The SMART Way to Use your Credit Card

Credit Card

Since Christmas is fast approaching, one of the most common problems of Filipinos is being in debt during this season. As we all know, this is a season of celebration and of giving. Most of us would want to make our friends and family happy by enjoying the long weekend. Some would want to go for a staycation or even go celebrate Christmas and New Year abroad. Some would just eat out and stay at home. No matter how you celebrate this season, it would still have costs along with it.

Credit cards were made to help us find liquidity when cash is not yet readily available. But it does not mean that you should treat it as an asset or as an emergency fund. Once you used it, you should pay it.

With the many local banks and international banks present now in the country insisting you to have a credit card with them, should you take the offer?

Here’s my take: Do not Use a Credit Card if you can’t CONTROL yourself.

Opt for an alternative way to shop online like a Prepaid MasterCard. In this way, your spending limits are still controlled. A Prepaid MasterCard or VisaCard works like a credit card. But you should fund it first before you could use it. Most local banks are offering this already like BDO, BPI, Eastwest Bank and more.

Remember that if you cannot control yourself in spending and if you’re the type of buyer who makes impulse buying or who easily says YES to marketing offers and spiel then DO NOT put yourself in a situation where it will be very hard for you to leave.

If someone called you and told you that they are giving you a credit card for free, better say NO and take it as a bitter pill to swallow than say YES and suffer the consequences later.

Currently, I have 4 credit cards with me namely, Metrobank M-Card, BPI Amore, Citibank Cebu Pacific Card and RCBC Gold Card. Each card has its own perks and advantages and disadvantages. But I will dwell on that later.

Now, if you think you are already READY to have a credit card.

Here are my tips for you on how you could maximize the use of it and how you could not be guilty about it:

 

  1. Opt for a credit card with a lifetime waiver of the annual fee.

Annual fees are fees charged by credit card company for having their credit card regardless if you will use them or not. It is a sort of membership fee. Most companies waive the annual fee for the first year and charge you in the following years.

Some, however, will need certain criteria that you need to comply with so that they could waive it for you the next year or even perpetually.

These conditions are usually the following:

 

  • Transferring your other credit card balance to their credit card
  • Enrolling in their online banking facility
  • Auto-charging your utility bills or phone bills with them.
  • Spending a certain amount per year for it to be waived.
  • Availing of their convert to cash, credit to cash or cash to go facility (this is when you’ll cash advance your credit card limit and opt to pay it in installment for an interest per month).

 

Regardless on how you could avail their waiver for the next year or succeeding years, seeing these options listed, somehow, benefits them more than it benefits you. So how do we go about this? Fortunately, there are still many credit card companies that will NOT require any of these things for you to enjoy a lifetime waiver of the annual fee. It is POSSIBLE. I told you I have 4 Credit Cards.

Those four credit cards have no annual fee for life simply because I applied for it when I saw their promotion. For my  Metrobank card, however, my first card was a Metrobank Femme Platinum card. When I called the hotline, I asked them on how I could still continue using their card without having to pay for their annual fee. They told me I could convert it to their M-Card that has no annual fee for life. So, I opted for it and presto! No more annual fees!

Annual fees today ranges from P1550 pesos to as high as P3000 per year. Instead of paying for it, why not use it for other worthwhile purchases. Agree? And it’s just bothersome to think about it every year. Not to think of the reversal of it once you see it charged already. Last time I check, RCBC and BDO as well as Citibank still offers waived annual fee for life.

 

  1. Find a Credit Card that Matches your Spending Lifestyle

 

Because times are changing, credit card companies today are also doing their best to create credit cards that match the consumer’s lifestyle.

Before you get a credit card, you must first know what are the things that you usually pay for when you go out. Are you the type of person who always eats out? Many credit card companies today have partner restaurants and hotel. You may visit their website first to have a look.

If you are a frequent traveler, you may opt for a credit card that has a great conversion of purchases into miles. Most credit card companies have a card suited for traveling.  But points conversion vary so better compare and check first. One credit card company has a conversion as low as P25 is to 1 mile. Others are as high as P45 is to 1 mile.

For me, it is good to know that my Citibank Cebu Pacific Card, as well as my BPI Credit Card Reward Points, could be converted into miles through GetGo points. And since I like to travel, I always use these 2 cards for my purchases.

If you are a frequent shopper, some credit card companies have tie-ups for one shop or more. These type of credit cards will help you earn points as well as rebates just by buying those clothes or shoes! Credit cards like BPI Amore for Ayala Malls, have discounts and perks from brands under Stores Specialist Inc., BDO Credit Card, on the other hand, gives you loyalty reward points from your shopping to all SM stores. They have a Forever 21 and Bench credit card type if you usually shop for these brands. RCBC on the other hand, have a credit card for Landmark shoppers and Fully Booked readers.

