There are a lot of misconceptions about credit cards among Filipinos. Among them is the idea that credit cards are debt traps. However, with proper money management and financial literacy, credit cards are actually helpful financial tools.
With that said, it can be hard for first-timers to decide on which credit card to get. The same goes for those looking for a secondary or a replacement card. That’s because many don’t know what to look for in a credit card. Philippines-based consumers simply focus on making the most of their money that’s why there are those who sometimes get caught up in the details to ensure they get the best offers.
However, it’s not really that complicated. To help you out, we’ve listed the top things you should check when you evaluate a credit card offer:
Your Personal Spending Habits
Let’s face it. If you want to get a credit card, you want to use it in the future. The question is, how are you planning to do so? This is the biggest and most important consideration you need to determine so you can pick the best one for you.
For example, if you’re planning to use your credit card for buying groceries and paying bills, it’s a good idea to choose cashback cards. There are also those who are partners with certain supermarkets or groceries, which can earn you extra reward points and bigger discounts.
If you’re going to use the credit card for buying big-ticket items such as a TV or a big refrigerator, the best option is a card with low finance charges. You should also consider those that offer good installment plans or those with deferred payments (buy now, pay later).
For those who plan on using their credit cards for online transitions, choose one that has enhanced protection against internet fraud. There are also credit cards that give bigger rewards points and other perks when you use them for online transactions.
The Bank Offering It to You
Usually, it’s easier and better to get a credit card from a bank that you already have a relationship with. In fact, if you’ve been a loyal customer of the bank, you might get an offer for a credit card even if you haven’t sent an application.
If you don’t have a bank account or if your bank doesn’t have a credit card offering, make sure to do your research. Different banks have unique packages and partnerships. For example, there are credit cards that have exclusive partnerships with airlines. If you love to travel, then this might be the kind of card you want to get.
You may also want to ask your friends and family members who already have credit cards for advice or referrals. Some banks offer bonuses to the referrer. You can also use the experience of your loved ones when deciding on a credit card. If the bank has their glowing review, particularly the customer service quality, it might be a good choice for you, too.
The Perks and Rewards
One of the biggest reasons that people want to get credit cards are the perks and bonuses that come with them. Usually, these rewards come in the form of points that you can then convert to shopping credits, vouchers, or items and services. Most credit cards also offer to convert these accumulated points into cash rebates.
Aside from shopping and lifestyle perks, some of the most common credit card rewards include:
● Airline miles
● Fuel discounts
● Hotel room discounts or upgrades
● Restaurant gift certificates or discounts
● Free subscription fees for different services
● Waived annual fee
There are also credit cards that give you more value the more you use it. For example, if the card has a partnership with a supermarket, you might get discounts if you shop weekly rather than monthly. Make sure to review the fine print so you don’t miss out on the rewards you want.
The Fees of the Card
Credit cards have a lot of fees you need to remember, but the three most important are the following: the annual fee, the cash advance fee, and the late charges. The annual fee is like a membership fee. You pay this so you can continue to enjoy the privileges of having a credit card. Usually, this is automatically charged to your account at the beginning of the month of your membership. Do note, however, that a lot of banks waive this fee for the first year and under certain conditions in the following years.
The cash advance fee is the interest billed when you make a cash advance on your card (when you withdraw money instead of charging a purchase to your card). Depending on how much money you withdraw, the fee will be around 3% of the amount or around Php 500, whichever is higher.
Finally, the late charge (sometimes called penalty fee) is the interest that is applied if you aren’t able to pay the minimum balance due before the due date. At most, the late charge is 5%. However, there are banks that don’t charge a percentage interest, but rather a fixed amount depending on the amount due.
The Interest Rates
Depending on the bank and the type of card you want, you’ll notice that there are credit cards that have a lower monthly interest rate on the amount due. However, the lowest you can find is from 2.5% to 2.75%. Some credit cards have an interest rate of 3% or higher.
Remember, though, that you don’t have to worry too much about these interest rates if you always pay your bills in full and if you pay on time. There are also banks and credit card companies that have longer due dates or are willing to extend due dates under certain circumstances.
The Credit Limit (vs How Much You Spend)
Your credit limit is the amount you can spend using your credit card. This is usually determined by your capacity to pay. If you have a good credit rating, you’ll get a higher limit. For first-timers, however, this amount will usually be lower. Don’t worry, though, because banks definitely give good-paying customers an increase in their credit limit after a couple of years.
However, do note that a higher credit limit doesn’t always mean a good thing. The best thing to remember is that you should base your credit card expenses based on your capacity to pay.
The bottomline is that you have to do your research before you settle on a credit card. It takes a bit of work, but it’s not entirely difficult. All that effort will be for your benefit, anyway.