You’ve probably heard horror stories about credit cards from family and friends. For example, how expensive the fees are, how they are never approved for one, and how their credit card bills continue to accumulate. They may have discussed the benefits of credit cards at one point, but their credit card woes far outweigh the benefits of credit cards.
What Benefits Do Credit Cards Offer?
It’s beneficial to be aware of the advantages. However, in order to manage your expectations, it’s prudent to be aware of the disadvantages. If you’re still undecided, we’ve compiled a list of ten reasons why you should get a credit card and why it’s superior to cash and debit cards.
1. Teaches You to Be a Responsive User
One of the advantages of a credit card is that it teaches you how to be a responsible user. Credit card horror stories from other people do not have to be your own. At the end of the day, it all comes down to your usage habits.
In short, debt should not be blamed on credit cards. After all, cards do not automatically swipe at malls or enter CVVs, correct?
If you frequently use your card to its maximum limit, pay your bills late, or pay only the minimum balance, your fees will inevitably accumulate.
On the other hand, if you use your card responsibly, you can manage your monthly payments. Additionally, if you have no outstanding balance from the previous month, you will not be charged finance charges.
What does it mean to be a responsible credit card user?
• Charging only what you can afford to pay in full when your next statement arrives
• Managing your spending, such as avoiding impulsive purchases and cash advances, as well as covering everyday living expenses
• Keeping your monthly spending below 30% of your credit limit
• Making on-time payments on your credit card bill
2. Assist You in Keeping Track of Your Monthly Spending
The ability to manage your spending is one of the benefits of having a credit card. You can easily monitor your balance and transactions to ensure you do not exceed your credit limit. This way, you’ll avoid being surprised by your bill when it arrives.
3. As a credit cardholder, you are Legally Protected
Did you know that the Philippines has a law protecting credit card holders from deceptive debt collection practices? The Philippine Credit Card Industry Regulation Act (Republic Act 10870)[1] is the name of the law. That is one of the advantages of using a credit card over other methods of payment.
In May 2018, the Bangko Sentral ng Pilipinas (BSP) promulgated new rules governing providers in the country:
• Complete disclosure of finance charges and other fees in an easily-understandable manner
• Calculating finance charges based on the unpaid balance as of the billing statement cut-off date, excluding current and deferred charges
• Adequate notification of clients prior to implementing fee changes
• Posting payments via payment centers on the same day
4. Online Shopping is Safe
Are you concerned about using a credit card for online purchases? One of the benefits of credit cards is the ability to detect fraud.
For instance, if you are approved for an application from BDO, BPI, or Metrobank, you can use the issuer’s virtual card (BDO Virtual Card, BPI eCredit, or Metrobank ON Internet Mastercard). Using a separate card for online shopping protects you from online shopping scams because the card has a unique card number that is not associated with your regular card.
Online shopping is only as secure as the websites you visit and your own diligence in avoiding credit card fraud. Ensure that you only purchase from reputable websites with secure payment systems.
Reduce the amount of money you pay on your credit card bills!
5. Provide a Higher Level of Security Than Debit Cards
Debit operates in the same way as credit cards do. Your debit card can be used to make purchases online and in stores that accept Visa or MasterCard.
However, using a debit card carries some risks. Due to the fact that debit cards are directly linked to the cardholder’s savings or checking accounts, you will suffer significant inconvenience if your card is lost or stolen.
Unauthorized transactions would deplete your account of large sums of money. As a result, you may find that you lack sufficient funds to cover any automatic bill payments. Additionally, recovering your money may take several months due to the bank’s investigation of the incident.
If a hacker steals your card information, you have a better chance of recovering your money if the money was taken from a credit card rather than a debit card.
6. Having It is Rewarding
Perhaps one of the most attractive features of credit card payments is the rewards program. Air miles, travel perks, and rebates are all examples of these. More information about the best credit cards in the Philippines can be found here.
Rewards aren’t always available when paying with cash or a debit card. More importantly, rewards points do not expire as long as your account maintains a positive credit score.
7. Assist in the Development of Credit History
Another significant advantage of credit cards in the Philippines is that they enable you to establish and build your credit record.
One of the most prevalent misconceptions about credit cards is that they can negatively impact your credit score. Not always, as it can actually help you improve your credit score over time. It increases your total available credit and decreases your credit utilization ratio, both of which are considered when calculating a credit score.
Having it to begin with is beneficial if you do not yet have a credit history, as it can help you build one over time with responsible use. Without it, it will be more difficult to obtain loans or lower auto insurance rates.
8. Obtaining It is Simple
Another widespread misconception about credit application in the Philippines is that they are difficult to obtain and maintain.
However, you can now apply quickly and conveniently online. There is no need to leave your homes — simply apply for a it online using your mobile device.
If you’re concerned about being declined for your application due to your low income, you’ll be relieved to learn that there are applications available with low minimum income requirements.
Have you been denied income documentation due to your status as a freelancer or recent graduate? There is no problem! Without submitting financial documents, you can apply for a secured credit card from AUB, BPI, Metrobank, RCBC, or Security Bank.
If you’ve been a customer of a bank for a long period of time and have a sizable balance in your bank account, you may also qualify for a credit card. Your bank may contact you to offer you a credit card without requesting proof of income.
9. Purchases Can Be Protected
The purchase protection insurance offered by credit cards is one of the lesser known but critical benefits to customers. This feature is available on certain credit cards, including the PNB Platinum Mastercard, the BDO World Elite Mastercard, and American Express Blue.
Purchase protection insurance covers lost or stolen items, as well as physical and accidental damage to purchased items, for a specified period, such as 90 days from the date of purchase. If an item charged to you is lost or damaged, you may be reimbursed up to the maximum amount. When you pay with cash or with debit card, you will not be covered by this protection.
10. You Will Not Be Charged If Your Card Is Lost
If your credit card is lost or stolen, you should contact your bank immediately to have it blocked and prevent unauthorized use. In the event of any unauthorized transactions, file a dispute. The bank will then investigate and issue refunds for erroneous purchases.
In comparison, if your cash is lost or stolen, the chances of recovering it are extremely slim, if at all.
Is it Necessary to Have a Credit Card in the Philippines?
If you believe you are prepared for the responsibilities associated with owning one, go ahead and apply. Apart from the benefits listed above, a credit card is beneficial to have if you plan to finance a large purchase such as household appliances, furniture, electronics, or other high-ticket items. Rather than saving for months, you can already purchase the item on a zero-interest instalment plan.
