Are You Ready to Have Your 1st Credit Card?

Sunday, July 23, 2017

I have two adult children who have joined the corporate world within the last three years. One, is with one of the top 50 companies in the Philippines. The other one is with a growing company which has already carved a niche in its industry. The first one earns a little over the minimum wage, while the other one earns the minimum wage plus commission.

The idea of getting their own credit cards came about recently and both have asked me for some advice if they can already get one.

To answer their question, I gave them instead questions that they had to answer:

  1. Why do you want to have a credit card?
  2. How much credit limit are you desiring to have?

Their answers to question number 1 were as follows:

Credit card is now a requirement to transact on-line for purchases being made. Most of their purchases would include registering for Spotify; buying products thru Instagram or Facebook;

Credit card offers easy installment terms for bigger purchases P5,000 and above , like buying a rubber shoes (which my son needs to regularly change because of the nature of his work).

Both answered that they do not know the amount of credit card limit that they will need.

I agree with both of them that it was about time that they own their 1st credit cards.

Credit card has become a major tool to transact in this fast moving and technology driven world. It has become one’s identity to get approval for booking hotels and airfares without going thru tedious lines. It is a temporary wallet to buy things on credit without carrying cash. It has become so attractive with promos to lure one to buy more on credit and earn rewards.

Credit cards have also evolved into different forms and which one suits you will be based on the purpose you have for acquiring one.

  1. PREPAID CARD – This is a prepaid credit card. One has to deposit money to one’s credit card account prior to using this on-line or purchasing from any establishment where Visa or Mastercard affiliations are accepted.Annual Dues: Range from P250 to P350 every 2 years
    Documentation Requirements:
    Application Form
    1 government I.D.
    Initial Cost to Open an Account: P100
    No Maintaining Balance
    Chances of Approval : 100%
    Credit Limit: You can load your card up to P100,000
  2. Secured Credit Card (secured by one’s deposit) – This is a credit card that gives you 80% of your secured deposit as your credit line. For example, you agree to have P20T of your deposit to be put on hold (cannot be withdrawn), the bank can give you P16T as your credit limit.Annual Dues: Range from P1,250 to P2,000 every 2 years
    Documentation Requirements
    Application Form
    1 government I.D.
    Minimum Amount of Deposit to be put on HOLD : P10,000
    Chances of Approval : 100%
    Credit Limit: 90% of your secured deposit
  3. REGULAR CREDIT CARD – A credit card that is given to you by a bank based on how they value your credit worthiness.Annual Dues: Range from P1,250 to P2,000 every 2 years
    Documentation Requirements:
    Application Form
    1 government I.D.
    ITR
    Employment Cert / Latest 1 month payslip
    Bank Statement if business owner
    Chances of Approval : will depend; higher chances of approval if you have an existing credit card of good standing, you merely have to give your latest credit statement
    Credit Limit: will depend on your financial documents, credit rating and results of credit investigation

As to which credit card fits my 2 children new in the challenging world of making a living, I recommended 2 different cards for them.

  • Child A (working for a top corporation) – Prepaid Card
  • Child B (working for a growing company) – Prepaid Card and Secured Credit Card

Why I recommended these cards for them:

  1. Getting a credit card early in one’s career is not consistent with my mantra of growing the right money habits.The right money habits should be established once you start earning. These are:Save before you spend.
    Spend below your means.
    Get yourself insurance protection.If you have the discipline of saving and providing for future purchases, then you do not need a credit card.
  2. Credit cards are approved credit limits, not an extension of one’s disposable income. Use a regular credit card to pay for emergency needs, buy large purchases (in installment) or when you simply prefer do cashless spending.Given these benefits, however, be wise to know that your ability to pay is limited by the income you generate. If you find it necessary and practical to apply for a credit card, limit your credit line up to 1 month of your salary. Putting a cap on your limit helps you take control of your spending.Refuse the generous credit limits being offered by banks that go with many gifts and rewards. If you always accept or apply for new credit cards, do not be surprised that one day your credit limits will surpass your annual income.
  3. There’s nothing like paying everything in cash. If you have to use your credit card, use it with the intention to fully pay what you have used from your credit limit the following month. If you cannot pay your purchase thru a credit card the following month , do not use it.Save yourself from paying the expensive cost of interest (3.5% per month) on purchases thru credit cards. The more cash that you have, the greater ability you have to start saving and investing to fulfill many of your dreams.

I am happy that my children heeded my advice. A prepaid card and a secured credit card keep you in control of your purchases. You determine what you can handle to use as your credit limit. The annual dues are cheaper, too. A prepaid card is also best for internet transactions as it keeps your chances of your card being hacked under control. You can merely load it up once you know how much you would need prior to your purchase. Enjoy the use of a prepaid card as there is no minimum balance to maintain it!

BPI offers a wide range of choices  of credit cards.  Check this out and see what suits your needs.

For Prepaid Cards: https://www.bpiexpressonline.com/p/1/105/my-eprepaid

For Secured Cards: http://www.bpicards.com/page/262

To your success, wealth and happiness! Lulu Your Personal Money Mentor “The rich rules over the poor and the borrower becomes the lender's slave." Proverbs 22:7