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Credit Card Basics

It has become a practice for Filipinos to remain ignorant because it is “nakakahiya” to ask. Credit card is a good example. Balance transfer? Fixed-interest rates? Good credit? GoBear asked a few people who are interested to get a card, but for some reason, are still plastic-less. Here are the questions they’re too afraid to ask the bank — maybe they're your questions too. Time to find the answers here.

How do I know if I am qualified for a credit card?

See if you can provide the following:

1. Proof of income. E.g. latest income tax return (both employees and business owners), payslip for the last three months, certificate of employment or business registration, working Visa, and POEA certificate for Overseas Filipino Workers.

2. Proof of identity. E.g. passport, driver’s license, SSS, TIN ID, NBI Clearance, and Voter’s ID.

3. Proof of resident. E.g. utility bills within the last three months.


Can I still get a credit card without an ITR?

Yes, that’s possible. There are other proofs of income besides ITR like payslips and bank statements.

So for instance, you are a freelance professional who does not pay taxes but can show proof of income through bank statements, then ask the bank if that will do. Most of them, especially if you’re applying for a card in the same bank will accept that. In fact, many of them will not wait for you to apply for a credit card account because you will be offered a pre-approved one if they can see an impressive account history.


What is the income requirement?

At least 10,000 monthly income for classic cards. Expect it to be higher, like 35,000 to 150,000, for gold, platinum, or titanium cards.


Are there any credit card interest rate and fees involved?

Yes there are. Here are some:

1. Annual Fees - this is usually waived for the first year and can be waived forever if you’re in good credit standing. It normally costs 850 to 1,500 per year for classic cards.

2. Monthly interest rate - this is the credit card interest rate for balance not paid full on time, normally around 3 to 4 percent per month.

3. Cash Advance Fees - most banks offer 100% your credit limit for cash advances, withdraw-able via ATMs. This costs up to 4% of the amount withdrawn.

4. International transaction fees - if you use your card abroad, it will typically incur around 3% interest rate.

5. Overlimit fees - newbies are usually offered 15,000 credit limit. Spend beyond that and you’ll pay about 500.

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Are instalment options without interest available?

Absolutely! So if you purchased a laptop worth 24,000 and put it on a 12-month 0% instalment plan, you will pay 2,000 each month. Just make sure you pay on time or interest charges will apply.

Also, watch out for marketing mind tricks and always, always compare how much the same item will cost if you pay in cash.

Real life example: One of the largest computer stores in the Philippines sells a laptop for ₱24,000. If you use a card, you can put it on a 12-month instalment at 0% interest rate. But if you pay it cash, you will get 10% discount plus some freebies worth ₱2,000. We know you’re smart to conclude what this means.


Can my card be used by someone else?

Unfortunately, yes. Your card can be lost or stolen and be used for their purchases, which you will have to pay. Keep it a secured credit card by checking it regularly. If it seems lost, report to the bank immediately. Better read more about credit card scams, too.

But if you’re referring to authorized usage, you may opt for supplementary cards for immediate family members. These are cards under your account that will allow your loved ones to enjoy the full benefits of having their own credit cards while you keep in control of their spending limit. Your account in this scenario will be referred to as the principal card.


What is the easiest way to pay for credit card bills?

The easiest is arranging an automatic debit to your savings account. But you can also pay over the counter, via ATMs, online, and phone facilities.


Will I go to jail for my inability to pay my debt?

No. But depending on how grave the case is, the creditor may file a civil case against you. Harassment is not tolerated, though, especially with a new bill being pushed into law. You can file a formal complaint with the FCAG in case you experience this.


How can I manage if I'm in big credit card debt?

If you are in credit card debt, whether it is big or small, the first logical step you need to take is to pay it. Duh. But what if you don’t have enough money to pay for it? In that case, pay at least the minimum amount before the due date. Do this monthly until you’re out of debt.

What if you can’t pay even the minimum amount? In that case, your balance will be tagged “unpaid.” You will be given 30 days to pay. And please, please consider this a life-and-death situation. There is a big consequence if you won’t pay!


What happens if I will not pay my debt?

So yes, you cannot be put to jail for a bank debt. Cool. Does that mean you can get away with it? Not so fast. There are big consequences that await you.

First, your debt will never collect dust in the corner. It will instead get bigger and bigger because of late payment penalties and compounding rates. Until you settle it, your debt will continue to grow. So do not be surprised if your ₱20,000 debt grows to ₱500,000.

Second, you will get a very, very bad credit history. This record tells all the banks and other financial institutions in the Philippines that you have debt. So what? It will be hard, if not impossible, to enrol for a credit card and loans (personal, car, business, and housing).

If you are having difficulty paying your debt, it’s best to talk with your bank and discuss your payment options like possible balance transfer to your other accounts with lower interest rate.

Credit card is confusing. But GoBear is not! Compare credit cards with this free and easy tool to get you started.