • Since its purely based on the merits of the applicant such as income and other determinants, there is no need for monetary security.
    • The interest rates are projected on a monthly basis, compounded annually for the purpose of calculation.
    • Comes with ancillary perks such as option to earn reward points on the basis of the purchase value, discounts and deals both in the Philippines and around the world.

    How to Choose Between the Two?

    While secured credit cards are not a common offering with all the banks in the country, it's only provided by a few to ensure lesser risks in their lending system. At the onset, not all qualify for an unsecured credit card, a secured one comes into picture when you need the most. If you have a stable credit with no history of defaults and late payments, applying for a card that does not require a security comes recommended as you do not have to arrange for monies to provide as security. On the flipside, if you’re new the the world of credit or trying to make up a broken credit, going for a secured credit card does wonders by not only providing a credit to meet the expenses, but also helps in building/rebuilding credit in a longer run.

    Banks that offer secured credit cards in the Philippines generally accept a linked instrument such as monies held in the savings/current account or against Time Deposits. Be sure to check the requirements before making an application. If you do not have an existing relationship with the bank, you may be asked to open an account and make the required deposit to get a secured card.

    Bankbazaar.ph offers free resources to help you choose the best credit card that syncs with your needs. Use the Credit Cards menu option on the homepage to read about card offers both on the basis of banks and by category. The site also maintains details pertaining to Fees & Charges to help you understand the monetary implication.

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