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Debunked: 5 Credit Card Myths That Pinoys Need To Forget

by: Michelle Matandac

Credit cards have become the symbol of evolution in terms of how consumers pay their expenses. These tiny plastics that replace the use of cash have made it possible for people to conduct safe transactions online.

Credit cards entail a lot of advantages as it also covers consumer’s protection. By milking this cashless system, you can travel for free, get a lot of promos and redeem rewards. It is a gateway for an efficient and convenient purchases.

Despite of its abundant perks and its long existent cashless transaction in the payment industry, the Philippines shows significantly low credit card penetration compared to its neighboring countries in Southeast Asia. In the latest data of World Bank’s Global Findex database, only 34.5 percent of Filipinos aged 15 and up had formal bank accounts.

The lack of financial literacy has its way in shaping misconceptions and negative connotations about having a credit card in the country.

Here are the five Pinoy credit card myths you should stop believing:

MYTH 1: Credit Cards Will Put You in Debt

First things first: Having a credit card doesn’t automatically put you in debt. Not paying in full, on time or nothing at all, do. The accumulated spending and compounding charge of interest and penalties due to late payments are the main culprit of debt in plastic money.

Second: You can even save money when you get yourself one. There are banks proffering 0% interest and offering huge discounts from the merchants they are affiliated with. Setting limits on your expenses and regularly checking your transactions will save you trouble.

MYTH 2: Credit Cards Will Make You Spend More Than You Need

Flat-out wrong. Owning a credit card can give you tons of advantages and knowing how to maximize these rewards could give you an edge. However, using it without considering the amount of cash you have would result to overspending and financial stress. Therefore, mismanagement and reckless use of it can cause you to overspend.

The maximum amount of credit that you can use without incurring any interest or penalty fees is referred to as credit limit and by understanding its use, it would help you to control your expenses. If you wish to avoid the impulse of having unnecessary purchase, you can ask your bank to lower your credit limit. Credit card equates to responsibility. Financial discipline aids you to improve your spending habits.

MYTH 3: Credit Cards Will Damage Your Credit Score

False! With or without credit cards, whatever you do affects your credit score. Getting one is a first step to earn a credit score and it won’t hurt to have one unless you do not pay full and on time. You are in control of your own credit card. Using it responsibly and regularly can help you to boost your credit score. The long-term advantages of a well-managed credit card could be of use in your future loans.

MYTH 4: Unpaid Credit Cards Debt Can Put You in Jail

Remember: Unpaid debt is a liability, not a crime. Many Filipinos are afraid to get a credit card for there is a chance that it could put them behind bars if they are not able to pay their credit bills.

In the Philippines, unpaid debts are considered as civil liability. It is in accordance with the Philippine Constitution, Sec. 20 Article III, stating that no person can be imprisoned due to debt. However, the issuer can sue you or go after your properties but if you really cannot pay, the bank has no other choice but to declare your debt as “uncollectible”. One thing is for sure, your credit score will suffer a big loss and it might affect your future loans.

MYTH 5: Closing Old Credit Cards Boost Your Credit Score

Having plethora of credit cards sit in your wallet tempts you to get rid of them. If you think throwing out old and unused accounts would increase your credit score, think again. Closing your credit cards could do more damage than increasing them.

Keeping multiple cards raises the available credit around you, gives you more options and lowers utilization. By cutting up old credit cards, you are decreasing the average age of your account. Keep in mind that issuers consider the length of your credit history when computing your credit score.Excess credit cards can be maximized by allocating them to your small monthly expenses such as paying your Spotify account, Netflix account or cellphone bills.

By sticking around with these myths and misconceptions, you are missing out on lucrative perks of these payment tokens. Credit cards come in handy when used with discipline and dangerous when you are not careful. If you want to get one yet still hesitating, it would be best to discuss its whole functionality with your bank. Always remember to read the terms and conditions before signing up the contract. Proper knowledge and understanding about it can help you manage your account well.