Everything You Need To Know About Credit Cards in the Philippines

We tell you everything you need to know about credit cards in the Philippines, how they work, and what you need to qualify.

Introduction

With the lingering uncertain economic outlook and the past financial crises in Asia, many have associated the term “credit card” with debt trap. A lot of people, especially those who live in the Philippines, see credit cards as instruments that can financially debilitate people in the long run.

However, this actually isn’t the case if you know how to manage your spending and use your credit card well. Credit cards are useful financial tools that can help you in times of need. Banks also offer credit cards that come with perks when you use them often. Learn more about credit cards now and see just how convenient and valuable these can be for you.

credit card
Getty Images

 

Credit Cards in the Philippines

Credit cards may be a norm that almost everyone knows today, but it actually wasn’t until 1948 when the first form of the modern credit card was issued by the Biggins Bank in the United States. Since then, other financial institutions and banks have launched their own versions of credit cards — even reaching far-flung countries like the Philippines due to western influence and expansion.

Today, there are many different types of credit cards that are available in the Philippines, including but not limited to personal, prepaid, and business credit cards. Most major financial institutions have at least one type of card to offer their customers – all coming with varying rates, fees, benefits, and terms and conditions. 

Choosing the best credit card in the Philippines requires careful consideration of the elements stated above. But before we delve into the nitty-gritty details about your credit card options in the Philippines, it would be useful to understand the nature of credit cards and how they work. 
 

How do credit cards work?

Credit cards give people access to a credit limit that works like a loan. It permits you to take as much credit as you want under the allowable credit limit and gives you the chance to reuse that “loan” again and again as long as you pay back the amount you’ve borrowed. 

As soon as you swipe your credit card to make a purchase, your credit card issuer will give feedback on your merchant’s credit card terminal if you have available credit. If it is approved, you can immediately finalize the transaction.

Each month, your credit card bill will be delivered, with a minimum amount set to be paid by a set deadline. If you fail to pay the amount in full or pay less than the minimum amount, you will be charged interest. This added amount is called a finance charge – an additional payment based on your outstanding balance and current interest rate. 

Let’s say you have a PHP40,000 credit limit. If you borrow PHP20,000 and fail to pay that back given the set deadline, it will start to accumulate interest. Your PHP20,000 will be multiplied at the interest rate that your bank has given to you and it will continue to grow as long as you fail to pay back the amount you borrowed plus the interest. 
 

credit card use
Getty Images

 

Types of Credit Card

Before choosing the best credit card option for yourself, you need to know a little more about the different types available. Here are some of the most common credit cards you can find in the Philippines today:

 

Basic Credit Cards

With a basic credit card, you are given a credit limit – the maximum amount of credit that you can lend from the financial institution you applied for. You are free to spend this amount as you choose, whether through online or in-store merchants, as long as they are connected with the card.

Payments for your spending will depend on the card, but usually, they come with a minimum amount each month that you have to pay back. Whatever isn’t paid by the due date will accrue interests, and this amount varies as well. Some of the BSP-regulated credit cards in the Philippines that you should look into are BDO, BPI, Metrobank, Citibank, HSBC, UnionBank, Security Bank, and PNB. 

 

Prepaid Credit Cards

A prepaid credit card or cash card allows you to deposit credit into the card; thus, giving you the ability to control your budget for spending. It is one that you might give as a gift to someone or use yourself for a certain amount of money. With this type of card, there is no need to sign up for a bank account as you can acquire them for one-time use and or load money into it. Prepaid cash cards are usually connected to networks such as Visa or MasterCard, which make them ideal for travel and online purchases, or use for day-to-day expenses. 

If you’re looking for the top prepaid credit cards in the Philippines, you might want to look into the Visa Debit Card by LandBank, Prepaid MasterCard by PSBank, Prepaid Visa Card by EastWest Bank, and Cash Card MasterCard by BDO. 

 

Specialty Credit Cards

Sometimes, it’s better to get a credit card that’s for a specific purpose. Specialty credit cards target certain groups of people and give them perks that might suit their type of spending. Two common types are business cards and student cards.

