Do you hope to apply for a credit card in the Philippines? Millions of individuals spend money in such a manner and these cards offer numerous benefits. However, it is still important to appreciate the basic mechanics. This article will therefore discuss topics including (but not limited to) the importance of credit history, how payment fees work, and interest rates. Understanding these and similar concepts will enable you to make an informed decision when the time is right.
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How Does a Credit Card Work?
We can think of a credit card in a similar manner to a loan. You are provided money (known as the line of credit). These funds can therefore be used to purchase various goods and services. In return, the cardholder will be required to make future payments.
Credit card issuers will also attach penalties if payments are not made on time. If the card’s outstanding balance dips below a certain point, late payment fees may be charged. These can make it difficult to obtain future cash advances. Furthermore, they may even harm your credit rating. However, we should also note that some credit cards can double as debit cards. In this case, debit cards can be used to withdraw money from an existing savings account. Credit/debit cards have become increasingly popular throughout the Philippines.
Credit Card Fees and Charges
The issuer of a credit card will charge customers certain fees. Here are some of the fees that may apply to the principal credit cardholder:
- The annual fee (annual fees are set by the financial institution in question).
- Fees for balance transfers.
- A cash advance fee.
- Fees for foreign currency transactions.
- Charges for multiple payments within a specific time frame.
Furthermore, one of the most common charges involves a late payment fee. This depends upon the type of credit card as well as when the payment was initially due. Failing to settle these charges can negatively affect your credit history. This is why it is always important to stay on top of the status of your credit card.
Credit Card Limits
Every credit card is associated with a limit regarding the total amount of money that can be withdrawn. Each time the card is used, a certain amount will be deducted from the balance. The resulting figure is known as the “available credit”. Making regular monthly payments will help to “refill” this limit. As a result, it is possible to purchase additional goods and services. Note that your credit line is also affected by fees and interest rates.
How Your Credit Limit is Calculated
How do institutions calculate your card limit? Most firms will examine the history of the client. Those with good or excellent credit scores can therefore enjoy higher limits. In other words, they are less likely to default on future payments. This is even more important when referring to secured credit cards (those requiring an initial deposit when opening an account).
The limits of a credit deposit account are also defined by several other variables including:
- Any existing debt.
- Additional card accounts and/or outstanding loans.
- Outstanding credit card bills attributed to other firms.
- How long a card account has been open.
In other words, those who maintain a clean record are much more likely to enjoy higher credit limits.
How to Increase Your Credit Limit
Let us imagine for a moment that you wish to extend the limit of your secured credit card. What steps can be taken? Perhaps the most important recommendation is to make all payments on time. Furthermore, it is crucial to keep track of how much money you spend in relation to the account. Try to avoid applying for a cash advance unless absolutely necessary. This could make it more difficult to settle future payments.
Still, there are a few other strategies to keep in mind. For instance, it may be possible to contact the credit card company and ask for an increase. Some credit card holders could also try to settle any outstanding loans. This helps to improve the existing credit score. As a result, it can be easier to be approved for a higher limit. Any changes in your credit limit may take time to become active.
Credit Card Interest Rates in the Philippines
Any credit card is associated with a specific interest rate. Simply stated, these rates are the price that you pay for borrowing money. Interest rates are normally quoted on an annual basis. This is referred to as the annual percentage rate (APR). In the Philippines, this rate applies to payments as well as cash advances.
At the time that this article was written, the average interest rate stood at 3.5% per month. However, note that financial history can also impact these rates. Those with a poor credit rating are often charged higher rates. This is because they are at a greater risk of defaulting on payments. Once again, this is why maintaining a good credit card history is important.
How to Choose the Best Credit Card for You?
How can you determine the most appropriate credit card? Here are some expert recommendations:
- Examine the annual fee and similar charges.
- Find cards with agreeable interest rates.
- Check the APR (mentioned earlier).
- Learn about the minimum repayments that are required on a monthly basis.
Still, let’s remember that it is wise to think outside of the proverbial box. For instance, many companies offer rewards points. These rewards points can then be redeemed for cash or other valuable discounts. This may also apply to credit/debit cards.
Another factor involves the reputation of the credit card company itself. Have clients been happy about their overall experiences? Are complaints solved within a timely fashion? What types of customer service solutions are available if you have a question or an issue arises?
Finally, be sure to look at any possible perks. Credit card rewards points, low introductory interest rates and cash-back offers are some factors to examine. It is also wise to compare at least three companies to appreciate what each has to offer. Furthermore, use online comparison sites to evaluate other variables such as how the annual fee differs between providers. A clear decision can then be made.
How to Apply for a Credit Card
Applying for a credit card is a rather straightforward process. This can often be performed online. However, note that some documentation will be required. Most companies will only approve a credit card for those who earn over ₱20,000 per year. Additional documentation includes your most recent Income Tax Return (ITR), proof of a permanent address, an employment contract, and the latest three-month payslip. Note that the exact requirements may vary depending on the card company.
Now that we have covered the documentation, here are some general steps to take when applying for a credit card:
- Visit the bank’s official website.
- Submit the required documentation.
- Ask about any other offers (such as rewards points or pre-approved cards).
- Wait for approval (the length of time can vary).
Once again, ask any questions that you may have during the application process. If the company is not willing or able to address these concerns, it is best to look elsewhere.