Cash rebates, sign up gifts, vouchers and all the benefits that comes with a credit card, comes with a price. There’s a reason behind the money spent on credit card marketing campaigns – the banks wants you to spend on the cards and hope that you don’t pay in full or on time. Credit card debts can affect your financial standings unless you take control of it before the compounding interest binds you in a mountain of bills.
Even though credit card penetration is low in the Philippines compared to the South East Asia region, at only less than 8% of the national population, most of these card holders actually hold more than one card. And according to the Credit Card Association of the Philippines, more than half of credit card holders do not pay in full thus incurring the monthly interest rate of 2.5 to 3.5% per month, one of the highest in the world. Getting into credit card debt is simple but managing that multiplying debt will be tough.
So before you go on another shopping spree or decide to make a big purchase on your credit card, think again. Not just about the interest you will be paying but also fees and clauses that binds you to your purchase. The terms and conditions agreement (in the smallest font size possible) that you sign when you take up a credit card contains clauses that the bank will not emphasize to you. And we are going to share these secrets that you may have missed out:
1. Interest rates
Sometimes banks can offer teaser interest rates to entice consumers to sign up. However in the tiniest fine print agreement, it is stated that banks can increase the interest rates on credit cards by notifying cardholders 2 weeks (depends on bank) before the changes take place. By retaining the card equates to consent to the changes after they sent out mail notification to card holders. So always remember to check your mailbox for letters from your bank for such letters. Call in to negotiate a better interest rate when that happens or just threaten to cancel the card, more than often the bank may be able to offer a sweetener to retain customers.
2. Cash advance
It is often advertised that credit cards and credit lines provide you with emergency cash options when you need it. It can be tempting to withdraw huge wads of dollar notes from the machine but hold on, it is never that simple. The transaction may cost you a service fee of the withdrawn amount or a fixed amount in Pesos whichever is higher. That is on top of the daily interest charged on the cash withdrawal which is compounded daily for cash advances from the moment the ATM dispenses the cash. If an emergency arises and you do need cash, a better alternative would be applying for a balance transfer on your credit card as the interest is generally lower and lower fees are incurred.
3. Credit limit and fees adjustments
The bank, at their discretion, can and may decrease your credit limit with due notification. If your outstanding balance exceeds the revised credit limit, you are liable to pay up the excess immediately and may also incur an over limit fee imposed by the bank on your next statement. Banks can also adjust the fees, charges, and terms, at any time and will notify you of these changes accordingly. By not cancelling and continuing the usage of the card, it is equivalent to agreeing to these changes. Likewise, as a customer you reserve the right to negotiate these changes, share the rates of a competitor and request for a better package.
4. Interest-free installments
Enjoy up to 36 months of interest free installments for that big purchase at selected merchants? While it is true that if you pay the monthly amount on time within the tenor, you will not be incurring extra fees. However, some banks do charge a processing fee for such plans or a cancellation fee should you choose to pay up earlier. Always check the conditions of such offers before committing to one. There may be hidden costs that you may incur
5. Minimum payments
So long as you make minimum payment you are safe isn’t it? This is what the bank would love for you to think. Making minimum payment only saves you the late fee charges. When you do not pay in full for your credit charges, you are incurring interest on your unpaid portion which is profit for them. With a low requirement of repayment, consumers are tempted to spend more and accrue more outstanding each month. This can amount to an astronomical figure on your credit card bills and affect your credit standing as the minimum payment is only enough to pay the fees and interest. If you do find yourself unable to make the payment in full, there are options such as balance transfer and fixed repayment plans that most banks provide.
6. Card benefits, services, facilities and privileges
Taking up a new credit card because it gives you a new suite of attractive benefits and services? The bank can introduce, amend, restrict, terminate, or withdraw your Card benefits, services, facilities and privileges at any time. Though this may not happen often but do take note of changes made and always read letters from your bank in the mailbox.
7. Approval of card transactions
There is a clause in the agreement that even if a transaction may cause the balance on your account to exceed your credit limit, the bank can approve the transaction! And you will be liable for the fees and charges incurred in cases like this. Always be aware of how much outstanding you have on your card before making a huge purchase to it to avoid such situations happening.
In all truth, the banks do need to reserve their rights to make adjustments and amendments. The banks also do need consumers to spend on their credit card and it’s up to us to manage the bills wisely. Be diligent in checking your bills and letters for any changes or for the latest promotions from the banks. With proper management of the outstanding, you can actually save with the rebates and freebies that the bank dishes out to encourage spending.
Credit card is a convenient payment mode to shop online and with the booming e-commerce development in Philippines, it is essential to have a credit card for ease of payment. Always keep in check of your expenditure and spend with merchants that gives you rebates like ShopBack Philippines who collaborates with major retailers and merchants to provide you online shopping with greater savings. So remember before you sign on that credit card again, check if you are able to make the payment when the bill arrives and if you are getting the best deal possible on that purchase!
Disclaimer: This article has been contributed by ShopBack Philippines. MoneyTalkPH did not receive any compensation for this.