A business credit card is targeted for business owners and might offer perks that appeal to their needs. They are used for corporate purposes and have benefits like fuel discounts for company cars or points awarded for stationary and office related purchases. They can help a business get better credit standing and consolidate their spending efforts to the one account. Some of the popular business credit cards in the Philippines are BDO MasterCard/ Visa Corporate Card, BPI Corporate MasterCard, and PNB Multi-Corporate Card. 

Student credit cards are targeted at students over 18 years old. They are usually free or low charge to set up and come with better interest rates or interest-free periods but lower limits. To qualify, you’ll need to prove that you are a student and may still need to prove some credit history. These are a great way to build up your credit score if you are responsible with spending.

 

Rewards Cards

Rewards credit cards are specifically created to give the spender rewards for their purchases and may give back certain points or discounts for however much money you spend. They usually focus on specific types of spending like flights or fuel, while some financial institutions partner with certain merchants to offer discounts and freebies.

Some of the top rewards credit cards that people subscribe to in the Philippines are the Metrobank Travel Platinum Visa, UnionBank Miles + Platinum Visa, Citibank PremierMiles Visa, and BDO ShopMore MasterCard.

 

Low-Interest credit card

A low-interest credit card is one that offers a lower interest rate, better suited to people who don’t intend on paying the balance off in full each month. Compared to other cards, they don’t have a lot of perks or promotions and are generally about creating a ‘no frills’ approach to a credit card.

 

Secured

For people who have bad credit, you may be eligible for a secured credit card. This relies on some other form of collateral that you put up, like a property or vehicle, in exchange for the credit offered by a financial institution. Perhaps some of the most known secured credit cards in the Philippines are AUB Secured Credit Card, BPI Express Start, and Metrobank Save and Swipe. 

 

Balance Transfer

A balance transfer credit card usually comes with a zero percent interest rate for the first six or 12 months. The purpose of these is for customers to be able to transfer the entire balance from another card onto the new one and try to pay off the new balance while no interest is being charged. Where these lenders make money is people failing to pay off the balance and ending up with a lot of interest charged.

 

Airline Miles

One of the most popular perks that credit card companies offer is airline miles or points. This means that a credit card company or financial institution has partnered up with a specific airline or more than one, and when you make purchases with your card, you can accrue points or miles to be used towards flights and travel.

Some credit cards offer quite generous rewards with airline miles, but they come with conditions like minimum spending amounts. If you know that you can meet the minimum spending amount, they can be a great way to earn yourself free travel around the world including flights, dining, and accommodation.

Some of the best credit cards with mileage benefits in the Philippines are the PNB Jaguar Platinum MasterCard, BDO Visa Classic, UnionBank Gold Card, Metrobank WorldMastercard, and more.

 

girl shopping online
Getty Images

 

Cashback credit cards

A cashback credit card, as its name suggests, gives people cashback points for every X amount they spend using the credit card. Partner merchants like supermarkets, utility companies, and gas companies will provide percent discounts that credit card owners can avail until they reach the upper limit of their cashback total. 

Let’s say the cashback credit card you have earns you one point for every PHP20 you spend and it also gives you 4% rebates on gas, 5% on groceries, 3% on utilities, 2% on dining, and 1% on shopping. You can have as much as PHP12,000 cashback total per year. 

You can compare rebates and benefits for a varierty of cashback credit cards, to assess which is most suitable for your needs. 

 

Easy approval credit cards

Although it may be easy for some people to get credit cards, some individuals do not have strong financial statements that usually serve as a requirement when applying for credit cards. However, there are some banks that offer easy approval cards to give these individuals an opportunity to have a credit card. 

While easy approval cards do not have a lot of added benefits that usually come with other credit cards, it gives people access to money in times of emergencies. You should compare  these easy approval credit cards before applying for them  as different banks offer different benefits such as no late payment fees, Air Miles, cash back and dining points. 

Depending on what type of spender you are, you have a wide range of options when it comes to the types of credit cards in the Philippines.
 

