In the Philippines, credit card debt deters a lot of Filipinos from owning a credit card. The truth is that many cardholders don’t go into debt and instead get to enjoy perks such as more flexibility in managing their finances, rebates and rewards. Going into debt does not come hand-in-hand with owning a credit card. By understanding how credit card debt works, you can properly manage your credit card debt and plan out your monthly payments so that you don’t incur outstanding debt at all.
How do you pay for your credit card in the Philippines?
Credit cards are a financial tool that provides cardholders with a credit limit. A credit limit acts like a loan and you can take as much credit as you want within that limit on the premise that you’ll pay off your “loan” on a certain due date. Each month, your bank will send you a credit card bill along with a minimum amount to pay which is typically 3% to 10% of your total bill.
You can pay off your credit card through various means, depending on your bank or credit card provider. You can pay your credit card bills through:
- Over-the-counter payment: The traditional way of paying you your credit card is going to go to your credit card provider’s physical bank and pay for your bills there. Depending on your bank, you can also do your over-the-counter payments at malls and stores via:
- Bayad Center
- Cebuana Lhuillier
- Robinsons Business Center
- SM Bills Payment Counters.
- ATM: Credit card payments via ATMs are similar to other ATM transactions. You can use your ATMs of your credit card provider, its partner banks or member banks of BancNet or Megalink-member. Generally, you can select “Credit Cards” under Bills Payment, but ATM credit card payment could vary among banks.
- Online or mobile banking: Nowadays, most credit cards have digital features that can make transactions more seamless. Most banks have online portals where you can enroll your deposit account to do transactions anytime and anywhere. Login to your online banking portal and pay for your credit card bills on your computer or mobile phone.
- Auto-Debit Arrangement: Cardholders can enroll for an auto-debit arrangement so that their credit card bills are automatically deducted from their deposit account, as long as the deposit account has sufficient funds.
- E-Wallet Apps: E-wallets, also known as virtuals wallets or mobile wallets, allow users to store their money digitally. Apps like GCash or Coins.ph also give you the option to pay for your credit cards directly through the apps.
Keep in mind that most of these methods usually take one (1) to three (3) banking days to process the payment. Do your best to pay earlier than the due date to avoid missing the deadline of your payment. If you pay your full bill on or before the due date, you won’t incur any additional charges.
Consequences of not paying your credit card debt in the Philippines
Let’s say you paid for your credit card bill on time, but you only paid the minimum amount required. The remaining balance that you did not pay for will be carried over to the following month. In addition, your bank will apply an interest fee onto your unpaid balance.
Should you fail to pay even the minimum balance by the due date, then your bank will add a late payment fee as well. Your balance being carried over plus both the interest and late payment fees will lead to your credit card debt growing and growing over time. This is why it’s best to think about your purchase before swiping your credit card. Managing your finances and making sure you can pay the full amount on or before your monthly due date prevents you from accumulating debt.
Accumulating credit card debt
Failing to pay your credit card debts will impact your credit scores greatly, and having a negative credit score will affect the financial transactions you will be able to perform in the future.
Cardholders build better credit scores through owning and using their credit cards or through loans. A credit score is a three digit number that’s calculated through several factors, one of which is how regularly you pay your debts and whether you do so on time or not.
If you do not pay off the minimum balance in ninety (90) days, your credit score will take a hit. Constantly missing your payments will make your credit score even worse. Maintaining good credit scores makes it easier for you to apply for credit cards or loans in the future, and might even help you get better deals for long-term payments such as insurance premiums or property. After all, your credit score tells financial institutions whether you can reliably pay off debts or not.
Even if you have settled all your credit card debt, the damage has been done and a certificate of full payment won’t instantly change a negative credit score.
How to deal with Philippine debt collection agencies
Should you skip your payment or at least the minimum amount required within two billing cycles – or sixty (60) days – your account will be considered delinquent, according to The Bangko Sentral ng Pilipinas (BSP). Once your account becomes delinquent, your bank will add you to a blacklist that is shared amongst other financial institutions in the Philippines, making it more difficult for you to apply for loans or other credit cards even from banks aside from the ones you owe debt to. At one-hundred and eighty (180) days or roughly six (6) months, banks consider your debt a loss and may turn your account over to a debt collection agency.
A debt collection agency are third party companies (or sometimes, a bank’s internal department) that are tasked with following up on delinquent accounts to get debtors to pay off their outstanding balance. You might be familiar with them as the collection agents who call often and continue to follow up about your credit card or loan payments.
The BSP’s Manual of Regulations for Banks (MORB) requires your bank and their subsidiary/affiliate credit card companies to inform you in writing that they are endorsing the collection of your debt to a third party collection agency. The notice must be given seven (7) days before the endorsement and must include the name of the collection agency and its contact information. This same law also applies if they are transferring your account from one collection agency to another, so that you won’t be caught off guard by the debt collection agency contacting you.
Protecting yourself from unfair debt collection in The Philippines
Even if your account has been flagged as delinquent, debt collectors do not have the right nor authority to commit illegal or abusive acts to get you to pay. The BSP has regulations to protect consumers from unfair forms of debt collection.
Under BSP Circular 454, banks, subsidiary/affiliate credit card companies, collection agencies, counsels and other agents cannot do the following in order to get you to pay your debts.
- Use of threat of violence against a person, their reputation or their property
- Use of obscenity and insults
- Publicly disclosing the names of credit cardholders who allegedly refuse to pay
- Threatening to take actions that are cannot be legally taken
- Communicating false credit information and not communicating when a debt is being disputed
- Using false representation or deceptive means to collect debt or get info on the cardholder
- Contacting the cardholder at unreasonable hours (before 6:00 a.m. or after 10:00 p.m.) unless the payment is more than sixty (60) days overdue
Should you be a victim of these unfair debt collection practices, you should document these interactions and try to ask for as much information as possible. Save emails, text messages or record calls with the agent’s consent as evidence. Report these abusive collection practices to your respective credit card-issuing bank so they can take a more direct action on these collection practices.
Another thing to look out for is that if you’re in the middle of paying off credit card debt in The Philippines, make sure you inform your bank if you have to move out, change jobs or leave your place of business. Under Section 14 of R.A. No. 8484 (Access Devices Regulation Act), if your credit card bills have been unpaid for ninety days (90) and amounts to more than ten thousand pesos (PHP10,000.00) and you suddenly leave your home, job or place of business, without informing your bank about your change of mailing address and/or contact number, you will be considered to have used your credit card with intent to defraud.
Remedies for outstanding credit card debt in The Philippines
The BSP and members of The Credit Card Association of The Philippine (CCAP) have set up an Interbank Debt Relief Program (IDRP), a debt restructuring program to help cardholders make their debt repayments more manageable.
Debtors who wish to avail of the program must have credit card accounts that are at least six months old, with an outstanding balance of at least P10,000 per card and total credit card obligations of at least P100,000 for all cards. If your bank is a participant of the program, acceptance is at their discretion once the proper documents are submitted. Once you are accepted in the program, you will not be able to use any of your credit cards, whether they are delinquent or not.
The benefits of availing this program are lower interest rates with a maximum of just 1.5%, longer repayment terms that can reach 10 years for extreme cases, and the same interest rates that can be applied to not just one, but all of the debtor’s credit card accounts.
Through the IDRP, CCAP hopes to help alleviate credit card debt in the Philippines and help debtors pay off their outstanding payments.