Credit card application in the Philippines

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FAQ

What is a credit card application?

In Layman's terms, "credit" refers to a person's ability to repay debt, and the most frequent way to obtain credit is through the use of a credit card., which is a payment card provided by a bank or a company that allows the cardholder to buy products and services from retailers who accept credit cards.

Every second individual in today's society has it, but have you ever questioned what a credit card application means? Customers can ask for a credit card by providing basic personal and financial information through the application.

The applicant can also specify preferences such as whether or not approved users will be added to the card and whether or not balance transfers will be allowed. All required disclosures and notices are included in the application, and all regulations governing the bank and the applicant have been considered when identifying data to be captured.

What is a credit card in simple words?

A credit card is a bank-issued financial instrument with a pre-determined credit limit that allows you to conduct cashless transactions. The credit limit is set by the card issuer depending on your credit score, history, and income.

You can buy things now and pay for them later with the card. It's crucial to remember though that the amount of money you can spend with this card is limited by your credit limit. Furthermore, you must repay the money by the due date. If you are unable to do so, interest will be imposed on the monthly sum carried forward until the dues are paid in full.

Credit card vs debit card: what is the difference?

Debit and credit cards are two of the most widely utilized payment methods worldwide. On the front, they both include a series of numbers embossed or printed, as well as the cardholder's name. Each card contains a magnetic stripe on the back, a unique security code, and an implanted microchip on the front that encrypts the cardholder's and account's important personal and financial information.

Difference between credit and debit cards

Despite the fact that they work in similar ways, they are fundamentally different. The following are the most significant differences between them:

  • If your bank account is empty, you can't use your debit card (unless you sign up for overdraft protection), but you can use a credit card.

  • When you use a debit card, you are using your own funds, but when you use a credit card, you are borrowing money from your card issuer.

  • If someone steals your debit card and withdraws funds from your account, recovering the funds may be more difficult and time-consuming than recovering funds from a credit card theft. You can report the card as stolen in that scenario, and your liability will be reduced.

  • A credit card comes with privileges such as discounts, cashbacks, and other rewards; on the other hand, a debit card only offers limited privileges.

  • Credit card eligibility is determined by a variety of parameters, including salary, debt history, residence, and so on, whereas debit card eligibility is determined by having a bank account.

  • Credit cards conduct all transactions in a billing cycle to produce a final bill that must be paid within a certain time frame. However, there is no charge because the money is taken directly from your account through a debit card.

What are the benefits of using a credit card?

With its ease of use and flexible payment options, credit cards have become an integral part of our life. A credit card's discounts offers and deals are unrivaled by any other financial product, making it a gold mine for savvy consumers.

The following are some of the many advantages of using a credit card:

  • Availability of credit. The most significant benefit of credit cards is the ease with which they may be used to obtain credit. Credit cards work on the principle of deferred payment, which means you can use your card now and pay for your purchases later. The money used does not leave your account, so you don't have to worry about depleting your bank account every time you swipe.

  • Credit line establishment. Credit cards give you the ability to build up a credit line. This is critical because it allows banks to see your active loan history, which is based on your credit card repayments and usage. Credit cards usage is frequently estimated by banks and financial institutions to assess a potential loan applicant's creditworthiness.

  • Payment in installments. You can choose to put a major purchase on your credit card as a way to defer payment if you don't want to spend all of your savings on it. Furthermore, you have the option of paying for your item in equal monthly installments, guaranteeing that you do not pay a large sum for it and depleting your bank account.

  • Offers and incentives. Most credit cards come with a slew of offers and incentives to encourage you to use your card. These can range from cashback to accumulating rewards points each time you swipe your card, which can then be redeemed for air miles or used to pay off your outstanding card balance.

  • Expenses are recorded. Each purchase made with credit cards is recorded, and a complete list is delivered with your monthly credit card's statement. This can be used to track and determine your spending and purchases, which can be helpful when creating a budget or filing taxes.

Can using a credit card be dangerous?

Credit cards, when utilized correctly, can be beneficial to you; when used incorrectly, they can harm your credit score over time, potentially stopping you from reaching your long-term financial goals.

The following is a summary of some of the risks associated with credit cards-

  • Debt trap. Interest rates on credit card balances are common. You'll have to pay additional interest every time you add to your debt and don't pay it off in full within the billing cycle. It may be tough to break out of credit card debt as a result of this.

  • Term changes. One of the risks with credit cards is that the issuer might change the conditions of the card agreement without your permission. Your interest rate and grace period may change without notice from the card issuer.

  • Account closure. The creditor may eventually close your account if you don't pay your credit card bill. Charge-off accounts are what they're called. Charge-off accounts can be a pain for years, in addition to having a negative impact on your credit score.

