Money & Power
7 Crucial Commandments Every Credit Card Owner Should Know
Everything you need to know about managing your credit card expenses.
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“A credit card can be a powerful and useful instrument for you and your family,” says Beth Legarda of the Credit Card Association of the Philippines. “Credit cards working to your advantage—you get additional purchasing power, provided you manage your credit wisely. Unlike a time deposit where pre-termination will cause you a penalty fee, credit cards can give you quick access to funds immediately. It’s also safer to carry than cash—if cash gets stolen, goodbye! You may at least be able to block any purchases the thief may try to make with your credit card.”

Credit cards also have promotions. Loyalty points from purchases, tickets to movies and complimentary dishes at restaurants, are a few that Legarda mentions. “And only a credit card gives you a thirty-day loan that’s collateral-free and interest-free, so long as you pay the whole amount on the due date. It gives a lot of freedom if used responsibly.”

So here are the most important things you have to know in order to use a credit card responsibly.

1. Pay your bills on time.

Normally, credit card holders have thirty days from the last credit statement to settle their bills. “Now, if you are past due by sixty days, you will get a call and a friendly reminder to pay up,” says Legarda. If this is ignored, some card companies outsource their collection of past due accounts to professional bill collectors. It can be very embarrassing for you if some stranger comes to your home or office demanding that you settle your outstanding bills.

If that still doesn’t convince you to pay up, at a certain delinquency stage (usually ninety days’ default on payment), your name is reported to a negative database file that is used as a reference when you apply for another credit card from any credit card company in the country. “This database is shared by all the members of the Credit Card Association of the Philippines,” Legarda warns. “If you clean up your act, your name will not be removed, but a note will be placed stating that your account was settled.” It’s still a red flag for other credit card companies that look up the negative database file­–it’s up to them to decide whether to issue you a credit card or to continue to allow you to use an existing on.

2. Pay your bills in full.

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Legarda did say earlier that a credit card is the only thing that can grant you a thirty-day interest-free loan. But this becomes possible only if you pay your bill in full. “Paying in full is the best habit of managing credit,” she emphasizes. “It’s a very good way to maintain discipline. Use your card only when you need to, knowing how much you can afford to pay and keeping within a budget.”

People who don’t pay in full don’t enjoy this privilege. They end up having to pay a monthly interest penalty depending on the credit card company they sign up with. “If you’re not careful, you tend to take for granted the outstanding amount that you have to pay,” Legarda cautions. “Paying in full ensures that you don’t accrue any interest charges.”

3. Keep important credit card data handy.

Always keep this in mind: keep a record of your card number, the expiration date, your exact name on the card, and the customer service number, especially when you travel.

An incident that happened some years ago taught Nicole de Leon, a seasoned traveler, to make sure to have photocopies of her credit card information always hidden in her luggage. She recalls, “I was riding an overnight train from Nice to Venice. The train car we were riding was broken into and most of the passengers were robbed as we slept. One Hong Kong-based couple lost all their credit cards. That’s why I always keep spare copies of these documents, to avoid ending up like them.”

When calling customer service, you will be asked information before a missing credit card can be cancelled: your card number, the expiration date and your exact name on the card. You should also know the hotline to dial so you can contact your credit card company at a moment’s notice.

4. Report a lost card immediately.

Beverly Pasqua knew something was amiss when she noticed an eight-inch tear in her handbag on her way home. “Someone slashed my bag open with a knife and my wallet and cellphone were missing,” she recounts. “I was really, really worried. Good thing I recalled the number of my credit card company and my bank and put a hold order on all my credit and ATM cards immediately. Thank God nothing was charged.” Other people aren’t so lucky. Arvin Montes didn’t realize his card had been missing for days. He says, “I got a call from my credit card company asking whether I bought a plasma TV for P90,000.”

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“It’s easier to have the card replaced than it is to settle a bill that was made by someone who stole it,” says Legarda. “Know this–until you report the card as stolen, you are accountable for the losses you incur from the card.” Her advice is to talk with the card company to settle unauthorized charges in terms of payment or to discuss possible lessening of charges.

5. Keep your credit card company updated.

There will be times, like when you go abroad or during emergencies such as a typhoon or earthquake, when you will deviate from your buying habits. It’s important to inform your credit card company of any changes you may have to make.

“Tell your credit card company in advance that you’re going abroad,” advises Legarda. “That way they don’t get surprised if you rack up purchases from abroad, whether they’re in dollars, euros or yen.” Extenuating circumstances, such as medical emergencies and calamities, also warrant informing your credit card company. Some companies will contact you regarding a sudden large deduction for hospital fees. “You can also ask the credit card company to assist you if you need a temporary increase in your credit line for things like this,” she explains.

6. Keep track of your spending.

“Monitoring your spending is an important aspect of owning a credit card,” emphasizes Legarda. “You can’t just keep charging and charging, thinking that you can pay for it next time.” Here are some other pointers to consider:

  • Check the charge slip before you sign. Some sales clerks might accidentally include items you didn’t purchase. However, some unscrupulous shops actually make it a habit of inflating your bill with items you didn't get. Make sure your statement is accurate.

  • Keep your charge slips so you can match them with your monthly credit card statement. If there is a discrepancy, you MUST call your credit card company. Be aware that the shop or café that charged you may be registered under a different name with the Department of Trade and Industry (DTI). So if you see a list of shops you don’t recognize in your billing statement, having the charge slips will help you reconcile the purchases you made by matching them with each other. Plus, keeping an accounting of your purchases helps you curtail overspending.

7. Know your limits.

What’s the ideal number of credit cards you should have? “It’s easier to have just two cards,” says Legarda. That said, if you receive credit cards in the mail and you don’t want them, tell the issuer so. If you don’t, you may be charged annual fees. Once that’s cleared up, destroy the card. Don’t even bother to surrender it to make certain no one else gets a hold of it.

The same is true if your credit card company decides to raise your credit limit. Don’t just say yes—ask yourself if you need the extra credit. “An increase in credit limit is not a necessity,” warns Legarda. “It is important to have a credit limit that suits your needs. If you overspend or lose it, the card exposes you to additional purchases that you may not want.”

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