Using a credit card the right way

CHRISTMAS holidays don’t have to empty out your wallet.

With careful spending, one can avoid soaring credit card bills, especially during this time of year, an official of the Bangko Sentral ng Pilipinas (BSP) 7 said.

Hazel Josephine Cultura, bank officer of BSP 7’s Economic and Financial Learning Center, challenged consumers to be money-smart when using credit cards to spend this Christmas season.

“Credit cards are convenient payment tools but when abused, it can lead to financial downfall,” said Cultura during the Consumers Forum organized by the Department of Trade and Industry 7 on Friday, Oct. 26.

Christmas is typically a peak selling season for retailers. In the Philippines, Christmas shopping season starts as soon as the “ber months” begin.

Cultura explained that Filipinos fall into a debt trap, not because they don’t have the capacity to pay, but because of credit card mismanagement. She said some consumers apply for credit cards not really knowing what they are getting into.

“It is important that would-be credit cardholders know the (bank) terms when applying for one,” said Cultura, adding that understanding credit card policies, especially when it comes to payment, can spare one from paying additional charges or bank fees.

Cultura encouraged consumers to become the transactional type of credit cardholder instead of being a revolver type. The former pays the entire credit card due or the total amount purchased the previous month; the latter, however, only pays the minimum amount as suggested by the bank.

“We have to commit to pay the total amount we purchased and not settle for the minimum amount,” said Cultura, adding that this is an effective way of better managing expenses done through credit cards.

She said that by paying the entire amount due, consumers would have peace of mind using their credit cards again without having to think about unsettled payments.

Another important tip is to keep watch of the credit card’s statement date.

Depending on the billing cycle, there’s a 51-day free interest fee (from the date of purchase to credit card due date) if one knows how to manage their finances wisely.

To avoid debt, she also advised consumers to keep track of their expenses. She said it is important to weigh well the needs and wants prior to splurging.

The BSP, she said, has also prohibited banks from issuing pre-approved credit cards, adding that banks should first determine if an applicant is capable of paying debts before issuing a credit card.

Besides knowing the credit card policies, it is also important to be cautious when using them, especially when buying items or doing transactions online.

Cultura advised credit cardholders to always keep their eyes on their cards, especially when handing these over to the cashier. She said the card contains important information that can easily be copied.

When doing online transactions, it is also important for consumers to verify websites first. She also advised consumers to create strong passwords and to never share them with anyone.

Billing statements, receipts and expired cards should also be disposed of properly because these, too, contain vital information.

The Monetary Board approved early this year the regulations that implement the Philippine Credit Card Industry Regulation Law.

The BSP said the law and its implementing rules and regulations (IRR) aim to make consumer credit readily available under conditions of safe, sound, efficient and fair business conduct aligned with global best practices.

The IRR addresses the key customer concerns regarding credit cards, particularly on the transparency and manner of computing charges and fees, safeguards against unfair collection practices, immediate posting of payments, confidentiality of consumer data, and expeditious resolution of complaints and disputed transactions, among others.

“The rules require all credit card issuers to fully disclose, in an understandable way, the manner of computing finance charges and other fees related to credit card use as well as provide ample notification prior to effecting any changes in the said charges,” the BSP said.

At present, there are more than eight million credit cards issued in the country.

According to the central bank, there is potential for expansion in the number of credit cardholders, in light of the current economic growth, the country’s demographics and the increasingly digital payment system.


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