by Moneymax, on category "Credit Card"
November 1, 2019
This article was published on April 4, 2014 and was updated on November 1, 2019.
It isn’t always easy to get a credit card. You may be an entrepreneur or freelancer and therefore don’t have a stable income. Or you have been declined several times when applying for a credit card due to a lack of credit history.
Banks, in general, are not too keen on having people with no credit history apply for a credit card. For those with a bad credit history, it’s particularly difficult. When applying for a regular credit card doesn’t work out, you could try to apply for a secured credit card.
Here, we explain the workings of secured credit cards in the Philippines and have a look at which banks are offering them.
A secured credit card is a type of credit card with a cash deposit serving as collateral. Because it’s guaranteed by the cardholder’s deposit, applicants can expect quick and 100% approval. Thus, a secured credit card application is the easiest way to get a credit card in the Philippines.
Usually issued to people with bad credit or no credit history, secured cards don’t require income documents. The deposit amount already reduces the risk to the issuing bank in case the cardholder fails to make credit card payments. This feature makes secured cards ideal for first-time cardholders, low-income earners, and self-employed people with unstable income.
A secured credit card shares many similarities with a regular credit card. You can use the card at any store or merchant that accepts Visa or Mastercard. Also, you can tap into typical credit card benefits as installment plans, discounts, reward points, and other perks—depending on the secured credit card you choose. Secured cards have the same fees and charges as well as interest rates as regular cards.
The main difference, however, is that a secured card requires you to open a savings or time deposit account with the issuing bank and deposit a certain amount into it, a percentage of which determines your credit limit. This means that if you put down a PHP 10,000 deposit, you’ll be given a maximum credit limit of PHP 9,000.
Using a secured card, you’re still expected to make monthly payments, but if you default on a payment, the bank will take out your hold-out deposit to recover your unsettled balance.
Thus, you have to manage your expenses very carefully and make sure this never happens, as it would mean that you won’t be able to use your secured credit card anymore. Besides, your credit history—which you’re improving when using a secured credit card—would be dealt a serious blow.
Generally, a minimum deposit of PHP 10,000 is required. From this amount, your credit card limit can be either 80% and 90%, depending on the issuing bank. The higher your deposit is, the higher your credit limit becomes.
This deposit cannot be withdrawn from your account until you clear and settle your credit card account and formally request card cancellation or lifting of your hold-out deposit. You’ll have to wait for one to two months for the bank to release the hold-out amount. From that point on, you should be able to withdraw your cash.
Ideally, you want your secured credit card to be eventually converted to a regular card. The conversion from a secured card to a regular one is possible either when you show enough proof of income, or if you’ve been paying your credit card bills on time and in full amount for at least a year.
Once you’ve converted your secured credit card to a regular one, you can start withdrawing from your deposit without having to cancel the card. Further, your secured card could help in applying for regular cards with other banks, as there is an increased chance that your application will be approved if you’re an existing credit cardholder with a good credit standing.
Now that you know how a secured credit card works, it’s time to weigh the pros and cons of having one, so you can decide if this is the right financial tool for you.
In the Philippines, you’ve got quite some choices when it comes to secured credit cards from AUB, BPI, Metrobank, RCBC, and Security Bank. Among these cards are the following:
|Secured Credit Cards||Minimum Hold-Out Deposit||Credit Limit||Annual Fee||Interest Rate|
|AUB Secured Credit Card (1)||PHP 25,000||80% of the hold-out deposit||Free for life||2.25%/3.50%|
|BPI Express Start (2)||90% of the hold-out deposit||PHP 1,350 to PHP 5,500||3%/3.50%|
|Metrobank Save and Swipe||PHP 12,000||90% of the hold-out deposit||Zero to PHP 6,000||3.50%|
|RCBC Bankard InstaCard (3)||PHP 10,000/USD 2,000||90% of the hold-out deposit||PHP 60 monthly/PHP 150 monthly||2.50%|
|Security Bank Fast Track (4)||80% of the hold-out deposit||PHP 2,000 to PHP 4,000||3.50%|
A secured credit card application is generally a smooth and straightforward process, and even simpler than getting a regular card.
Interested in getting one? Follow these steps to apply for a secured credit card in the Philippines.
Although it’s easier to qualify for a secured card than a regular card, you’ll still have to meet the eligibility requirements of the bank.
First, you have to be at least 21 years old (or at least 18, if you’ll apply for a BPI secured credit card). Security Bank and BPI also require prospective secured credit cardholders to have a business or residence landline number.
Most importantly, you should not have a delinquent credit card account with the bank where you plan to get a secured card from.
Any credit card in the bank’s lineup can be availed as a secured credit card. Especially if you’re trying to build a good credit score, it’s best to select the card that will work for you. You’d want a card that matches your budget, needs, and spending habits.
You can shop around for options at each bank’s website, or you can save time by comparing credit cards here at Moneymax.
Once you’ve decided on the credit card to apply for, go to the nearest branch of your bank of choice to open a savings account or time deposit for your secured credit card application.
Make sure to bring your valid IDs and the amount for your hold-out deposit. If you’re an expat or foreign resident, bring your work permit, Alien Certificate of Registration (ACR), or embassy accreditation documents just in case the bank asks for it.
The bank staff will ask you to fill out and sign forms such as a credit card application form, savings account opening forms, and a deed of assignment.
The deed of assignment is a legal document in which you authorize the bank to hold your deposit amount and in case you default on your credit card payments, the bank can debit the hold-out amount to settle your unpaid balance.
The approval rate should be close to 100%—after all, you don’t put in a deposit for nothing. Processing of secured credit cards in the Philippines takes around three to 10 baking days. It may be delivered to your address or have to be picked up at the branch where you filed your secured credit card application.
When you receive your new credit card, you may have to activate it by calling the issuing bank’s customer hotline.
Having a secured credit card is a great opportunity to get your finances on the right track—don’t waste that chance. When used responsibly, a secured card can help you build your credit and raise your likelihood of getting approved for credit cards and loans in the future.
Here are a few quick tips to ensure a positive credit score with your secured credit card use:
A secured credit is a good alternative to traditional credit cards, especially if you don’t have enough documents that prove a regular and stable income source. May this guide help you get approved for one and keep your finances in good shape.