The Difference between a Debit Card and a Credit Card

Debit cards and credit cards are two of the most common banking cards that people own in the Philippines. A debit card relies on your savings, whereas a credit card uses a line of credit. 

Often, people confuse debit and credit cards and wonder how they differ. To help you understand more about debit and credit cards, we’ve done a comparison to highlight what each of them is all about, together with their pros and cons.

 

What is a Debit Card?

A debit card is a plastic payment card just like a credit card. It allows you to make cashless purchases online and in-store. Debit cards are linked to a bank account where money is held, and the purchase is made with this balance. 

The money from your card is instantly taken from the bank and paid to the merchant, and unless you have a specific overdraft account, you must have the money in your account to pay for the items you buy. When deciding if a debit card is the best approach for you, you’ll need to weigh its pros and cons.

 

Pros of Having a Debit Card

Convenience

These days, people tend to prefer to pay with their cards rather than cash because of the convenience. Having one simple card that’s attached to all of your money means fewer trips to the ATM.

 

Budgeting

Spending your own money using a debit card means you’re able to track your own budget and know the limitations of your purchases. This is unlike using a credit card where you can easily spend more than you have.

 

Easy to get

There are a lot of requirements that come with partnering with banks for your finances. However, one of the easiest things to apply for is a debit card. You only need to submit a couple of requirements, but you wouldn’t need to prove a strong financial background before you get a debit card. Some banks even offer online applications for debit cards.

 

Cons of Having a Debit Card

Hard to dispute charges

Unlike a credit card, it is difficult to dispute any potentially fraudulent or incorrect charges with a debit card as there aren’t much fraud protection policies in place yet. That is why if someone steals your card and uses it to spend, it’s up to you to have to cancel it and report it to your bank.

 

No rewards

Debit cards don’t offer a lot of perks and benefits like credit cards do so you won’t find promotions like frequent flyers and other rewards programs.

 

Won’t help your credit score

Having a debit card won’t have any impact on your credit score — good or bad. If you’re trying to build up your credit score, then it might be better to use a credit card for your purchases instead of a debit card. 

 

What is a Credit Card?

A credit card is also a plastic payment card, but one that works a little differently. Your credit card will have a set limit or balance on it that a bank can provide, and you will only be allowed to spend within that range. 

If you do not have the money to pay off your charges in full within a certain timeframe, you will be charged interest on your purchases. If you’re thinking about getting a credit card for yourself in the Philippines, you’ll want to consider its pros and cons.

 

Pros of Having a Credit Card

Purchasing power

Let’s face it— we don’t always have a lot of money in our bank accounts when we need it. Having a credit card gives you access to better financial mobility so that you would be able to improve your purchasing power for things that you really need or want.

 

Rewards and benefits

One of the biggest ways that credit card companies attract new customers is with their rewards programs. There are plenty of ways you can earn various prizes and points for things like flights, shopping, fuel, and the like.

 

Helps increase credit score

When you’re smart with your credit card and don’t let any payments default, they can be a great way to give your credit score a boost. This will put you in better standing with lenders in the future.

 

Protection for fraud and emergencies

Credit card companies are very serious about protecting their customers from fraud and have many measures in place that can help you keep track of transactions. It can also help you during emergencies, especially if you need fast access to money you do not currently have. 

 

Cons of Having a Credit Card

Interest

Sadly, you don’t get to spend a lot of money that doesn’t belong to you without paying some sort of price. Interest is usually charged on credit cards for the balance that you don’t pay back at the end of the month, and this can accrue to larger amounts over time.

 

Fees

Most credit cards come with an annual fee, but in some cases, you might be able to waive this. Again, it depends on the type of card and what other conditions are attached to it. 

 

It can destroy your credit score

When people are financially irresponsible with their credit card and don’t make payments on time, it can cause major damage to your credit score. Having points subtracted from your score can take years to rebuild and will affect your ability to borrow money in the future.

