You love to shop for credit. You must understand how much you spend or the additional expenses that you incur when using that plastic. You must understand also that credit cards don’t give you money, they just give you the purchasing power even without cash in hand. To understand further, I have listed below the additional burdens of keeping and using that card.
1. Finance Charges- The most common monthly interest rate on credit cards is 3.5%, if you fail to pay the outstanding balance in full. To illustrate, suppose you have an outstanding balance of P10,000 on your last bill and you have paid only the minimum amount of 5% or P500.00. At 3.5% interest, out of the P500.00 payment, only P150.00 will be deducted on your credit card debt. That means, you have incurred an additional P350.00 for using that card.
The next month’s bill will reflect an outstanding amount of P9,850.00, and you will pay again another P500.00, suppose that is your monthly budget for card debts. It will take you 35 months or almost 3 long years to pay off that debt…
Balance Interest Payment Forwarded Balance
10,000.00 350.00 500.00 9,850.00 FEB
9,850.00 344.75 500.00 9,694.75 MAR
9,694.75 339.32 500.00 9,534.07 APR
9,534.07 333.69 500.00 9,367.76 MAY
9,367.76 327.87 500.00 9,195.63 JUN
9,195.63 321.85 500.00 9,017.48 JUL
9,017.48 315.61 500.00 8,833.09 AUG
8,833.09 309.16 500.00 8,642.25 SEP
8,642.25 302.48 500.00 8,444.73 OCT
8,444.73 295.57 500.00 8,240.29 NOV
8,240.29 288.41 500.00 8,028.70 DEC
8,028.70 281.00 500.00 7,809.71 JAN
7,809.71 273.34 500.00 7,583.05 FEB
7,583.05 265.41 500.00 7,348.45 MAR
7,348.45 257.20 500.00 7,105.65 APR
7,105.65 248.70 500.00 6,854.35 MAY
6,854.35 239.90 500.00 6,594.25 JUN
6,594.25 230.80 500.00 6,325.05 JUL
6,325.05 221.38 500.00 6,046.42 AUG
6,046.42 211.62 500.00 5,758.05 SEP
5,758.05 201.53 500.00 5,459.58 OCT
5,459.58 191.09 500.00 5,150.66 NOV
5,150.66 180.27 500.00 4,830.94 DEC
4,830.94 169.08 500.00 4,500.02 JAN
4,500.02 157.50 500.00 4,157.52 FEB
4,157.52 145.51 500.00 3,803.03 MAR
3,803.03 133.11 500.00 3,436.14 APR
3,436.14 120.26 500.00 3,056.41 MAY
3,056.41 106.97 500.00 2,663.38 JUN
2,663.38 93.22 500.00 2,256.60 JUL
2,256.60 78.98 500.00 1,835.58 AUG
1,835.58 64.25 500.00 1,399.82 SEP
1,399.82 48.99 500.00 948.82 OCT
948.82 33.21 500.00 482.03 NOV
482.03 16.87 498.90 (0.00) DEC
At this rate, you have to pay almost twice as much as you have purchased or 175% of the original balance for three long years. Is it really worth it?
2. Late Payment Fee- If you think finance charges make you sick, the Late Payment Fee is even more sickening. This is an additional expense for not paying on or before the due date. So, in addition to that bothersome and burdensome finance charge, you will have to pay another 7.5% of the minimum payment due. In the illustration above at P10,000.00, you will pay an additional P37.50 for this, which further deducts your supposed payment of P500.00, bringing your outsanding balance to P9,887.50. Yes, it’s very disappointing, to say the least, that you have paid P500.00, but have lessened your debt by a measly P112.50. So be very cautious on your payment due date, your failure to pay on time will really hurt your pockets.
3. Annual Fee- Most credit card companies waive off the annual fee for the first year, but on the following year, they will automatically charge you with this fee, which ranges from P1,200/p.a. to P2,500/p.a.
This means that just by keeping the card, you will pay the card company for P100.00-P200.00 per month.
4. Overlimit Fee- You have an assigned credit limit for your card. If you use your card above that limit, you will be charged by P500.00 or more. How is this possible? Since most credit card companies have a system which blocks transactions above your credit limit, you may wonder how on earth can you exceed your spending limit.
This happens if you maximize your allowable limit on or before the cut-off date. Suppose you have a P20,000 assigned credit limit and your cut-off date is every 12th of the month. If you have used up your limit up to P20,000 on Feb.12, and you have a previous balance that you have not fully paid this will incur finance charges, which will add up on your outstanding balance. This will lead to overlimit, or over credit limit, which entails the overlimit fee.
5. Cash Advance- You need cash right away and you can’t withdraw from your ATM, you have the option to get cash using your credit card. You may have to think twice or thrice before availing this service, because for each withdrawal, you will be charged an additional P300-P500 on your bill. In addition to that, if you fail to settle the full amount, additional charges will apply. Unless you’re desperately in need of cash, this service is definitely not advisable.
There are other charges that card companies impose such as transaction retrieval fee, payment for lost/stolen card replacement fee and account maintenance fee. Check their website or call the customer service hotline numbers for details.