There is also a credit card for motorists, one that offers gas rebates from Petron, Shell etcetera. BPI, Citibank, and BDO offer cards like this. Check their website.

For women that like being pampered and are asking for discounts when it comes to their beauty regimen and vanity, we have Metrobank Femme and  EastWest Bank’s  Dolce Vita’s card.

Regardless what type of credit card you availed for, choose one or two cards that suits you best and matches your lifestyle! The lesser credit card you have the more you could accumulate points which could be converted to rewards such as gift certificates, appliances or gadgets.

 

  1. Do not wish for a LARGER credit card LIMIT right away.

 

Many people think that the larger the limit, the better. Well, credit card companies based the credit card limit they give you usually on the following parameters:

 

  • Capacity to pay which is reflected in your income.
  • Previous credit card (if you had one).
  • Credit card payment handling (if you had one)
  • Existing loans (auto loan, housing loan, personal loan).
  • Credit score of your spouse (if you are married).

You cannot be given a high credit limit right away if the credit card company is not satisfied with all those parameters. Sad to say, our country has no credit score yet available. In the United States, they use a FICO score to evaluate the client.

 

With a credit score on hand, credit card companies could easily be able to tell if you have a good credit standing or not since this score would show your behavior in all your payments. However, here in our country verification is done by calling the banks individually that’s why most of the time, credit card approval takes about a month.

 

Going back, starting with a small credit limit will eventually help you build your credit card score as you use your card. If used responsibly, expect that you’ll be given an increase. Most credit card companies will call you and sometimes they will just automatically increase your limit. If not, the tables would turn, instead of having a good credit score, you could have a bad one and it will be hard for you to apply for another one.

 

Credit card companies have a database that could check your credit card history across all banks in the Philippines. With great credit card limit comes also a great responsibility. So just start small and gauge if you could handle it before you asks for an increase!

 

  1. Do not Pay the Minimum, Pay in FULL and on TIME!

Now comes the most dreaded part. The payment. One thing I have noticed is that, if you have cash with you, better pay it in cash right away and don’t swipe your credit card anymore. This is applicable especially this Christmas season! Hard to resist if you know you have a credit card with you. But wait, if your credit card is enrolled online and you could pay it right away when you go home, then fine, use it for the sake of points! But promise yourself that you’ll pay it once you arrived home.

 

“Na-realize ko talaga na yung mga oras na pinili ko magbayad ng cash, wala kang pagsisihan. Yung pakiramdam na pagdating ng billing ng credit card statement mo,  nakalagay ay total amount due ay zero. Sarap ng feeling kasi wala ka na dapat pang  isipin versus yung meron ka pa  palang payable. Nakakawala talaga ng stress at mas na bubudget mo  rin ang pera mo ng tama.”

 

Remember this, if you’ll use your credit card, make sure you really have the cash to pay it in full. If you MISSED paying it in full for the first time, it is a warning that you depend on someone else’s money and that you are already spending more than you could earn.

Remember that aside from late payment fees, credit card companies charges interests as high as 3.4% on unpaid credit card bills.

That’s higher than the highest time deposit rate that the 3 major banks are offering now. An interest rate is a double-edged sword. Good for investments, bad for debts.

 

  1. Set an SMS Alert to avoid Fraudulent Transactions

 

 

Most credit card companies are offering this already for FREE so better opt for this facility. Some credit card companies also offer spending limits in purchases online or abroad. Call them and assign limits.

 

  1. O% Installment

Most stores especially gadget stores are offering 0% installment for 3-6 months.

However, before you opt for this type of payment structure, remember to ask them first the price of the gadget if it would be on a cash basis. Most of the time, if it is a credit card payment, it would cost higher.

Aside from that, make sure that if you will opt for an installment, make it as short as 3 months.

Do you want your cash flow to be eaten up by a short-term debt for as long as 12 months or even 24 months? That’s like being tied-up with your postpaid plan with a no way out. It’s okay to get committed in savings and investing for 24 months. But to commit yourself to pay for 24months or 36months? Hell no.

 

Well, I think that’s it!

I hope you learned something from this article. I’m happy to say that all my credit cards are safely intact in my house until this holiday season ends. Prevention is indeed better. But if you think you are responsible enough. If you think you could pay on time and in full. If you know what you are going into then go ahead! Just be responsible and don’t blame me. Happy Holidays!!!!

 

PS 1: Photos credits to the owner

PS 2: I am not promoting any credit card companies, just citing it for a better explanation to my readers.

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