Disclaimer: Grit PH is not affiliated with any of the banking institutions featured in this article. The sole purpose of this guide is to educate our readers on how to choose and use credit cards wisely.
Credit cards are an unavoidable part of adult life nowadays – and they can be quite intimidating too if you’re not familiar with what you’re dealing with.
According to a study conducted by We Are Social in January 2018, only 3% of the Philippines’ population own a credit card, which is likely related to the equally low percentages of Filipinos making online payments.
When it comes to credit cards, a whole plethora of myths and stigmas often play out a factor with people.
In turn, the majority of the earning populace end up avoiding availing credit cards – many have heard the horror stories of credit cards amounting to debt, unintended expenses or other undesirable financial effects.
To clear that up, let’s answer the simple question of “what is a credit card?”
What is a Credit Card?
To put it simply, a credit card is a way for you to borrow money from a bank to purchase something, regardless of whether it’s something very cheap or expensive, without the need to bring physical cash.
If you pay back the money you borrowed using a credit card within a month, you don’t have to pay extra fees. If you don’t pay on time, you pay an additional amount referred to as “interest.”
Why get and use a Credit Card?
There are a lot of reasons why this is useful and why people get credit cards in the first place.
- Reward Programs:
To encourage new credit card customers, most local banks nowadays offer reward programs. The gist is simple: For each Dollar spent using your credit card, the bank will reward your account with points. As long as you pay your dues back on time.
These points are redeemable for a variety of things such as gas for your car, airline tickets or in-store discounts.
Some banks offer great sign-up bonuses when you first get your credit card as well as cash back programs where you perpetually save a few percent on certain purchases.
- Security for your money
Credit cards are also a great safety net despite what some people claim. If you lose your card, your bank can block your card from being used within minutes of securing a report.
This precaution is far safer than losing your wallet with all your cash. Some banks offer terms to which you are only liable for the first PhP 2,500-3,000 on unauthorized purchases.
So, never lose your bank’s number, because, reporting loss and disputing charges needs to be done as soon as possible to prevent fraudsters making the most out of your hard-earned money.
- Accessibility and Convenience
Additionally, there are plenty of places in the Philippines that don’t accept debit cards, so your options for payment are cash and credit.
Traveling around with a huge wad of cash isn’t ideal because bulging wallets can attract the wrong kind of attention. By having a credit card that fits in your pocket and doesn’t take up space in your wallet, is a convenient way to take care of your purchases, especially big denomination purchases.
For example, you went on shopping for appliances, air conditioners, and other big priced item in the hardware section, you don’t need to carry a huge amount of money to pay for those.
Another convenience credit cards bring is when you’re traveling abroad, you won’t need to bring as much money to be exchanged into foreign currency.
- Building Credit History
The benefit of building credit history is to establish your account to be eligible for loans. Without credit history, there is going to be difficulty to get loans approved,
To banks, a handsome credit history is an account that remains consistent in paying its dues on time, and that it has the means to pay back what it has borrowed.
A clever way to build up credit history is to make small purchases and paying them back in time.
Credit history is a form of building assurance and trust that your account can borrow and return money to the bank, and as such, major loans you’d need in your adult life such as mortgage or auto loans can be approved much faster.
- Emergency Source of Funds
If you don’t have cash as a source of emergency funds, having a credit card can be a dealbreaker, should you find yourself in a circumstance where you need a large amount of money to pay medical bills, or an emergency flight ticket to get back with the family.
It is better to pay off credit card interest than taking risky loans that could be much more difficult and heftier to pay off.
- Budgeting Tools
On a past article here in Grit.ph, we talked about how to save money, and that there’s a section about budgeting apps.
Some credit cards can be synced with those budgeting apps to give you a clear-cut diagram on your spending habits, the money you save, and how to make the most of your time to pay your dues back.
How to Get Approved for a Credit Card in the Philippines
In the Philippines, Banks have their way of screening first-time credit card applicants.
They have the ideal archetype and template of the perfect cardholder. Pays on time, spends less than his means. To convince the local, domestic banks to approve your credit card, here are some tips.
1. Stable source of income is a must
To banks, an employee that has been tenured and is committed to a company over a long period of time is much more attractive than an employee that has a record of short-term employment or job hopping. Stability equates to qualities of loyalty.
Loyalty in one’s source of employment and income, and loyalty and punctuality when it comes to paying what is borrowed.
The typical minimum requirement for applicants’ monthly income is P15,000. But with a higher pay-grade, you’d have better chances of getting approved.
2. Start with a deposit account
A deposit account record is a good way to pass the strict credit checks a bank will impose on an applicant. A deposit account can give the bank an idea of how your cash and income flows in and out of your account.
It’s also important to maintain at least a P20,000 running/daily balance in your savings account in 6 months or more. Banks usually send out credit card offers to qualified account holders.
3. Apply for a secured credit card
A sure-fire way to have a credit card granted to you is by applying for a secured credit card. Albeit much more expensive because of a pledged deposit that you will need to settle with the bank, you’re basically paying in advance for the convenience of having a credit card.
A pledged deposit is the collateral the bank uses to guarantee repayment.
