Beginner’s Guide to Credit Cards in the Philippines

Reading time: 6 minutes

December 14, 2018



Credit cards are more than just plastic cards that you swipe when shopping. When used properly and responsibly, a credit card can help you manage your finances. Get a better understanding of how credit cards in the Philippines work so that you know how to maximize its benefits.

Planning to get your first credit card? Or still deciding whether to get a credit card or not? Here is a comprehensive guide to help you understand credit cards better.

How does credit card work in the Philippines?

A credit card is a small plastic card that allows you to spend money on credit to pay for goods or services at local and international merchants. It is one of the more convenient, more flexible, and safer payment alternatives to cash and checks.

When you hand your credit card to a cashier for swiping (or send your credit card information for online shopping), the merchant validates your credit account. If the issuing bank approves your purchase, it is added to your account.

You will be asked to sign the receipt containing the transaction data, including the amount that must be paid. Signing on the receipt means you agree to pay the amount you owe to the issuing bank.

The bank consolidates the charges to your credit card into a statement and sends it to you every month. You can pay at least the minimum amount due, but it is better to pay in full by the due date to avoid extra fees.

What are the advantages of credit cards?

Is it worth having a credit card? Credit cards are not for everyone, so consider both the benefits and drawbacks when deciding whether to apply for a credit card or not. By itself, a credit card is not bad—it is how you use your card that affects your finances.

  • Convenience. A credit card is faster to use than cash and check—no need to wait in line to withdraw money from the ATM and look for loose change. Just swipe the card and sign the receipt, and your transaction is done.
  • Payment flexibility. With a credit card, you can make both online and in-person purchases. You can also pay for expensive items like appliances, furniture, and gadgets in installments.
  • Security. Carrying a credit card is a lot safer than cash, especially in theft-prone areas. Even if your card gets lost or stolen, you can have it blocked immediately to prevent unauthorized use.
  • Rewards. One of the most attractive credit card features is earning points that can be traded off with perks like gift certificates and airline miles. Banks also offer credit card promos such as discounts and freebies to cardholders.
  • Funding emergencies. Using a credit card may not be the best option for covering sudden expenses like medical bills, but it is extremely useful when something unexpected happens and you do not have enough cash on hand.
  • Tracking expenses. Because credit card transactions are recorded and shown on your monthly bills, your expenses are easier to monitor rather than those paid in cash.
  • Building credit history. If you have not established a credit history yet, using a credit card correctly can help you build good credit records, helping you to qualify for loans and mortgages in the future.

What are the disadvantages of credit cards?

  • Risk of overspending. With a credit card, it can be tempting to spend more than you can afford. Essentially, you are borrowing money you have not earned yet, so you might fall into a credit card debt trap if you do not control your spending.
  • High interest rates. Compared to loans, credit cards have higher interest rates. So when you miss just one payment or carry over a balance, you will be paying more each month. You can avoid paying interests by paying off your monthly balances in full.
  • Expensive fees. Late payments and exceeding your credit limit come with penalties.
  • Risk of fraud. If you are not careful when using your credit card, hackers might steal your personal information and use your card without you knowing it.
  • Ruining credit history. Carrying huge balances and missing payments can hurt your credit history and your chance of getting approved for future loans.

What credit card fees should I know about?

The convenience of a credit card comes with several costs. Some fees are avoidable; some are not. You can avoid certain credit card fees when you make full and timely payments.

Here are the common credit card fees:

Annual fee

Most credit card types charge an annual fee ranging from Php 300 to Php 6,000. Generally, the higher the annual fee, the better the benefits. Premium cards may have much higher fees because of their exclusive benefits.

Some banks may also waive the fees for the first year or so (depending on promos), while others do not charge an annual fee.

Finance charge

It is the interest added to your total amount due when you fail to fully pay off your balance in the previous month. Monthly interest rates on credit cards in the Philippines range from 2.00% to 3.54%. You can avoid them by always paying your balance in full.

Late payment fee

It is charged any month that you fail to pay the minimum balance by the due date. Some cards may waive this for the first year, but after that, cardholders will be subject to a late fee, which is 2.25% to 8% of the total amount due or Php 300 to Php 750, whichever is higher.

Over-the-limit fee

Usually ranging from Php 500 to Php 1,500, this fee is charged every month that your credit card’s balance remains over its limit.

Not all credit cards charge over-the-limit fees. If yours does not have it and you exceed your credit limit, the bank will automatically decline your transaction.

Cash advance fee

When you make a cash advance against your credit card’s limit, you are essentially borrowing cash. The cash advance fee is usually around 5% of the amount of the advance, which is taken once per transaction.

Cash advance balances have higher interest rates than regular charges. This transaction has no grace period, so it needs to be paid off quickly to avoid debt.

What are the best credit cards for first timers?

Although credit cards in the Philippines charge a lot of fees, it does not mean that beginners cannot afford to own a credit card. The best credit cards for first timers can help save money with these features:

  • Low-interest credit cards. These cards provide the usual rewards and benefits of regular cards but at lower interest rates than the general average of 3%.
  • Credit cards with low or zero annual fees. Most cards can set you back thousands of pesos in annual fees. Go for a budget-friendly credit card without an annual fee or with a lower annual fee of Php 1,500 or less.
  • Low-income credit cards. Low-income earners can opt for these cards to stretch their spending power at low costs. To qualify for a low-income credit card, your gross annual income should be at least Php 120,000 or Php 180,000 (Php 10,000 or PHP 15,000 monthly). This credit card type typically comes with a lower credit limit, which can help you control the urge to overspend.

What are the credit card requirements?

Before you apply for your first credit card, make sure that you are qualified to own one. Banks require applicants to meet their eligibility requirements.

Basic credit card requirements:

  • At least 21 years old
  • Filipino citizen or foreigner living in the Philippines
  • Home, office, or business location near a branch of the issuing bank
  • At least one landline phone and one mobile phone
  • At least 1 year of regular employment status or at least 2 years of profitable business for self-employed individuals
  • Minimum gross annual income ranging from Php 120,000 to Php 1 million (depending on the chosen credit card type)

Required documents:

  • Completed and signed credit card application form
  • Valid ID bearing credit card applicant’s photo and signature
  • Certificate of employment
  • Latest BIR Form 2316 or Income Tax Return
  • Payslips for the past two to three months
  • Latest BIR Form 1701 and latest financial statements (for self-employed applicants)
  • Alien Certificate of Registration/Immigrant Certificate of Registration and Work Permits (for foreign residents)

How to apply for a credit card

Credit card applications in the Philippines are straightforward even for beginners. You can apply in-person at a branch of the issuing bank. Some banks allow online credit card application in their respective websites.

Steps for in-person credit card application

  1. Pick the best credit card for your needs, lifestyle, and budget. An online credit card comparison tool can help you make the right choice.
  2. Go to the nearest branch of the credit card provider.
  3. Fill out and sign an application form.
  4. Submit photocopies of the required documents. The bank staff may ask you to present the original copies for verification.

Steps for online credit card application:

  1. Visit the bank’s website.
  2. Fill out the required fields on the online application form and choose your preferred credit card type.
  3. Upload scanned copies or clear images of the required documents to the online form. Or send them to the bank via email.
  4. When you have completed the form, click the Submit button.

Processing of a credit card application, which includes credit history checks and verifications, usually takes two to three weeks. To follow up, you may contact the bank or check your credit card application status online. Upon approval, your new credit card will be delivered to your home or office.