Credit cards can be useful financial tools that help you pay for purchases conveniently or serve as safety nets in emergency situations when you don’t have cash on hand. However, to use a credit card to the fullest, it’s important to be aware of the terms and conditions attached to your specific card. In particular, you’ll want to familiarize yourself with the various fees you can incur by using it.
Credit cardholders will likely already be familiar with the interest charges that issuers can collect on cards with unpaid balances at the end of each month. Many credit cards also come with annual fees to offset the cost of the perks they offer. Besides these basic charges, your provider can also charge you for going over your credit limit, paying your bills late, and taking other irregular actions.
The following 5 tips can help you dodge extra fees on your credit card and potentially save you thousands of pesos:
Request a Waiver for Your Annual Fee
Many banks and credit unions offer basic credit cards with no annual fees. As previously mentioned, however, cards with premium rewards programs and other perks typically charge a yearly fee to help cover the cost of these features. If you’re thinking of applying for a new card, it’s always a good idea to choose one whose rewards are worth the cost. You may find it helpful to run an online search for “credit cards Philippines” to find cards with rewards programs you see yourself using often.
That having been said, credit card issuers will sometimes agree to waive the annual fee in certain circumstances. If a sudden financial emergency has left you unable to cover the fee for the year, for example, it never hurts to call your provider, explain your situation, and request a waiver. Your chances of getting your fee waived are especially good if you use your card regularly, have a good payment history, or have held the card for a long time.
Always Pay Your Bills in Full
If you don’t pay off your credit card balance in full for a particular billing cycle, your provider has the right to charge you interest on the remaining amount the following month. In the Philippines, credit card providers calculate interest rates based on 30-day time periods. Hence, these rates increase or decrease accordingly in months with more or less than 30 days. Interest rates can also change depending on mandates from the Bangko Sentral ng Pilipinas (BSP), which may impose higher or lower interest caps depending on economic conditions in the country.
The simplest way to avoid interest charges is to pay off your credit card bill in full each month. You can manage this by budgeting your income carefully and only buying things on credit that you can afford to pay for in cash. You’ll also want to check your cardholder’s agreement to see if your provider offers a grace period, which is a stretch of time between the end of the billing cycle and your bill’s final deadline. You won’t be charged interest on your credit card balance during this period—as long as you settle your bill by the due date.
Pay Your Credit Card Bills on Time
Your provider may also levy an additional late payment fee if you fail to pay your dues on time. Multiple late payments will hurt your credit score in the long run, compromising your eligibility for future loans and other financial tools. To avoid these consequences, make sure you pay at least the minimum amount due by your bill’s due date.
Stay Under Your Credit Limit
Credit card providers will usually decline any purchases you try to make that exceed your card’s credit limit, but some providers may approve these transactions for an additional fee. However, it’s generally not recommended for cardholders to opt in for over-the-limit fees if they can help it, as there’s little benefit to doing so. You may just end up with more debt that you’re ill-equipped to repay.
It’s never a good practice to max out your credit card, and many financial experts will even recommend that cardholders limit their spending to under 30% of their credit limit. Tracking your credit card charges on paper or using a budgeting app can help you stay updated on how much credit you’ve used for the month.
Avoid Taking Out Cash Advances
If you need cash quickly, your credit card provider may allow you to borrow against your card’s line of credit, which is a type of short-term loan known as a “cash advance.” Though taking out a cash advance may appear to be an easy way to get some quick cash, the fees and interest rates can quickly outweigh the benefits. Consider other options if you find yourself in need of money, like borrowing from family and friends or looking for personal loans that offer better terms.
Though credit card fees may seem manageable in the short term, these costs can quickly add up in the long run. Reading your cardholder’s agreement carefully is the best way to figure out what fees your issuer can charge and how to avoid them.
Karina is not your ordinary supermom. She juggles her time bonding with her three amazing kids while being in the loop on the latest happenings in the tech and lifestyle scene. Follow me on Instagram (@digitalfilipina) regularly visit www.digitalfilipina.com for daily dose of updates not just for moms but for everyone!