8 Credit Card Myths You Should Stop Believing
Do you really believe everything you hear about credit cards? Think again.
Believing in wrong assumptions about credit cards can hurt your credit score, cost you more money, and have you miss out on the benefits of credit card rewards.
Stop being misinformed. Know the common credit card myths Pinoys fall for and the real deal about credit cards.
Table of Contents
- 1. Credit Cards Will Drown You in Debt
- 2. You’ll Be Fine If You Only Pay the Minimum Balance
- 3. Unpaid Credit Card Debt Can Get You in Jail
- 4. It’s Difficult to Apply and Get Approved for a Credit Card
- 5. You Can’t Negotiate Credit Card Terms
- 6. You Can’t Have More Than One Credit Card
- 7. Credit Card Fees are Expensive
- 8. Credit Cards are Only for the Rich
- Final Thoughts
1. Credit Cards Will Drown You in Debt
“Huwag kang kumuha ng credit card! Mababaon ka lang sa utang.”
Heard this already from your family or friends? Many Filipinos are still afraid of owning a credit card because it will only leave them in debt due to interests and other charges.
Credit cards are also perceived as a big temptation to overspend. With a credit card in your wallet, it’s easier to give in to impulsive buying. Well, it’s somewhat true, but it depends on how you use it. You can actually save money if you’re strategic about using your card.
You just need to be disciplined each time the urge to splurge props up. You also need to learn how to take advantage of credit card rewards, rebates, and promos. Some millennial travelers can travel for free using their rewards points!
Responsible use of your credit card also helps build your credit score, which banks and lenders use as a basis for loan approvals. By paying your credit card bills on time and consistently, you can build a better credit score. So, if you’re planning to start a business soon and apply for a loan to get capital funding, you might want to think of getting a credit card to increase your chance of successful loan application.
2. You’ll Be Fine If You Only Pay the Minimum Balance
Some credit cardholders assume that as long as you pay the minimum amount due every month, nothing can go wrong.
This is one of the most dangerous credit card myths, as it leads to higher interest payments and increasing outstanding balance month by month.
Your credit card bill will keep on growing each month if you just continue paying only the minimum balance. If you can’t make the full payment for a certain month, try to pay the highest amount you can afford and minimize your credit card spending until you’ve paid off your credit card debt.
3. Unpaid Credit Card Debt Can Get You in Jail
“Can I go to jail for not paying credit card debt in the Philippines?”
Some Filipinos are afraid to get a credit card because they might go to jail when they can’t pay off their unsettled credit card debt. But the truth is, unpaid debt is considered a civil liability, not criminal. The Bill of Rights (Art. III, Sec. 20 of the 1987 Charter states that “No person shall be imprisoned for debt.” This is true not only for credit card debts but for other personal debts as well.
In addition to this, banks can’t file derogatory information on your NBI record if you have unpaid credit card balances. Thus, you won’t get a “hit” on your NBI clearance for that situation.
However, it is strongly encouraged to settle your credit card balance. Accumulating debt will hurt your credit score. With a bad credit score, you’ll have trouble having your loan approved.
Paying off your credit card debt will also give you peace of mind. You can rest easy knowing you don’t owe anyone money.
So what happens to unpaid credit card debt in the Philippines?
Since you can’t go to jail for unpaid credit card debt, your bank will turn over your credit card account to a third-party collection agency. A collection agent will call you to convince you to repay your unsettled debt. If you do promise to pay your balance, the credit card company can take the matter to court. However, lawsuits can be long and costly so the credit card company might also enter in a out-of-court settlement with you.
4. It’s Difficult to Apply and Get Approved for a Credit Card
To some extent, this is true for some people, especially those with poor credit history. But not all types of credit cards are difficult to apply and get approved for. This is one of the many credit card myths you should stop believing.
For example, even if you don’t have enough financial documents to show to the bank or have poor credit standing, you can easily qualify for a secured credit card.
If you’ll get a credit card for the first time, you have plenty of options for cards designed for starters. There are also credit cards with simple application procedures and minimal requirements. Check them out in our guides below:
- 8 Credit Cards with Easy Application Requirements
- 11 Credit Cards for First-Time Applicants in the Philippines
5. You Can’t Negotiate Credit Card Terms
It’s wrong to assume that whatever terms your card comes with are set in stone. Credit card terms are negotiable. You just have to call your bank and ask.
For instance, you can request an annual fee waiver if you’ve been a good customer (i.e., you always pay your full credit card balance on time). You may even try negotiating a lower interest rate, especially if you’re trying to pay down your credit card debt.
6. You Can’t Have More Than One Credit Card
The fear of having multiple credit cards comes from the misconception that it can badly affect one’s credit score. Well, it does have an impact, like when you have many credit card applications at the same time, which can lower your score a bit.
However, the computation of a credit score doesn’t include the number of credit cards owned. It isn’t a big deal. So yes, this is only one of the many credit card myths out there.
In fact, it’s great to have multiple credit cards for maximizing your rewards, like having a separate card for grocery rebates and another for earning air miles.
So nothing should stop you from owning two or more credit cards if you want to and you’re sure you can handle them.
7. Credit Card Fees are Expensive
Not all credit card fees are expensive. Certain credit cards come with a low or no annual fee or foreign transaction fee.
Other fees are avoidable, such as the finance charge and late payment penalty. At the same time, there are many credit cards that offer rewards and cash back. You can save money with these credit cards each time you use them. See the best ones below:
- Save Money With These 8 Rewards Credit Cards in the Philippines
- 8 Best Cashback Credit Cards to Help You Save Money
8. Credit Cards are Only for the Rich
One of the common credit card myths in the Philippines is that only high income-earners can afford them. This is not true.
Banks always want to earn as much as they can. Because of the booming Philippine economy in recent years and the high purchasing power of Pinoys, more people are now qualified for a credit card more than ever.
Some credit cards in the Philippines target low-income earners and young professionals with a limited budget by having a low minimum income requirement and charging low or zero annual fees.
The real problem with Pinoys who believe in these credit card myths is that they fall for hearsay and don’t actively seek out the facts.
What are the odds? You’ll lose some great perks out there because of your fear! For example, instead of asking people what credit card is the best for you, you might want to do your own research.
Thanks to technology, you don’t need to go through the hassle of researching because, with Moneymax, you can compare and find the best credit card for you in less than a minute. Using this platform is free!
Sources:  Dealing with a collecting agent crying credit-card fraud (The Manila Times)
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