A Beginner's Guide to Credit Cards

Aug 24, 2024

Credit Cards for Beginners

Introduction

  • Host: Nicole
  • Purpose: Credit Card 101 series for beginners
  • Experience: Started as a student and now has four credit cards

Structure of the Video

  1. What is a credit card?
  2. Why get a credit card? (Pros and cons)
  3. How to apply for a credit card
  4. Sponsored by Skillshare

What is a Credit Card?

  • Credit Card vs. Debit Card:
    • Debit Card: Linked to savings account; money deducted immediately
    • Prepaid Card: Must be loaded before use
    • Credit Card: Access to short-term debt, using the bank's money

Key Comparison

  • Debit Card: Money subtracted instantly
  • Prepaid Card: Requires loading before use
  • Credit Card: Charges listed to be paid later (like a restaurant bill)

Types of Credit Cards

1. Basic Cards

  • Entry-level cards (often labeled "classic")
  • Minimum income requirement: Php10,000 to Php21,000/month
  • Examples: BDO Visa Classic, Union Bank Visa Classic

2. Mid-Tier Cards

  • Usually labeled "gold"
  • Higher income requirements and better rewards (e.g., cashback, travel perks)
  • Annual fee: Php2,000 to Php3,000
  • Examples: BPI Gold, BDO Mastercard Gold

3. Premium Cards

  • Labeled as "platinum" or "titanium"
  • Higher income requirements, better perks (e.g., travel lounges)
  • Annual fee: Php3,000 to Php5,000
  • Examples: BPI Visa Signature, Citibank Premier Miles

4. Elite Cards

  • Exclusive, often by invitation or requires high balance with bank
  • Annual fee: High (e.g., Php12,000 for some cards)
  • Examples: EastWest Singapore Airlines Chris Flyer, BDO World Elite MasterCard

Basic Credit Card Terms

  • Issuer: Bank that gives you the card (e.g., BDO, BPI)
  • Credit Card Networks: Institutions facilitating transactions (e.g., Visa, MasterCard)
  • Credit Limit: Maximum borrowable amount (e.g., Php10,000 limit means you can't spend more than that)
  • Statement Date: Date when your bill is generated
  • Transaction Summary: List of transactions for a specific period

Types of Transactions

  1. Straight Transaction: Paid in full immediately
  2. Installment Payment: Spread payments over time
  3. Buy Now, Pay Later: Payment deferred to a later date
  4. Cash Advance: Withdraw cash from credit limit (high fees)

Important Due Dates

  • Due Date: Deadline for payment to avoid penalties
  • Minimum Payment: Lowest amount to keep credit in good standing

Pros and Cons of Having a Credit Card

Pros

  • Cashless transactions; lightweight alternative to cash
  • Safer online transactions; easier to dispute unauthorized charges
  • Transactions recorded for easy tracking
  • Useful abroad without needing foreign currency
  • Potential cashback and rewards from transactions
  • Helps in building credit history for future loans

Cons

  • Temptation to overspend; can lead to debt
  • High-interest rates on unpaid balances

How to Apply for a Credit Card

Application Methods

  • Online through bank websites or in-person at branches
  • Kiosks in malls or company offers

Requirements

  • Age: At least 21 years
  • Minimum monthly income: Varies by card
  • Personal information and valid IDs
  • Proof of income (e.g., payslips, ITR)

Tips for Beginners

  • Apply at a bank where you have an existing relationship
  • Consider secured credit cards for guaranteed approval
  • Watch for promotional offers from banks

Conclusion

  • Select a card that matches your lifestyle and spending habits
  • Focus on understanding reward-to-spend ratio and potential benefits
  • Future videos will dive deeper into credit card topics
  • Thank you for watching!