  • Risks of credit. Another disadvantage of credit cards is the possibility of overuse. According to MyFICO, 30% of your credit score is based on amounts due, so if you use a large percentage of your available credit (more than your credit card limit), your credit score will suffer.

  • Theft of a credit card. There's a chance you've been a victim of fraud, though it's not particularly prevalent. With technological advancements, it is now possible to clone a card and obtain access to personal information, allowing another person or entity to make purchases on your card. Check your statements for any strange purchases and notify your bank right once if you suspect card fraud. If the fraud is verified, banks will normally waive charges, so you won't have to pay for purchases made by the thief.

How to apply for a credit card?

If you are a Filipino citizen, then using a credit card can help you improve your personal and professional life. There is a wide range of credit cards available in the market, each with its own set of benefits and privileges that might help you save money even when you're spending. So, whether you want to book a flight to your favourite vacation spot or buy the device you need to increase your productivity, you can do so with a credit card. You can also use EMIs to avoid running into financial difficulties while paying your payments.

Credit cards also come with a variety of rewards, including cash back, cash rebates, restaurant discounts, travel, hospitality, and leisure bonuses, and much more. Credit card application process is very simple, so you may visit the issuer's website and choose the card that best suits your needs. You will find multiple credit cards with a lot of perks, some of which are:

  • Interest back cards

  • Secured credit cards

  • Rebate cards

  • Travel cards

  • Rewards cards

  • Supplementary cards

  • Student reward cards

To apply for a credit card, you need to follow these simple steps:

  • First, research what type of credit card you want, and then select which issuer you would like to go with.

  • Once you are done, go to the issuer's website, and search for the Apply form under the credit cards section.

  • Fill out the online application with details like your name, address, ID proof, gross income, etc.

  • Some issuers will also need your mobile number, and you will be asked to verify the number for further clarifications.

  • Once you have completed your submission, you track the status of your online application through the issuer's website.

  • For example, if you have applied for a Citibank credit card, simply go to the official website of Citi credit card and enter your 11-digit application reference number (given to you by SMS at the phone number you gave). Enter your phone number and click on Track to know the status of your Citi credit card application.

How to choose the best credit card for you?

Having a credit card is no longer only a status symbol now that more Filipinos are opting for cashless payments as the new normal. Rather, it's a requirement. Credit cards make payments far more convenient, secure, and budget-friendly. They can also aid in the management of your finances if you choose the proper one and utilize it responsibly.

Compare credit cards offered by the lenders and consider the following crucial aspects to help you narrow down your options and choose the finest credit card in the Philippines:

  • Minimum income and other requirements. Before applying for a credit card, make sure you meet the eligibility and documentation requirements. After all, you can only apply for cards for which you are eligible. People with good credit scores also get an exciting cash advance with their cards.

  • Fees and charges. The annual fee, late payment fee, and over-limit fee should all be carefully considered. If you're going to use your credit card in another country, keep in mind the foreign transaction fees.

  • Exciting rewards. Look for credit cards with the best rewards, rebates, discounts, and freebies for the items you spend the most money on, such as restaurants, grocery, gas, internet purchases, and gadgets.

  • Examine your credit report. Checking your credit score should be the first step in obtaining the ideal credit card. Your credit score plays a role in selecting which credit cards you are eligible for. The majority of the best rewards credit cards demand strong or exceptional credit, but there are also cards for customers with average credit and even cards for those with no credit or short overdue history.

  • Choose the sort of card that best suits your needs. Once you have a better understanding of your credit situation, you may focus on which form of credit card is best for you. As you may have observed, there are a plethora of cards to pick from, each with its own set of benefits and drawbacks based on your objectives, budget, and income.

Eligibility to apply for a credit card

If you're applying for a credit card for the first time, you may not realize that banks have severe standards for such applications. Most often, to be eligible for a card, you must meet the following requirements: 

  • Applicants must be over the age of 21.

  • If you have another credit card balance, you must have a minimum annual salary of ₱180,000. However, if you don't have a credit card, your gross income should be around ₱2o0,000 per year.

  • You must have a working landline or cell phone.

  • You must have a valid TIN, SSS, GSIS, or UMID number which can be required for identification purposes. 

  • You must be a Filipino citizen

Required documents to apply for a credit card

The issuer requests papers from applicants when they apply for a credit card online. Knowing which documents are required makes the job much easier.

The following is a list of documentation that most lenders want from applicants:

  • One copy of a valid government identification card with a photo and signature (passport, driver's license, etc.).

