Pinoys are frequently reluctant to get credit cards for a number of reasons. Some are deterred by the thought of paying high-interest fees, while some don’t want to sit through a lengthy and complicated approval process. Others don’t believe they have the financial discipline to use a credit card responsibly and are afraid of ending up with hefty monthly bills. Many personal financial advisors will also often advise their clients to use credit cards as little as possible to avoid racking up debt.
Contrary to popular belief, however, there are many good reasons to get a credit card and use it to pay for purchases regularly. In many cases, paying via credit card can even be more efficient and safer than using other methods, such as debit cards and cash. As long as you use your card responsibly, monitor your spending, and pay your bills on time, you can take full advantage of the following benefits:
Credit Cardholders Enjoy Legal Protections
One of the most compelling advantages credit cards have over other payment methods is that they’re protected by law. The Philippine Credit Card Industry Regulation Law (Republic Act 10870) safeguards credit cardholders against unjust collection practices by requiring credit card companies to follow certain rules. As stipulated by the Bangko Sentral ng Pilipinas (BSP), all credit card providers in the country must do the following:
- Disclose the computation of all charges and a breakdown of all credit card fees in a simple and comprehensible manner
- Calculate finance charges based on the unpaid balance at the billing statement’s cut-off date, without taking into account any deferred or current charges
- Alert clients through accessible channels before implementing any fee changes
- Send credit card payments through payment centers on the same day
- Move due dates that land on weekends and holidays to the next banking day automatically
- Ensure that collection agents interact with clients professionally, reasonably, and fairly at all times, including clients with overdue payments
Credit Cards Are Safer than Debit Cards
Debit cards offer just about the same conveniences that credit cards do. They’re a viable alternative to paying with cash at stores that accept Visa or Mastercard, and you can even use them for online purchases.
However, because a debit card is linked directly to the holder’s checking or savings account, you have to be especially careful about how you use it. If your card gets lost, hacked, or stolen, thieves may be able to withdraw large amounts of money from your accounts. Getting your lost cash back can often take several months, as the bank will have to investigate the incident before it can reverse any illegal transactions.
In contrast, when a thief or hacker uses your credit card to make a fraudulent transaction, you don’t lose any money. All you need to do is notify your credit card company and refrain from paying for any unauthorized charges while your provider resolves the issue. Major credit card networks often even provide zero liability coverage for fraudulent purchases as a means of incentivizing clients to use their cards over other payment methods.
Credit Cards Are Universally Accepted
When you’re traveling, you’ll find that it might be more difficult than usual to pay for purchases with a debit card. Most hotels and rental car companies will insist their customers pay with credit cards because this makes it easier to charge customers in case they damage the room or car. Furthermore, unless your rental or hotel stay has been prepaid, the merchant has no way of knowing what your final transaction amount will be. It thus makes sense for them to block off part of your available credit to protect themselves from unanticipated charges.
Furthermore, many debit cards typically can’t be used outside their origin. If you’d like to travel overseas with one, you may have to apply for a separate international debit card. Most credit cards, meanwhile, are universally accepted, which means that you can make purchases in foreign countries even if you don’t have their local currency immediately to hand. Do bear in mind, however, that overseas purchases paid for via credit card will probably come with foreign currency mark-up fees.
Using a Credit Card Earns You Rewards
Credit cards allow cardholders to earn a certain number of rewards points per purchase. These points can be accumulated toward redeeming certain rewards such as airline miles and other travel perks, merchandise from selected retailers, or gift certificates from participating brands or restaurants. Many rewards credit cards will also award rebates for certain types of transactions, such as spending on groceries, gasoline, or meals at restaurants.
There’s also a vast variety of credit card rewards to choose from, so users should look for cards that align well with their spending patterns. A co-branded credit card, for example, will be linked to a particular brand, store, or organization and is a good choice for regular clients of these establishments. Cardholders typically receive exclusive discounts, promos, and other perks when purchasing the partner brand’s goods and services.
Responsible Card Use Helps Your Credit Record
A common myth surrounding credit cards is that using them can hurt your credit record, but the opposite can be true if you use them responsibly. Using credit cards in the Philippines can be a great way to start building your credit history and establish a good credit score over time. As your card provider will have to report your payment activities, credit bureaus will immediately be able to see if you routinely exhibit good practices like paying your bills on time and staying under your monthly limit.
Debit card and cash payments aren’t tracked on your credit report, so they won’t contribute anything to your credit score. Hence, it’s a good idea to get a starter credit card if you have no credit history yet. Even if you end up having to put down a deposit for a secured credit card, doing so will help you start working on your credit record and eventually qualify for an unsecured card, cheaper car insurance rates, and larger loans.
Credit Cards Teach Financial Responsibility
Your friends and family may have shared lots of credit card horror stories with you, but there’s no reason for you to repeat these experiences in your own life. At the end of the day, how beneficial or detrimental a credit card is to your personal life and finances depends on how you choose to use it. The cards don’t swipe themselves, so it doesn’t make sense to blame them for hefty debts and large penalty fines from late payments.
If you make a habit of maxing out your card, paying only the absolute minimum balance, or paying your bills late, then it only stands to reason that the fees you have to pay will get away from you. On the other hand, if you’re mindful of your credit limit and make it a point to pay on time, you’ll probably find settling your monthly bills a manageable experience. If you’re really diligent about making sure you have no unpaid balance from the prior month, you won’t even have to deal with additional finance charges.
The following are just some good practices that responsible cardholders observe:
- Charge only for amounts you can pay in full during the next billing period
- Control your credit card spending and consider limiting it primarily to pay for essential daily living expenses, instead of using your card to make large impulse purchases
- Keep your monthly expenditure at 30% of your credit limit or lower
- Pay your bill in full a decent amount of time before the due date
It’s also worth noting that having a credit card may make it easier to develop the habit of tracking your spending. Keeping track of your credit card transactions and monthly balance is easier than ever, as many credit card companies now also have dedicated mobile apps for this purpose. This ensures that you have a good idea of where your money is going and prevents bill shock at the end of the month when your statements arrive.
Getting a Credit Card Is Easier than It Appears
Many Filipinos think that applying for and getting approved for a credit card is extraordinarily difficult, but these days that’s simply not true. More and more credit card providers allow potential customers to apply online. All you need to do is fill out the application forms and upload the required documentation onto the company’s platform.
Those who are worried about having their credit card applications declined because of low income may benefit from looking into the many available credit cards with low minimum income requirements. As for freelancers and fresh graduates without the benefit of income, documents may opt to apply for secured credit cards from major banks.
If you’ve been banking with a particular financial institution for a long time and have a significant amount of money saved up, your bank may also offer you a credit card. Banks will frequently contact qualified customers and facilitate their credit card applications without requiring them to submit income documents.
If you’re confident in your ability to manage your spending and settle your bills promptly, there’s no reason you shouldn’t enjoy the many benefits of credit cards. You’ll be able to take advantage o buyer protections, rewards, and other benefits that those who pay for purchases with other means don’t have access to.