Today, let's talk about credit cards for beginners. Yo! What's up friends? Welcome back to this video.
If you're new here, what's up my name is Nicole. I'm planning to make an entire credit card 101 series. I made a video before about how and why I got a credit card as a student. You guys can watch that video here. I was a beginner then, but now I have four credit cards.
And now that I've had a bit more experience with using and actually applying for credit cards, I wanted to make this video to help you guys understand how credit cards actually work. It's time to boost your financial literacy powers. Let's go!
To make everything more organized, this is how I'm going to structure this video. First, what is a credit card? What is this piece of plastic that everyone is scared of?
Like, oh my god! Next, Why get a credit card? Like it's pros and cons.
And then third, if you're considering getting a credit card, how do you actually apply for one? This video is also sponsored by Skillshare, but we'll talk more about them later. All right.
Let's start with the basics. First, what is a credit card? How does it differ from a debit card and other types of cards?
So, debit cards, ATM cards, these are linked to a savings account. And then, the other type of card is a prepaid card. These cards, you need to load it up first, top it up, before you're able to use it.
So as an example, this Paymaya card. There's also the GCash MasterCard. And even this, Crypto.com card, I need to top this up first with crypto before I'm able to spend it.
And credit cards are pieces of plastic that give you access to short-term debt. Utang. You're gonna make use of the bank's money to pay for your stuff.
But don't be scared. Utang is not necessarily a bad thing. In this case, you can actually make use of it to your advantage.
So as a comparison with these three types of cards, when I use it to pay for something, for debit cards, if I use this... the money is automatically subtracted from my savings account. For this one, I need to load it first before I'm able to use it.
And when I swipe it, it's gonna get deducted from the load balance this has. And then for credit cards, when I swipe, it's gonna get listed down. And then when I receive my statement date, that's when I need to pay for it.
So it's like eating in a restaurant. Like you eat all the meals, but then at the end of the meal when everything's done, all of the meals that you ate is listed down and you need to pay for it. Now, let's talk about the different types of credit cards.
For the purpose of this video, I actually chose to group them according to the tier. All right. So, the first tier, the bottom tier, are the basic cards.
These are the entry-level starter cards. Usually, they have the word classic attached to their name. The minimum income requirement for these types of cards are usually Php10,000 to Php21,000 a month. So, these are really made for low-income earners or beginner credit card users.
And because this is the basic tier, the annual fee is also the lowest. The reward system is not that wow. Some of these cards don't even have a reward system. So, I'm going to show you how to group them. So some examples is this BDO Visa Classic.
There's Union Bank Visa Classic, BPI Blue, City Simplicity, and PNB Zillow Classic. And then the next tier is the mid-tier. Typically, they have the word gold attached to their name. Because it's a higher tier, they typically have higher income requirements, come with better perks.
So for example, you can get cashback. There are rewards points for miles, free flights, and so on. The annual fee for these types of cards range from about Php2,000 to Php3,000 a year.
And as an example of these mid-tier cards, it has BPI Gold, it has BDO Visa Gold, BDO Mastercard Gold. And then after the mid-tier, we upgraded the premium cards. Usually this has the titanium platinum word attached to the name. So these are even higher income requirements.
But it comes with a lot better perks than the mid-tier and the basic tier. Usually you also have access to travel lounges. And usually you also have priority hotline when you call the bank. The annual fee for these cards are also higher.
So around 3K to 5K range.. So as an example of these types of cards, there's the BPI Visa Signature. This is my dream card. I want this card.
There's also the Union Bank Platinum Mastercard. Then, there's the Citibank Premier Miles. And then, after these are the elite cards.
These are the very exclusive cards. Some of these are only by invitation. Or, you can only access them if you have like a massive relationship balance with your bank.
Yeah. These are the ultra rich cards. So, some examples of this is the EastWest Singapore Airlines Chris Flyer Platinum MasterCard. Huh.
Then, there's BDO Cathay Pacific American Express Elite Credit Card. Citibank Prestige. The annual fee is Php12,000. And then, BDO World Elite MasterCard. The annual fee is Php1,500.
And, you need a minimum of Php50,000,000 deposits on BDO. These are mega high earner status cards. Whew! And now, let's talk about some of the basic credit card terms you need to know.
I know when you're new to this world, it kind of gets overwhelming. What does this term mean? What is this?
What fee? What... Huh? And usually, it's best to refer to your state of account or like the packet that comes with your card when you receive it, so that you better understand how your credit card works. First now, what is a credit card issuer?
The issuer, this is the creditor, meaning the one who gives you money. Usually, this refers to the bank that issued your card. Like say for example, the issuer of this card is BDO.
