[Finterest] Credit card 101: How does it work, and which one is for you?

MANILA, Philippines – More Filipinos have credit cards now than ever before.

As of March 2024, there were more than 13.9 million cards in force across the Philippines based on the Credit Card Association of the Philippines’ (CCAP) 1st quarter survey. This was 2.1 million cards (17.8%) more than the same period last year, CCAP executive director Alex Ilagan told Rappler.

Not only are there more cards in the market, but Filipinos are using credit cards to pay for more of their expenses as well. Credit card receivables jumped by 30% to P744.7 billion as of March 2024, compared to the same month in 2023.

If you’re unfamiliar with how credit cards work, the entire concept could feel intimidating. After all, every swipe of the card means another thing that you’ll have to pay at the end of the day.

What is a credit card?

Essentially, credit cards are issued by banks or financial institutions to allow you to borrow money up to a certain limit to pay for goods and services. When you use a credit card, you are basically taking out a short-term loan, which you agree to pay back by a specified date.

In this way, credit cards can make you more liquid. Most people only receive their salary twice a month. That means come petsa de peligro, the debit card linked to your bank account might run too dry to buy yourself a treat. With a credit card, you can still purchase items right away and pay for it at a later date when your salary arrives. When you put big purchases on plastic, you can also sometimes avail of installments to easily pay the amount over several months. (On a side note, some banks are starting to use recycled plastic for their new credit cards.)

But that’s only one way to use credit cards. Sindiong said that they can also help you as a “payment tool.”

“To simplify, it’s really a tool for customers to effectively manage their finances. It helps you track your expenses,” Sindiong told Rappler. “The fact that you don’t have to put out cash, you don’t have to count coins, you don’t have to count bills – all you have to do is just tap it at a merchant.”

Having a credit card is a good way for you to go digital and cashless. You can pay for bills and purchases more conveniently online, and you can just tap your card at stores instead of bringing around a bulky wallet. Most bank-issued credit cards also allow customers to neatly line up their expenses at the end of the period in a mobile app or even in a spreadsheet. (READ: How long can you go cashless? Filipinos last for 10 days on average)



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