Part of the Filipino culture is trying to impress others through spending money we really don’t have, creating an image that we are better off, and splurging to create an image that we are generous and even if we can’t really afford it. It is for this reason that some Filipinos misuse their credit cards.
To be aware and prevent misuse of credit cards, let us look at the seven most common credit card mistakes that Filipinos make:
Using Credit Cards for Small Purchases
You might think you are saving time and effort of having to search for an ATM machine to withdraw your cash just by paying with your credit card for small purchases but in reality, you are just letting these small amounts of purchases pile up to a bigger bill come credit card payment time. Keep in mind that merchants charge a fee for any purchase, regardless of the amount, a reason why some stores require a minimum purchase for credit cards. In general, it is suggested to just pay with cash as much as possible, especially with small purchases.
Paying Late
Not paying on time also has its repercussions, which is an increase in the amount you have to pay in your next monthly bill. With overdue bills, it’s not just the amount you have to pay that is affected, your credit score is also endangered. Better pay as soon as you can to steer clear from extra fees that you might incur when you forget to pay on time. You might want to opt for auto-payments on your account or to pay through online banking facility.
Not Reading the Terms and Conditions
With so many attractive credit card offers and the freebies, discounts and other perks that come with a credit card, it can become easy to make up one’s mind and choose a credit card to apply for. However, financial experts suggest aspiring credit card holders to check the fine print first before signing up for a card. Read the terms and conditions, ask questions, and make sure that you understand everything before signing up. The fine print usually includes additional charges that may apply for whatever terms and the interest rates you will get for certain conditions and as time goes by.
Maximizing Credit Card Limit
It is also a common mistake for Filipinos to maximize the credit limits of their cards. Ideally, you should aim to be around 10-20% below your credit card’s maximum limit to be able to maintain a good credit score. Exceeding credit limit will only result in a reduction of up to 45 points from your credit score. Another drawback of exceeding your credit limit is encountering difficulties in applying for other terms of loans or financial services.
Making Cash Advances
Some Filipinos who need to have cash are sometimes tempted to make cash advances on their credit cards by withdrawing from ATM machines. This is another common credit card mistake, as making cash advances on credit cards are usually associated with high credit card interest charges. Cash Advance credit card charges can be anything from 10-15 percent higher than your regular credit card purchase charges. Rather than make credit card cash advances, just go for a personal loan application instead.
Using your Credit Card for Rewards
A credit card should primarily be used for emergency purposes and other necessary day-to-day needs which you just can’t pay immediately. As such, applying for a credit card should not be done for the sole purpose of gathering points to be used for getting rewards, freebies and perks. Keep credit card use to a minimum and do not feel compelled to buy certain products which you don’t really need just because you want to have a favorite brand or product for free.
Giving Credit Card Details
Before giving out your credit card details, make sure that the site is secure, check the spelling if it’s correct and not missing a letter or that it doesn’t have an extra letter on its name. You may also check if the site is verified by the company. Another tip is not to give credit card details through email as it can easily get hacked and your credit card info may be used fraudulently for transactions. Should you find that there has been an unauthorized use on your card, file a report immediately within 60 days of the date of your last statement of account.
Be sure to keep these tips in mind, together with a vigilant promise to watch over your spending. Remember that you did not apply for a credit card to be able to buy all the things you want without responsibility, and that each little purchase is coupled with interest rate charges that you need to pay monthly and on time.
Read more: Credit Card Do’s and Don’ts for the Financially-Savvy Filipino
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