If you're new to credit cards, the entire process can seem a bit daunting. Not all credit cards are created equal—each card has a unique set of features and target different types of consumer demographics. This guide will help you navigate the world of credit cards in the Philippines so you can pick the best credit card for first-timers.
How do credit cards work in Philippines?
Credit cards are issued by banks or financial institutions. They allow you to borrow money up to a certain limit, which can be used to make purchases online or in person at merchant stores. Credit cards can also be used to withdraw cash from ATMs. In order to repay the borrowed amount, you must make monthly payments that include interest and other fees.
Banks partner with payment networks, such as Visa, Mastercard, or American Express, to execute transactions and process credit card payments.
To qualify for a credit card, you must first submit an application to the bank. If approved, you will be given a credit limit, which is the maximum amount of money that can be borrowed.
How to use credit card for first timers?
A credit card can be a great tool for first-time users. It can help you build your credit history and credit score, which will pave the way for you to gain access and be qualified for better loan products. But using a credit card also comes with responsibility. You need to be aware of the potential risks involved and take steps to avoid them.
Once you have received and activated your credit card, you can start using it right away. When making purchases, simply present your card at the point of sale and sign for your purchase. For ATM withdrawals, you'll need to provide your PIN (personal identification number).
Here are some tips on how to use a credit card responsibly as a first-time user:
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Activate your card as soon as you receive it. You should also take a moment to familiarize yourself with the terms and conditions of your card, including the interest rate, fees, loan terms, penalties, and payment grace period.
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When making purchases, be sure to budget and calculate how much you can afford to pay back each month. It's important to only charge what you can afford.
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As much as possible, pay your balance in full each month to avoid interest charges.
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Monitor your credit card activity regularly. Check your statements often to ensure there are no unauthorized charges on your card.
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Make payments on time. Missing a payment can damage your credit score and result in late fees from your issuer. Set up automatic payments if necessary to ensure you never miss a due date.
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Be mindful of foreign transaction fees. If you plan to use your card while traveling abroad, make sure you know what fees you'll be charged before using it. Many cards charge a foreign transaction fee of 3% or more, so it's important to factor this into your travel budget
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Use your credit card wisely to build up your credit history and improve your credit score. This will help you qualify for lower interest rates and better credit products in the future.
Features to search in a credit card for first timers
As a first-time credit card shopper, you may be feeling overwhelmed with all of the options offered to you. It is important to keep in mind a few key features while searching for your first credit card.
You will want a credit card that is easy to apply for. Many cards have minimum income requirements, which target high-income earners. Go for starter credit cards that are designed for people with little or no credit history. These cards typically target students, new graduates, and low-income demographics.
Annual fee
Another factor to consider is the annual fee. This is the fee that credit card issuers charge each year for the privilege of using their card. The typical fee is anywhere from PHP1,000 and PHP5,000 per year, depending on the type of card.
Some cards have no annual fees, or they are waived for the first year. In some cases, the banks don’t charge an annual fee if you meet minimum purchase requirements, or you have accumulated enough rewards points. You want to find a card that has a reasonable annual fee so that you do not have to pay too much money every year. If you must use a card with an annual fee, make sure it provides enough value to justify the cost. For example, some cards offer rewards points or cash back that can offset the cost of the fee.
Low interest rates and fees
The interest is the fee credit card companies will charge you if you carry a balance on your card from month to month. The interest rate used to be 3%-3.5% per month, but the Bangko Sentral ng Pilipinas (BSP) lowered the maximum interest rate to 2% or 24% per annum. For cash advances made through the credit card, the processing fee is PHP200 for every transaction. Anything higher than what BSP set should not be shortlisted.
Types of credit cards for first timers
There are several credit cards that are perfect for first timers:
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Supplementary credit card. This is, by far, the easiest way to acquire a credit card. All you need to do is ask a parent or a spouse to apply one for you. Keep in mind that the credit limit is shared between you and the primary cardholder.
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Secured credit card. This is where you put down a deposit that acts as your credit limit. It’s essentially tied to your savings account.
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Starter credit cards. These cards are designed for people who have no or limited credit history. They usually have low credit limits starting at PHP10,000. However, they can help build a good credit history if used responsibly.
What to consider before getting a credit card first timers?
Before you get your first credit card you have take note of the following considerations:
Spending habits
How much can you afford to spend each month? It’s important to only spend what you can afford to pay off each month so that you don’t get into debt.
Credit card perks
What do you want to use your credit card for? Cash back? Frequent flyer program? Rewards? Choose the type of credit card that matches your lifestyle.
Financial situation
Do you have any other debts? If so, prioritize paying those off before getting a new credit card. This will increase the chance of getting approved.
How to apply for a credit card for first time?
- You'll need to gather some documents. You'll need proof of income, identification, and residency. You can get a copy of your income tax return from the Bureau of Internal Revenue or your employer.
- For identification, you'll need valid photo IDs. Government-issued IDs are preferred (e.g. Passport, UMID, Drivers License, etc.) For residency, you'll need a utility bill or lease agreement showing your address in the Philippines.
- Choose which bank or financial institution you want to apply with. Once you've selected one, you can begin the online application process or go into a branch and apply in person.
How to know if you’re qualified for a credit card in the Philippines?
In the Philippines, the general age requirement for getting a credit card is 21 years old. However, some banks allow teens (13-19 years old) to have a supplementary credit card. Aside from age, banks also consider employment status and income when reviewing applications for a credit card.
Most banks require applicants to be employed or have a regular source of income before they can qualify for a credit card. Some banks have no minimum income requirement, while others may require an annual income of at least PHP 120,000 for primary cardholders.
Common requirements in a credit card for the first time
Before you apply for a credit card for first timers Philippines, make sure you meet the following general requirements:
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You must be a Filipino citizen. Foreigners living in the Philippines for at least 2 years are eligible to apply for credit card for the first time.
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You must be 21years or older to apply for a credit card.
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You must have 2 valid photo IDs.
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You must be employed, own a business, or have a regular source of income.
The best credit cards for first timers
As a first-time credit card user, you'll want to start with a basic card that offers low interest rates and fees as well as a good rewards program. Opt for the no annual fee offers, especially if you have a low credit limit.
Every issuing bank has a starter credit card and some of the noteworthy credit cards for first timers PH are the following:
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BPI Blue Mastercard (BPI credit card for first timers)
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BPI Edge Mastercard
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Bank of Commerce Classic Mastercard
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PNB Visa Classic
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Metrobank M Free Mastercard
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Citi Rewards Card
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RCBC Flex Visa
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Robinsons CashBank Mastercard
Once you've established a good payment history, you can consider upgrading to a credit card with a higher credit limit and more perks.