  • A copy of your minimum gross annual income source

  • Income tax return (ITR), certificate of compensation payment, tax withheld, or other documents of a similar nature

  • Latest 3-month payslip BIR Form 2316 or comparable document certificate of employment or employment contract

  • Pension evidence

  • Copy of latest audited financial statements for the last three months

Tips to get approved for a credit card

However, finding the perfect credit card for you, let alone applying for one, can be nerve-wracking. You might be unsure where to begin, what information credit card issuers require, or how to improve your chances of getting approved for a card. That's why, before applying for a credit card, you should understand everything you can about the application process and what to expect.

Here are a few pointers on how to improve your chances of being approved for a credit card:

Don't apply for too many credit cards at the same time. Applying for a credit card lowers your credit score, so applying for multiple cards at once doesn't appear good to lenders. Rather than wasting time applying for cards you are unlikely to be approved for, take your time to choose the perfect card to apply for.

Apply for credit cards that are appropriate for your credit score. Some credit cards are exclusively available to people with exceptional credit, while others are designed for people with fair or ordinary credit limits. You have the best chance of approval if you apply for cards that match your credit limit for your credit card account.

Make timely payments on your invoices. Paying your bills on time each month helps your credit score by adding to your loan history. This covers credit cards, student loans, mortgage, rent, and utility bills. To prevent skipping a payment and incurring late-payment penalties, consider setting up automated payments, at the very least for the minimum payment due each month.

Keep an eye on your credit card usage. Lenders check at your credit usage rate, which compares how much credit you're using to how much credit you have available. Maintaining a total credit utilization percentage of less than 30% will boost your credit score. That is, if your credit limit is ₱100,000, you should not spend more than ₱30,000 per month.

Having a diverse loan history. A few different types of cards and loans will improve your borrower appeal. When you consistently make on-time payments across the board, it demonstrates that you can handle various types of credit and makes you more likely to be considered a trustworthy applicant.

Pros and cons of using a credit card

Credit cards are frequently regarded as a rite of passage for financially self-sufficient individuals, particularly among young adults. There are plenty of possibilities for anyone looking to borrow money today, whether it's for a specific purchase, to supplement income between pay periods, or to start a small business.

Credit cards might be an excellent complement to your day-to-day budget. However, before you open a card, think about the following advantages and disadvantages:

Pros

  • Builds credit limit. Your credit history is a record of how well you've managed to borrow money and repay it. The lender reports your behavior to a credit reporting agency every time you open a new credit card account. They'll also let you know if you've missed a payment or are consistently late with your monthly payments. Your credit score is based on your past loan history, and it tells lenders whether or not you're a good candidate for a credit card or loan, as well as which parameters to assign you (i.e., your interest rate and credit limit). If handled wisely, good credit can improve your quality of life and help you achieve your financial goals.

  • Secure than cash. Credit cards are widely utilized, even by those who have access to cash advances in their deposit account, because they provide an additional layer of security. If you misplace your credit card or your information is stolen, the credit card issuer can put a hold on it to prevent fraudulent purchases. Furthermore, many credit card issuers monitor suspicious activity and will alert you if something appears to be out of the ordinary.

  • Reward point. Many companies provide benefits for using their cards on a regular basis, such as cashback or airline miles. These points can quickly mount up if you use a credit card for everyday purchases. Although many reward cards include annual fees, the benefits you can earn over the course of a year can easily outweigh the expense of keeping the card active.

  • Easy to carry. Using cash is generally more hectic compared to credit cards, and the latter take up less space in a wallet than a stack of bills. They are an excellent consumer spending instrument because they are accepted in almost all retail and corporate scenarios around the world. They can be kept in your pocket at all times, ready to be used at any time. Furthermore, if you misplace your card, your issuer can simply mail you a replacement. With currency, however, this is not the case.

Cons

  • Cash advance. Credit cards are convenient, but the cost of borrowing is usually far greater than a regular loan. Many have high annual percentage rates (APRs), service fees, and late payment fees. It also comes with additional annual fees. These additional financing charges can easily increase your existing debt if you don't pay your balance down every month. In addition, many credit cards allow you to receive a cash advance if you need money right away, but the interest rate on these advances is generally considerably greater than the rate paid on purchases.

  • Credit loop. New credit cards may provide you access to more funds than you've had in the past, depending on your credit limit, making it simple to overspend if you're not careful. It's critical to just spend what you can afford to pay back each month to prevent digging yourself into a hole and potentially ruining your credit and financial health. If you don't have one already, creating one can help you remain on track and avoid accumulating too much debt.

  • The danger of using multiple cards. While using a few cards on a regular basis and paying them off on time will help you establish and enhance your credit, there is a limit to how many cards you should open. Lenders can check your credit report every time you apply for a new credit card account to determine your credit eligibility. Too many applications might hurt your credit score, and lenders may be suspicious if you appear to need a lot of credit and deny your application.