4. Maintain a credit profile
A decent credit profile is attractive to banks because it shows that you are punctual when it comes to payments. As long as your account leans towards a good credit profile, you increase your chances of getting your card approved higher. Pay off your debts, and you will be just fine.
5. Reduce your debt to income ratio
There are times when it’s a perfect opportunity to lower your debt to income ratio. For example; you have successfully negotiated a salary raise, or if business has been good and profits are growing.
The sooner you have access to higher amounts of money, focus on paying your debts to the credit card first, and maintain this without incurring other debts.
Over a period of time, your credit report would reveal that you have decreased your debt to income ratio. This account makes an attractive candidate for banks to approve their credit cards for.
6. Don’t do follow-ups
According to local lore, following up frequently within two weeks of application for a credit card in manila would send a signal that you need credit badly. This would not reflect well with banks.
Prevent yourself from contacting the bank within the first two weeks of applying a credit card. If you weren’t given a call, chances are, your application has been rejected.
10 Best Credit Cards in the Philippines
Now that we’ve covered why you should have a credit card and how to get one, let’s look at some of your options in the Philippines:
1. Citi Cash Back Card
The Citi Cash Back Card’s terms are designed for the professional who resides and makes purchases within Manila. It offers consumer friendly rebates and rewards, such as Meralco utility bill rebates.
Branch Availability: Makati and San Juan City
- Up to 6% rebates at supermarkets
- Up to 2% rebate on your Meralco bills
- 0.20% rebate on all purchases
- P5,000 Nike Park eGift (for new subscribers until May 31, 2018)
- Minimum income of P250,000 per year to avail of the card
- Requires spending at least P10,000 per month to avail of maximum rebates
- P3,500 annual membership fee
2. EastWest Platinum Card
The EastWest Platinum card’s terms are designed to offer the most convenience for the Filipino jet-setter. Its terms make it as the best card to have on you when you’re traveling abroad.
Branch Availability: Available all over Metro Manila, from branches in Quezon City, Mandaluyong, Makati, Pasay, Paranaque. East West Bank has an abundant amount of branches for you to apply.
- Free Lifetime Membership, no annual fees for owning the card
- Free Travel Insurance for up to P20 million if you buy airline tickets using the card as well as access to 950 VIP lounges at airports across the world
- Discounts at several resorts and restaurants in the country
- Each P40 spent earns 1 platinum rewards point
- Most benefits revolve around travel, so may not suit everyone’s lifestyle
3. BPI Family Credit Card
If you are a frugal spender looking for low-interest rates, BPI Family Credit is for you. Its terms make it the best credit card to pay off when it’s time to settle dues.
Branch availability: Abundant in Quezon City, Makati City, Mandaluyong, Pasig, San Juan.
- Low annual fee of P1000, with the first supplementary card free for life and the second (up to sixth) supplementary card costing on P500 per year
- Low interest rates of 2.0%, compared to the usual 2.75% up to 3.5% from other banks
- Fewer discounts and benefits at stores, restaurants or hotels compared to other cards
- No point system to take advantage of to accumulate points to redeem for rewards
4. RCBC Bankard Gold Card
The RCBC Bankard Gold Card is designed to be used as much as possible, because of its point system that never expires. Along with the EastWest Platinum Card, this credit card is a huge contender for the jet-setting Filipino.
- Unlimited earning potential for rewards and accumulated points never expire
- Free travel insurance and cheap access to airport lounges
- 0% installment for purchases abroad
- P3,000 annual membership fee with P1,500 per supplementary card
- High interest rate of 3.5%
- Minimum income of P30,000 per month to avail of the card
5. HSBC Red Mastercard
One good thing about the HSBC Red Mastercard is the ease of meeting the minimum amount required for an applicant’s monthly income. This card is ideal for residents and for local purchases. One thing to look out for is that HSBC has a hefty PhP700 penalty for late payments.
Branch Availability – Easy to find in Quezon City, Pasig, Makati, Mandaluyong
- Low minimum monthly income of P13,500 to avail of the card
- 4X bonus points earned on up to P40,000 worth of transactions per month
- 3% fuel rebate on Caltex gas purchases
- High late payment charge of P700 or unpaid minimum amount, whichever is lower
6. AUB Easy MasterCard
The most attractive qualities of AUB Easy MasterCard are; it offers options to the customer, its flexible payment terms are a treat for customers that stick to their financial plans and budget tools.
Freedom from annual membership fees for life is designed to win over the customer’s loyalty and commitment to keep their accounts active with AUB.
Branch Availability: All over Makati, Manila, Quezon City
- Flexible payments – customer gets to choose their own payment schedule
- Free annual membership for life
- Easy to earn points at P20 per reward point for almost all transactions
- No other privileges and discounts other than the reward point program
7. BDO Diners Club Premiere
Another contender for the jet-setting Filipino, the BDO Diners Club Premiere is an international card that earns you miles and access to exclusive privileges for Diners Club establishments.