Depending on your purchasing ability and needs, there are times when credit cards are preferable over debit cards, and when the contrary is true. Learn more about the detailed offers of credit versus debit companies to know which would suit your need. 
 

Common Credit Card Fees

Every credit card in the Philippines come with their own limits and fees. These are decided depending on the type of card you get, the conditions attached to it, and your own personal financial history and credit score. Those with better credit scores will be more favorable to give a line of credit too, and so the bank may reward these customers with lower interest charges and fees.

 

budgeting finances
Getty Images

 

Annual Fee

Annual fees are one of the most common charges you will get if you own a credit card. Every year, your credit card provider will charge you for the services and benefits rendered to you throughout your use of their credit card for the whole year.

The annual fee will vary from bank to bank. Usually, the annual fee cost will depend on the number of perks your card offers. The more benefits your credit card offers (travel card or rewards card), the higher the fee. 

For example, a cashback credit card may offer up to 6% rebates in local supermarkets and up to 2% rebate on your electricity bills, but it may have a higher annual membership fee.

Compare that with another offering from a different bank with a much lower annual fee and lower interest rate, but does not offer any rebates. Consider these factors when choosing a credit card to ensure you get the most benefits from your credit card.

There are ways to waive your credit card annual fee if you have a good credit score. You just have to speak with your bank about it, and they will let you know if they can offer that perk to you.

 

Late Fee

In addition to the annual fee you have to pay, there is usually a late fee that applies to cardholders who haven’t paid the minimum repayment figure by the due date. The fee is then added to your total balance, which means it will also be charged interest. When this amount starts to snowball, it can easily get out of hand.

Some banks charge as much as Php700 for late payments. Other banks charge late fees based on a certain percentage of the minimum payment due. For example, individuals who do not pay on time will accrue an additional charge based on a percentage of the minimum payment due. 

 

Interest Charges

Interest is the major cost that people will pay when using a credit card. Every card has a different interest rate that is set by the bank. Depending on your own financial profile and what the purpose of the card is, this can vary dramatically. This interest is charged when you don’t pay the balance of your purchases by the due date. 

Some banks offer relatively low-interest rates – less than 2% – interest for unpaid balances. On the higher end of the spectrum, some banks offer up to 3.5% interest rates. While the interest rates of these cards might look intimidating. However, these cards offer good perks like rewards, fuel rebates, mileages, and shopping points. 

To illustrate the interest rate system, here’s an example:

Using a Credit Card monthly interest rate of 2%, if you borrow Php25,000 and fail to pay by the due date, it will accumulate 2% interest. Next month, you will have to pay 25,500 in order to fully pay your credit, plus your new credit card charges. 

However, let’s say you borrowed Php25,000 and pay Php15,000 before the due date. Only the remaining Php10,000 will accumulate interest. That means that next month, in addition to your new credit card charges, you’ll have to pay Php10,200 (Php10,000 + Php200 monthly interest). 

You must make sure that you pay as much as you can by the due date in order to prevent accumulating interest. 

Some cards offer interest-free periods for certain times or they may offer promotions like 12-month interest-free on all purchases over a certain amount of money. Before applying for a card, it’s a good idea to think about the type of purchases you’ll be making and when you’ll be likely to be able to pay them back.

The finance charge/interest charge occurs when the balance of the card is not paid off, and the longer it takes a cardholder to pay this amount in full, the higher the charge will be. A new fee is added each month based on the interest you’ve been charged, and this can add up to quite a bit over time if no effort is made to pay it off.
 

Credit Card Benefits

One reason why people choose to purchase with their credit cards instead of alternative options is because of its benefits. To truly make most of the advantages that Philippine credit cards offer, you need to ensure you’re spending wisely and making the required repayments. Otherwise, the interest charges will completely negate any benefits you may have received and could put you in financial hardship.

Some benefits offered by credit cards might not appeal to everyone, so you need to find the ones that will reward you specifically. You might like to use them for travel, want a card with extra security, or just be interested in improving your credit score, so consider these possible benefits.