The issuer of this card is BPI. And then, credit card networks. So this is the MasterCard, Visa, American Express, UnionPay, JCB. Essentially, these are the institutions that facilitate your transactions. So they're payment processors.
There's not much difference between the credit card networks especially if it's widely accepted like Visa, MasterCard. The main difference is that they usually hold different promos for their card holders. And then for credit limit, this is the maximum amount of money that you can essentially borrow from the bank with your credit card. Say for example, your credit limit is 10,000.
Then the total amount of purchases that you can swipe with that card is only until 10,000. And then for statement date, this is the day your bill is generated. So all of your purchases that happened during that billing cycle will appear on the statement date.
And any purchases made after a specific statement date will appear on the next billing cycle. And then, you have the transaction summary or sometimes it's called account summary. This is just like a list of transactions within a certain billing cycle.
So, all of your transactions. And then, very basic, let's talk about the different types of transactions. First type of transaction is a straight transaction.
Say for example, this Pikachu costs Then, one swipe, I will pay for this in full. I'll buy one of these. If I pay for something in installment, I'll chop-chop the full price. Say for example, this is I want to...
pay for it in installment over a period of 12 months, Php41.66 will appear on my credit card per month. Then, buy now pay later. For example, I can swipe to pay for this, but it doesn't actually appear on my bill until a few months after. There's also conversion whereas if you've paid for something in straight where you change your mind, you actually want to convert it into installment. And then, there's also cash advance where you can essentially withdraw a portion of your credit limit as cold hard cash.
Like you can go to the ATM, You go in, get the cash, but don't do that. Because the fees are high. The due date is the deadline of when you should've paid your credit card balance. So the minimum payment is the lowest amount that you can pay on your credit card in order not to be tagged as delinquent to keep your credit card in good standing. Take note that if you don't pay your credit card debt in full, the excess, you'll still get charged interest for that.
The rule here is to always pay your credit card bill on time in full every single month prior you never incur. interest charges. And then you have fees. There's a lot of different types of credit card fees. But, the one that you should be aware of is the annual fee.
This is like a membership fee that gets charged to your credit card per year for using the credit card, for owning it. But, there are ways for you to waive it. You also have late payment fee, multiple payment fee, overlimit fee, cash advance fee. Yeah. All of these are part of your credit card packet.
You should read it there. I could show you an in-depth computation of how these fees are calculated, but I won't do that because you shouldn't be paying fees in the first place. In my almost two years of owning a credit card, I have never paid a fee.
I have never incurred an interest charge. And I intend to keep it that way until I die. If you're paying interest fees, I'll kick you out.
The most expensive credit card interest is like 2% per month. So it's like 24% a year. That's expensive. Now, let's talk about some of the reasons why you should consider getting a credit card.
I think everyone should have a credit card. It's a very useful tool, but I know there are pros and cons. First, you can go cashless.
So, credit cards are lightweight cash alternatives. Take note, keyword, alternative. It's a substitute for cash.
It's not extra cash. Credit cards shouldn't give you an excuse to spend more on things that you can't afford in the first place. I think this is a perk, but when you're swiping with a credit card, you feel like a boss.
There's like major adulting vibes now to owning a credit card. And when you're using a credit card, online transactions are safer in the sense that when you're using a debit card, because it's linked to your entire savings account, if it gets hacked, then the hacker will have access to your entire savings account. They can just essentially empty that out. As opposed to a credit card, even if there are fraudulent transactions, unauthorized transactions, you can review your bill first and tell the bank, you can dispute it that I didn't make that charge.
I didn't make that charge. Yeah. Security wise...
And all of your transactions with your credit card are also recorded as opposed to cash. Sometimes you forget what you spent it on, but if you swipe, it's automatically there. And when you go abroad, you can use your credit card to transact easily instead of carrying lots of amounts of foreign currency, right?
And you know where else you can use your credit card easily? On Skillshare which is the sponsor of today's video. Skillshare is an online learning community with thousands of interesting classes on productivity, graphic design, photography, and even freelancing.
There's so many topics to choose from. You can essentially use your credit card to swipe, swipe, swipe and pay for your online learnings. But, don't worry because I've actually partnered up with Skillshare to give the first 1,000 of you guys a free one month trial when you sign up through the link in the description. These are some of the classes that I recommend you guys checking out.
So, the first one is on e-commerce essentials, how to start a successful online business. Then, if you want to learn how to be creative, you can check out this class on how to find your style. Tapos, when you want to work better, find better ways to become more efficient, you can watch this class on real productivity, how to build habits that last. One month is a pretty long time to maximize the free trial so that you can dive deep into learnings.
