The Good and The Bad Side of Credit Cards

Back in 2008, I already touched on the subject about credit card debts (from my own experience that is) – Rule of 72 Working Against You – Credit Card Interest. I’d like to update on this subject since just lately, I’ve experience another credit card debt gone bad.

You see, back then (2008), I already got 3 credit cards – BPI, Citibank and HSBC. Of all the 3, BPI credit card is the best credit card and my favorite (more of this story later). Today, I still got 3 but already dropped Citibank and got Metrobank M Card. I didn’t actually applied to get the Metrobank M Card, I just got a call one afternoon from Metrobank (maybe because I have an account with them) offering their card. Their offer is hard to resist since they don’t have annual fee – for LIFETIME. So I thought what the heck. As long as I will be careful using it, then it will not be a problem. At least I won’t have to pay for annual fee (altho I found out you can also do that with other cards, I will show you how at the latter part of this article).

Fast forward. Just this year, first week of 2011 is my due date on Metrobank Credit Card. However, since I didn’t get any billing statement, I thought I don’t have any outstanding balance. Come February, here comes the mail and dang. I have a balance of P900.00. I quickly checked on the details and guess what, P500 is for the charge for not paying the minimum fee and P400.00 for the unpaid balance. The interest is even greater than the amount I’m suppose to pay. But I paid it anyway, as if I have options to choose from.

I think the same reason why BPI is my favorite is that, you can easily monitor your credit card usage using their online banking. And since it is tied with your bank account, paying is as easy as you can imagine. Not to mention the vast network of BPI banks everywhere. And on top of that, as long as you pay before your next cut off date, you can expect it to be charge free.

Why should you be cautious of your credit card usage?

I’ve seen too many (worst) casesĀ  of credit card debt gone bad stories. There’s this ex-officemate that acquired around 10k bill on his card but never bothered paying. After some years, he was surprised to see his statement quickly doubled because the interest also earned interest. Imagine, if your card company is charging 3.5% a month, that’s an easy 42% in a year – compounding monthly. So if you’ve accumulated an amount of P30,000, in just a year, that would be around P45,000+ because of the compounding interest. And if you also happen to read the comment on the previous post, this professor of mine back in college was blacklisted for non payment of his credit card debt.

I just wish we also have a system here like that in the US where debt consolidation is offered for public. It’s a system where they group people’s debt making it possible to turn them into one low monthly payment. So like if you have a credit of $10,000.00 and you’re paying an interest rate of 2%, they’ll combine them with other’s debt bringing down the interest rate. For example a group of 3 people with $10,000 each, making a total of $30,000.00 will have a lower interest rate. Instead of 2%, they may be able to bring it down to just 1%.

I read somewhere that a company named A New Horizon (http://www.anewhorizon.org) is offering the said service. If you will check their website and see their illustration, if say you have a starting balance of $37,000 and you’re only paying the minimum, you’ll have a total payment of $64,000 in a year. Compared to that of only $40,000.00 if you are enrolled to the program. You’ll have a total savings of $24,000.00.

I’ve also searched info on debt consolidation and found out that there are some groups that gives advise in financial matters like budgetting. That is super beneficial if you can’t handle your debt anymore. Basically when we talk about credit card, most often than not, we’re dealing with debt later on.

In essence, it’s more like balance transfer as what is being offered here in the Phils. Say if you got an outstanding balance of P30,000.00 in your card and you wish to pay a lower interest rate, you can transfer the balance to say BDO where they offer 1% or even less interest for the transferred balance.

On the positive note, credit cards are exceptionally useful when traveling and you want to avoid carrying too much cash with you. Not to mention the ease of shopping without change to local currency.

Another incentive I get when using credit cards is the freebies like for every specific amount, you can exchange it with food items for example with BPI. For every P2,000 receipt, you get a Jollibee Chicken Joy and Yumburger for FREE.

Conclusion

If you want to have a credit card, be sure you need it for a purpose. If you just want it to increase your spending power, chances are, you’ll be buried in debt without you knowing. Use cash as much as possible. Or use credit card for the freebies but be sure to pay the next day even if you don’t get the billing statement yet.

