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Credit Card

Find out the advantages and disadvantages of owning a credit card. We give it to you one by one

What will be discussed:


What is a Credit Card?

How a Credit Card works

Is a Credit Card same as a Debit Card?

Why you need a credit card

Why you don't need a credit card 

What you need to consider when applying for a Credit Card

How to use your Credit Card wisely


What is a Credit Card?

A credit card is a payment card issued to people as a system of payment. It allows the cardholder to pay for goods and services given a time frame of repayment, usually on a monthly basis. Cardholders are given a credit limit which distinguishes up to how much you can spend thru payments or cash advances.

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Credit cards can also be used worldwide but will incur higher interest or lower currency exchange depending on the bank or financial institutions’ terms.

How a Credit Card works

When paying using a credit card the cashier submits your card number over a secure internet line, the merchant you are dealing with validates your account and waits for your issuing bank whether or not they will allow the transaction to go through, if everything goes smoothly, your purchase is added to your credit account. Once a month, the bank provides a collection of all your credit card purchases and sends you a bill.

The best option, and the only option most banks recommend, is to pay your bill in full by the time of the due date. To avoid long queue at payment centers around the metro and can also be done automatically trough direct debit on your bank account. If not, you have to pay a minimum amount, determined by the bank, to avoid extra fees.

If you are responsible enough to pay promptly every month, depending on the bank’s terms, you may get additional credit limit for being a “good client”

Is a Credit Card same as a Debit Card?

No, a Debit Card works using the money you have in your bank account. So when you spend using a Debit Card it comes straight out of your account and you'll see the details on your bank account statement.

Why you need a credit card?

Here are some reasons where credit cards may be useful:

Travel arrangements

It's hard to travel with cash all the time and going thru different currency exchanges just to adjust with every country to go to. Reserving a room or Car rentals online for instance would be a hassle especially when you are required to go to a bank or a payment center to settle different kind of transactions. And carrying cash would just be a recipe for theft of loss. And it is always convenient to know that you would have a guarantee in case of emergencies.

Protection and Security

You'll get more security with a credit card than you will with cash or a debit card. Once the cash is gone, it's gone. And debit cards, which are linked to your banking account, can easily help a thief into your bank account if the card is lost or stolen.  With a credit card, all it takes is a simple phone call to prevent further loss and identity theft. 

Financing a Home or a Car

It's getting tougher and tougher to take out a mortgage these days, and like it or not, lenders will be checking your credit report. If you don’t have a card, there won't be a credit history to speak of, and you'll have a much harder time proving to lenders you're responsible with money.  But this is mostly to the advantage of the lenders, as for the borrower themselves; credit card can not only help them with financing needs but also a practice of their money handling skills.

Easy Installment Schemes for Purchases

Most working class people earn per 15-working days. With the use of credit cards they can take advantage of purchases and promotions for better pricing of merchandize now and smoothen their budget of repayment every time they get their salaries.

Although Credit Cards may be of big help on essential purposes, there are still some things you need to take in consideration when getting one.

Why you don't need a credit card

Because you think you should have it.

“You shouldn't get one just to get one”.  If you have no dire use of one then just don’t apply for it. Not all trends are useful to everyone. Remember, a debt is a debt, and you will incur more because of the interests you will have together with your purchases. Think through before you get a card and assess if it is really needed or “just because you want one”.

You're not planning to buy a Home (or a Car)

It's really up for the individual to decide. But if at some point you're going to need these things, the credit card is the best way to do it.  Bear in mind that a credit history must be built ahead of time of applying for a loan, not just a few months before.

If you impulse shop

Before you take the step of acquiring a card, you have to asses yourself if you are a wise spender and a disciplined payer. Clearly, if you're irresponsible or undisciplined, you can find yourself getting into a lot of debt quickly unless you can write a big fat check, but there comes a point in your life where you do need the convenience of plastic.

Credit cards are not for everyone

Like tools in the wrong hands, they can be dangerous. If you have personality traits like a tendency to lack self-control, if in the process of repairing your finances, or if you’re not ready for personal responsibility, avoid credit cards until you are mentally and emotionally prepared.


What you need to consider when applying for a Credit Card

There are a wide variety of credit card products and features. It is important to shop around for options before deciding. When choosing a credit card, look carefully at the following:


Annual Percentage Rate (APR)

The interest rate you pay on the balance you have not paid off at the end of the month. Of course, it is best to pay your balance in full every month to avoid paying interest, but in case there are times when you cannot, it is best to search for the lowest interest rate possible. Beware! Some credit card companies offer you a low interest rate for a few months and then, increase it to a much higher rate on the succeeding months.



Carefully review them before selecting a card. Fees vary widely among credit card companies and financial institutions, so find the best deal for you. The most common fees are:


Annual Fee

 A fee you pay per year for the use of your credit card. Most banks waive off the first years’ fee.

Application Fee

Cost of applying for a credit card. Some credit card companies do not charge an application fee.

Late Charges

Charged when you do not pay off your balance before or on the due date. Making late payments can also negatively affect your credit score.

Over-the-Limit Fee

Charged when you spend more than your credit limit (this includes all purchases and fees charged to your account).


Penalty Rates

Avoid card offers that include penalty rates or if you cannot, choose the ones that charge less. This is when the credit card company charges you a higher rate if you make a late payment or spend more than your limit.


Credit Limit

The maximum amount you can spend on your card. For example, if you have a credit limit of P50,000, you cannot spend more than this amount. There are some banks that do not allow you to go beyond your limit, but there are also some that charges you if you do.


Grace Period

The period of time you have to pay off your balance on your credit card before interests are added. Search for a credit card that offers this option.



Bonuses or awards that you receive for using your credit card, like rebates, loyalty points, exclusive discounts, and flight mileage you can earn every time you use your card. These cards that come with special perks might have higher interest rates, so better to look through everything.


How to use your Credit Card wisely

A Credit card can be very useful when you know how to use it correctly




·         Pay your bills on time.

·         Be conscious not spend up to or more than your limit.

·         Remember, credit cards are not extra cash!

·         The less cards you have the better

·         Only charge the amount you can pay at the end

              of the month. Pay your entire balance at the end

              of the month or as much as possible.

·         Use your credit card over a long period of time to

               show consistency.

·         Read your monthly statement carefully and

              notify your credit card company of any errors

              right away.

·         Pay your bills late.

·         Spend more than your limit.

·         Apply for and use many credit cards.

·         Keep a high balance on your credit card.

·         Constantly change credit cards.

·         Forget to review your monthly statement for errors.



If ever you are looking to apply for a credit card, always be aware of the positive and negative aspects of borrowing and the choice you make, as previously stated, “A credit card is a useful tool, but can be dangerous when used incorrectly”.


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