But after that, Skillshare memberships are also pretty affordable that you can just swipe with your credit card. Thank you so much to Skillshare for sponsoring this video. Next, credit cards are actually tools to help you leverage your cash.
Because there's like a time lag when you swipe and when you actually pay for the item, you can actually use it to prolong payments. There are these cards, for example, the Robinson's Mastercard DOS. When you swipe it, it automatically becomes an installment.
So, they call it the two gives. And unlike other cards, credit cards have like really good rewards, promos, perks. Say for example, BDO.
They have a lot of promo. Their reward system is not that good, but they're really good at promos. They have Citibank. Recently, they had the Merry Treats promo. So whenever I swipe my card at a minimum of I actually get a free GC or free Shakeys.
For points redemption, credit cards also have reward system. So for example, when I swipe, swipe, swipe, I earn points. I'll be able to redeem those points for cashback rewards, vouchers, exchange it for miles where you can get free flights.
Yeah. It's like rewards. These are things that you can enjoy when you're using a credit card. Credit cards are fun.
If you know how to use it properly. And of course, the very important pro of what credit cards are is that it helps you build credit history. Eventually, all of us probably will need to take out a loan, home loan, car loan. But it's hard to take out a loan because if you don't have an existing credit record, because the banks don't know how trustworthy you are with paying back loans.
But with credit cards, no. Because it's a mini short-term form of debt, you can actually start showing the bank that I'm a good payer. If you lend me money, I actually pay for it.
There are a lot of pros. There's a lot of reasons why I think people should own credit cards. And, when I was thinking of cons, it was kind of hard to think about it.
Yeah, there are annual fees and stuff like that that you can easily waive it. But, I think the major con for people why they don't want to own a credit card is the temptation to overspend. Obviously, when you're swiping with a plastic card, you don't feel the same ouch as if you were paying for something in cash.
Credit cards have one of the highest... interest rates, right? And when it comes to debt, credit card debt can get big easily. It can be a debt trap. But still, if you can control yourself, if you establish the systems to help you manage your credit card spending wisely, then it shouldn't be a problem.
All right. Now with all of that, if you actually want to get a credit card now, how do you do it? Okay. When applying for a credit card, there are multiple ways to apply because...
First, you can go directly to the bank on their one online website, or you go to the branch and you ask for an application form. Or, you can use my links in the description below if you want the Citibank credit card. You can also use physical booths.
So, say for example, you're walking around the mall, you can see like a little kiosk. Or, sometimes in the company, they actually offer their employees to apply for cards. For the requirements that you'll need to apply for a credit card, you can usually find this on the bank's website. It's the same thing.
You need to be at least 21 years old. There's also a minimum monthly requirement. depending on the card that you're applying for. You need to submit personal information, some valid IDs. If you're a first-time credit card holder, they typically ask for a proof of income.
So this can be in the form of your payslips, income tax return, if you're a freelancer, ITR, and then sometimes they even ask for an audited financial statement. But, if you're an existing cardholder, your latest credit card statement from another bank. So related to this question is how do you actually select a card?
For beginners, you don't really have a lot of options, right? You typically apply for the starter level cards. But, best advice to get higher chances of getting approved for a card is to apply at a bank that you already have an existing relationship with. Let's say for example, at this bank, you already have savings accounts with, you already have a debit card. Or, another route is to apply for a secured credit card.
So, a secured credit card is you have to deposit a certain amount, and a portion of that is what they will give you as your credit limit. More or less, your approval for this credit card is guaranteed and it's what I did. A quick tip, if you're like a first time credit card applicant to a certain bank, you should watch out for the promos that they have. Like for example, in Union Bank, they actually have free GC promo right now.
BPI also has a no-unwealthy-for-life promo. Citibank rewards card, it has a no-unwealthy-for-life promo right now. But the way to select a credit card is to select one that matches your lifestyle, your spending behavior, and what kind of rewards, perks, benefits you're after.
There are credit cards that are good all around cards. Whatever you spend on, it's okay. But for credit cards, take note that the points per spend are pretty useless. Like it doesn't mean that this card is good.
gives me 1 point for and this one gives me 1 point for this is better. No. What you need to look at is the reward to spend ratio. How much is the value of the reward you're getting as compared to the value that you had to spend in order to get that? This is like my basic computation for the cards that I currently own, what's the most worth in terms of the rewards.
But, yeah. Hope you guys learned something new. We'll dive deeper into credit cards in future videos.
But for now, thank you guys so much for watching. I'll see you in the next video. Bye-bye!