Rule of 72 Working Against You – Credit Card Interest

If you can still remember my previous post about the Rule of 72, wherein you can determine your money or investment the number of years to double, at a certain interest rate. Now, I’d like to share to you where the Rule of 72 working against you as I have personally experienced this one just last week.

Credit CardIf you have a credit card, then you can very well relate to this story. I got my first credit card last 2005 (BPI) out of necessity rather than wanting it, since I need to pay something online. The easiest way was to get a credit card and simply pay after. Until I got my 2nd (Citibank) and lately the third (HSBC) simply because I want the FREE Dunlop Watch that comes with it HSBC Credit Card ( I actually got 2 FREE Watch :D).

It was really a habit of mine to pay the full amount of any of the three to avoid the interest which is about 3.5% per month. Until lately that I forgot to update the address of my Citibank Credit Card. I thought that I had no outstanding balance until I received a call from its agent one afternoon.

“Hello, is this Mr. De Castro”, asked the agent on the line.

“Yes, who’s this?”, I asked.

“This is (I forgot the name) of Citibank. I just like to inform you that you need to pay this amount as the minimum payment for your credit card balance. Are you still using it, Sir?”.

“Yes. Do I have balance? But I haven’t received any statement?”, I surprisingly asked knowing that I don’t have any outstanding balance.

“According to our records Sir, the statement is always returned to sender.” The other line replied.

I then realized that the billing is addressed to my previous employer. I then quickly paid the full balance so as to avoid additional damage to my pocket for the compounding interest.

Using our formula for the Rule of 72:

72 / 42% (3.5%x12) = 1.71 years ( 1 year & 8 months ) to double my credit

Imagine that, in just a matter of 1 year and 8 months, if I have forgotten to pay my Php10,000 credit, it will instantly become Php20,000 by next year. So to all credit card holders out there, here’s my piece of advise to all of you.

Pay all your credit card balances before your due date – not just the minimum amount. A simple mistake can make you broke. And if possible, NEVER EVER buy on CREDIT.

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Garry Zaldy de Castro is an advocate, Financial Advisor, Certified Investment Solicitor (Mutual Fund Representative), blogger, IT practitioner, husband to Aileen and a dad to Jacob and JohnD. He started Financial Planning Philippines in 2008 just to share his financial learning to friends, relatives and anyone who wishes to be financially independent.


  1. People shouldn’t assume that the card companies will not run after them if they have an unpaid balance. With small claims, more and more card companies will run after delinquent cards and sue them in court. They need to speak with the banks and try and find an equitable solution to pay off the debt.

  2. Thanks for your comment Rod. Very useful information. Before, the common belief was that you can easily run away from unpaid bills. There really is no easy way out.

  3. I would like to share my bad experience dealing Credit Card Debt. It happened sometime ago when I left Philippines to work in Singapore. I have 10K pesos outstanding balance on my credit card for ABC Bank. I asked my brother to pay the amount due. Believing that it was settled already, I forgot to verify it from my brother. After one year, I tried to apply for a car loan from another bank. The bank told me that my application is denied because I have a bad record in data bank. I called up ABC Bank to clarify if they put me in data bank. I found out that the balance amount was not paid and went up to 32K pesos because of interest and fees for legal process. I was really upset to pay the full amount so I have just informed the bank if they can lower the interest otherwise I will not settle it. After some negotiations over the phone we agreed for 15K pesos as final settlement.

    This experience becomes a lesson for me. So guys, if you are in credit card debt, don’t forget to pay your balance before due date.

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