Inconvenient Truths About Credit Card Charges in The Philippines
Credit card bills can be a real shocker especially when you see that along with your spending amounts, you have incurred credit card charges and late payment charges that add up to more than you can afford. Where did it all go wrong?
Here’s five ways where it can go wrong. Know and avoid them!
Compounding interest means you would be paying interest on interest. This means that bank charges you interest based on your current outstanding balance along and accumulated interest charges.
To put it simply, If you have an existing balance of PHP10,000 on your account and failed to pay it on the due date, your bank charges you interest rate on your outstanding balance at the end of the first month. If your interest for that balance is at 100 or 1% (12% p.a. /12 months) for the total bill, an interest of 1% will be charged on PHP10,100 (you outstanding amount + accumulated interest) at the end of month 2. This accumulates until you have paid your balance in full.
Bottom line is, pay your bills on time, at least the minimum if you can’t pay in full to avoid your fees from piling up.
The Philippines have some of the highest credit card charges in the world!
Although regarded as a third world country, the Philippines is surprisingly reported to have a high interest rate compared to other countries. Since banks in the Philippines do not require an exhaustive and comprehensive data and information on the quality of their borrowers, they apply an extremely high interest rate to all their card holders to protect their private interests.
Interest is charged on a monthly basis on outstanding unpaid amounts, ranging from 2-5% per month accumulating to 24-60% a year. There is no cap or ceiling for credit card interest rates in the Philippines. Although there are already pending bills for this, the possibility of an interest rate cap would dissuade many credit institutions to extending credit card facilities leniently.
If the interest charges don’t get you, the other credit card charges may
Credit card holders may also incur a variety of other charges, including:
Cash Advance fees (3-6% of cash advance amounts), Late Payment Charges, Foreign Transaction Fee (0.75-3.25% of transaction value), Account Maintenance Fees, Balance Transfer Processing Fees, Cancellation Processing Fee, Card Replacement Fee, Over-Limit Fees and Sales Slip Retrieval Fees.
At iMoney, we believe that the best way to avoid the trap of interest rate charges is to simply pay your credit card bills in full, and on time.
Click here to read more about managing your credit card usage.