However, to avail any of these conveniences, one must have a minimum monthly income of P71,000
- Access to exclusive Diners Club Privileges across the world
- Earns airline miles for every P30 spent, allowing for significant accumulation of miles to be used on airline tickets
- High annual fee of P4500
- Minimum monthly income required is P71,000
8. PNB Mabuhay Miles World MasterCard
PNB Mabuhay Miles is the best credit card for loyal and active customers of Philippine Airlines. Booking flights with PNB Mabuhay Miles World MasterCard augments your flight bookings with PAL by rewarding you Miles points.
The good thing about Miles points is that these are transferable, so you can bring some friends or family along your trips.
Branch Availability – All over Quezon City, Manila, Mandaluyong
- Free 2,000 Mabuhay Miles welcome gift for new customers
- 10,000 free Mabuhay Miles when you spend more than P100,000 on Philippines Airline Tickets in one year
- Priority Check-in Counter for PAL flights at NAIA Terminal 2
- High annual fee of P6,000
- Minimum monthly income of P40,000
9. Bank of Commerce Gold MasterCard
The Bank of Commerce Gold MasterCard is most ideal for mall-goers, because its discounts and rewards are aimed for establishments that can be found in malls.
- 5x rewards points earned at certain dining and shopping establishments
- 0% installment plans at certain stores for up to 36 months
- No other privileges and discounts other than the reward point program
10. American Express Gold Card
The American Express Gold Card is the most practical choice if you are an immediate family member of an OFW or immediately related with Filipino US residents and citizens.
Reward conversion to miles can secure enough points for an airline ticket. Whether you’re sending someone to or from America, this seems to be a good deal.
Where to get one: BDO Unibank
- No spending limit
- Membership rewards that never expire
- Can convert 1 reward point to 6 airline miles
- Billed in US Dollars
- High annual fee of USD 150
Those are 10 credit cards you can avail of at your convenience. Of course, there are dozens of other cards on the market for you to choose from, so evaluating your lifestyle and financial needs are key to picking the right card and right bank.
On Using Credit Cards Wisely
In case you’re looking to getting your first credit cards, here are some tips to not fall into any of the pitfalls that can cost you some serious money:
1. Understand the fees
Understand which part of the month your fees are due and what the fees are., When it comes to auditing your credit card expenses, having a good grasp with tracking credit card fees will help you budget in the long run. Different types of fees such as the annual fee, the late fee or foreign transaction fees requires your attention, so be mindful when and where you use your credit card.
Here’s a little glossary for your reference:
- Annual fee – the amount you pay for your membership, charges every year.
- Late Fee – the penalty you pay for each time you fail to meet the bank’s grace period on payments and installments.
- Balance Transfer fee – The amount you pay for when you carry over your balance to another credit card or another account.
- Cash Advance Fee – The amount you pay for the convenience of getting access to cash through your credit card.
- Finance Charge – also known as interest. This is the amount that carries over when you don’t settle your monthly dues.
- Foreign Transaction Fee – The amount paid for every transaction made abroad.
2. Understand your income
Never purchase anything beyond your means using your Credit Card. This habit of buying things that you can’t afford is a one way ticket to suffering the vicious cycle of you getting stuck paying off the purchases plus interest over several months.
3. Use your rewards
Plenty of people accumulate a lot of points and rewards, but never check which rewards they’re eligible for and end up not using them. Always keep track of your reward points and be up to date to any offers and promos for your points.
4. Read your account statement
Check if all your transactions are properly accounted for and that you aren’t a victim of credit card fraud. Report and dispute any unauthorized charges immediately.
5. Make the minimum payment
Most credit cards don’t require you to pay off your debt immediately in one go, but instead require a minimum amount you pay each month or you’ll incur larger amounts of interest.
6. Stick to a budget
As discussed on Grit’s column on how to save money, sticking to the budget will save you money. By practicing restraint and by thinking twice over a purchase, you gain more financial freedom. With this is mind, it is wise to use your credit card sparingly as well.
7. Pay your bills on time
Being punctual when it comes to paying your dues on or before the grace period ends will reward you with a good credit rating. getting more trust from the bank, which gives you access to loans, this leads to an important point of carrying your balances responsibly.
Don’t make any purchases that will compromise the flow of your monthly credit card payments.
8. It’s okay to use cash sometimes
Especially when it comes to ride-hailing apps such as Grab and Uber. These services also accept cash. Most credit card users become unaware and lose track of their expenses with Grab and Uber, so sometimes, using cash can prevent you from incurring more expenses with these apps.
9. Check your credit report at least once a year
Understanding the flows of all acquired credit card fees, as well as your purchases, you can give yourself a self-evaluation when it comes to purchasing habits and the timing of your payments.
Ask yourself these questions: Am I spending beyond my means? Are my purchases making my monthly dues harder to pay?
Follow these and you should be fine. Never forget, the point of a credit card is to borrow money – never borrow money that you know you won’t be able to pay back.
Credit Cards are a brilliant innovation that allows you to be much more financially flexible.
As long as you use your credit card wisely, and as long as you punctually pay your dues, you can truly enjoy the convenience of going cashless, whether you’re in the domestic or international market.
Having a credit card would be one of your most grown up, adult decisions you’ll make. Best of luck!