Giving Credit to Credit Cards

I feel bad whenever I miss my posting date. My excuse for this week is that I was out with friends for a birthday celebration (not mine) Friday night. Before I left the house, I caught an interesting news item on our use of credit cards. Due to the hard times Filipinos are turning to credit cards for their money needs.

Instead of waiting for the paycheck, many are using credit cards to buy basic necessities. Apart from impatience with paychecks, the higher costs of virtually everything eats up a big chunk of the previous paycheck. We all have to live, and armed with a credit card, one can buy groceries ahead of their expected pay date.

This is just a mundane benefit of using a credit card, but it's an insight credit card companies can use. Marketers have drummed up every possible avenue to entice people to get a card. They can be points, miles, free cellphone for a new card, etc. Most of the times, people use cards for unnecessary purchases, fueled by the magic number of "0" percent interest rate. But using cards ahead of their pay dates for basic necessities? That's something unique.

While there will be peculiarities with the shopping habits of a Filipino, depending on his social class, I am pretty sure that the time will come when credit cards eradicate the informal lending sector (I hear 5-6). One day, even mid-sized stores outside of malls might start accepting credit cards.

Ever wonder about a scenario where auto shops in Banawe or furniture shops in Binondo start accepting credit cards? What about shopping in Divisoria using credit card? You can shop like crazy and you won't even have to bring loads of cash (and fear thieves) to do your shopping. That would be something right?

According to the Bangko Sentral (Central Bank), credit card receivables are up 19.7% from last year. As our country progresses (yes, we are), so does its capital market, albeit at a slowed pace.

Like I said in my previous post, we are going to see developments where we can save more, invest longer, and retire comfortably. Personal finance is now more pervasive in media, particularly on the Internet. These are developments people take for granted, especially the younger ones who will now grow up in a Philippines with many avenues for them to save and grow their money. And with credit cards becoming more and more of a necessity, younger Filipinos grow up in a world with 12 months 0% interest shopping and purchases.

I hope that the next landmark legislation for the country would be the establishment of a more transparent and fixed system of tracking credit history. I've read horror stories about individuals being chased by credit card companies, individuals being blacklisted from loans unilaterally, etc. It's something to look forward to, and hopefully we won't have to wait another 10 years (like the PERA bill) for it to pass as law.

For now, credit history is vague. We don't have a FICO score like Americans do. Locally, using credit cards, according to most news articles I have read, is your one best weapon to build up a good credit history. A good credit standing will allow you to faster processing of your loan applications - whether it's for business or personal needs (housing, car, etc.)