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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.

17 comments

  1. Hello! Medyo confused ako sa cut off date ko. I’m using bpi credit card. Statement Date ko is every 28th of the month. At payment due date ko pag 17th day. Viniview ko sya online since wala pa ring dumarating sakin na billing statement until now. Hindi ko sure if fix ba ung payment due date. Alin po sa dalawa ung cut-off ko? Kasi gusto ko sana magpurchase nlang ng items after ng cut off ko which i dont really have an idea. Thanks! Wala na kasi akong time to go to bpi bank to ask them, super busy. At if ever nagpurchase ako ng item ngaun, for example(June 12, 2013) total amount of 6k, kelan ko sya pde bayaran? I mean, ung due date nya kelan tatama? Wala kasi akong idea kelan tlga exactly cut-off ko. Please help me. Thanks.

    1. Sana po magets nyo pinagsasabi ko. Haha! Ung 6k ba na sinwipe ko kelangang bayaran ko this month or by next month. Wala tlaga akong idea kung kelan cut-off ko. Since, bpi user din po kau, baka mabigyan nyo ako ng idea at namention nyong sa online din kau check ng balances. Thanks so much.

  2. i can’t contact easily the customer service. i purchased a ticket worth 2,666 last oct.31, 2011. due date is 14th day of the month. it’s nov.11 now(friday), kung magbayayad ako sa nov. 14 (which is supposedly monday), may charge pa ba akong babayaran? or yung 2,666 lng babayaran ko? supplementary lang yung sa akin, principal yung sa kuya ko. hindi kami mgkasundo ng kuya ko eh. he said, i nid to wait for the billing statement pra malaman ko kung magkano lahat babayaran ko.. pls. i need some advice.billing statement is at 23rd of the month pa dba..
    i’m so confused. if ever uutang ako ng worth 300, then babayan ko after 1 week .madadag-dagan ba yung babayaran ko?like sa example ko na i purchased 2,666 last oct.31, then i’ll pay sa 14, magiging 3,000 + na lahat babayaran ko? thank you

    1. Hi Shaz,

      Mejo linawin lang natin ng konti. Ang payment due date ng credit card is Nov. 14? Tas you purchased a ticket last Oct. 31? If so, most likely, wala pa sa billing yan. Next cutoff pa xa ma iinclude. Altho best practice yun kung babayaran mo agad.

      RE: if ever uutang ka worth 300, sa next billing na din xa mainclude. So kung worried ka about payment on Nov. 14 billing malamang wala ka pa need na bayaran. Next billing, for sure dun ka dapat magbayad.

      1. metrobank credit card gamit ko but supplementary lang.nkalagay lang dun kasi, payment due date, 14th of the month, statement date: 23rd of the month.. worried ako sa interest.baka kasi di ko mamalayan na may interest na. wla pa kaya interest dun kapag umabot na yung billing ko? plan ko na sana mgbayad this monday. kasi sabi ng friend ko na nawowork sa bank, pde na ko magbyad. sabi naman ng kuya ko, hintayin ko pa yung billing before ako mgbayad. thank you so much po:) i love your site. it’s really helpful and informative! šŸ™‚

        1. For best result talaga bayaran mo na. That’s how we should treat credit card, parang cash padin. I also have Metrobank CC. Anything that falls before the Statement Date (which is Oct23), un ang due for Nov 14 billing. Pag beyond the statement date (Oct24 til Nov 22), ang billing nun is Dec 14. As long as you pay before the due date, walang interest un.

          1. hi..i would like to ask baka may info po kayo about metrobank supplementary cards. supplementary lang kasi sakin, pano payment ko? tama kaya ginawa ni kuya? ng purchase ako using my own card then he paid the whole amount tapos name and card no.nya nilagay sa payment slip. .tnx..

          2. Hi Shaz. Technically, supplementary cards are just an extension of the principal card holder. So any purchases that you made, it’s as if ung kuya mo ang gumamit. So, pag magbabayad ka, either pay mo na lang kuya mo or inform him na babayaran mo directly sa bank. Tama ginawa nya, name and card no. nya ung ilalagay sa payment.

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