 

Loyalty Programs

These programs are offered as a way to keep customers loyal to certain brands or merchants, and when you spend with them, you’ll be given specific rewards. They can include discounts for stores, money back on purchases, or accumulated points that are then used to buy other things. 

Loyalty programs are ideal benefits for people who like to shop in the same areas or for the same types of products as this really allows them to use it to their advantage. Usually, there’s a set amount of money that you have to spend to be rewarded, but your points could be accrued over time as well.

 

Security

A huge benefit of using a credit card versus a debit card is the security offered. Credit card fraud is a major concern for financial institutions and their customers, so all credit card providers must adhere to certain rules and policies put in place by regulating bodies. 

There are many types of potential fraud that can occur, particularly when websites get a hold of your details and can make purchases even without your card or card skimming where money is taken on the spot. Credit card companies make every effort to recoup these costs and are vigilant about fraud, so you have some peace of mind that your money will be safe.

 

Building Credit History

Whether you’re trying to get a personal loan or want a mortgage to buy your first home, you’ll need a good credit score to do so. Using a credit card and making repayments on time and in full is a great way to improve your standing, as long as you do it the right way. You will need to make significant purchases and pay the balance off by the due date so that they can see you are fiscally responsible.
 

How to Qualify for a Credit Card in the Philippines

In the Philippines, you need to be able to prove to credit card providers that you’re an ideal customer to receive their line of credit. Most credit cards have basic requirements for what you need to qualify, and some may have more. Here are a few ways to ensure you’ll be accepted for a credit card in the Philippines:

 

Proof of income

To get a credit card, you’ll need to be able to prove that you have a steady and consistent source of income from employment. Most banks will want to see proof of this with employment confirmation, pay slips, or regular deposits being made into your account. The average minimum amount of income required is around Php15,000, and the more you make, the more likely you are to be accepted. 

 

Good credit history

Banks and financial institutions will want to know about your past and can look at your credit history to get an idea. This will include things like late or missed payments and other sources of credit you might have. If they can see you’ve been financially responsible, you’ll be in better stead to be accepted.

 

Deposit account

Being able to show that you have a separate deposit account is a great way to prove your financial stability. You may be applying for a credit card with the bank you already use, and they can see your details or have to show proof of other accounts. Try to aim for a Php20,000 running balance in a savings account to prove your cash and income flow.

 

Debt to income ratio

Banks will also want to know what other debts you might have with financial institutions and lenders, and this can impact your suitability. You’ll want a low debt to income ration that shows you don’t owe a lot of money when compared to your earnings. If you do still own a large amount, try paying it off or at least down before you apply.

Some of the standard requirements that banks ask for when processing credit cards are the following:

  • Proof of Identification: Passport, Driver’s License, TIN/SSS, Postal ID, etc.
  • Proof of Income: Certificate of employment, latest pay slip, ITR, etc. 

Additionally, the cardholder must meet the following requirements:

  • Age: 21 years and above
  • Must be a Filipino or must be a foreigner with permanent residence 
  • Must be a regular employee or must have a business for at least 2 years (for self-employed)

Depending on the option you chose, there are varying requirements for each type of credit card. You need to look up more details regarding your chosen credit card to maximize its benefits, among others. 
 

Credit Card: A Convenient Tool for Your Finances

Although credit cards tend to have a bad reputation, they can be useful financial tools when used the right way. The first step to using a credit card wisely is knowing which one is going to be most beneficial to you and your finances. There’s no one size fits all approach to these handy little devices, so it’s better to know each option you have to get the best deal for yourself. 

Credit cards come with many benefits that can’t be enjoyed with cash or debit cards, so they’re worth investigating if you’re savvy with money. You might be able to enjoy free travel, get discounts on purchases, and even build up your credit score to put you in better standing to borrow large amounts of money in the future.

Although the use of credit cards in the Philippines is still growing, there are some great options out there from our financial institutions that can suit all kinds of needs. With the right credit card for your situation and some know-how on how to put them to good use, this can be one financial tool that will do you a lot of good.

Last update on Apr 02, 2019