Public warned against credit card loans

THE central bank is warning people against using their credit cards to withdraw cash because of the high interest rate their issuers charge on it.

“Don’t use your credit card to withdraw cash from ATMs or for cash advances as much as possible. This is an expensive form of credit,” the Bangko Sentral’s Financial Consumer Affairs Group says in an advisory.

The group says the interest rate on cash advances is 3 to 5 percent of the amount. Card issuers also charge an interest or finance charge on the cash advance apart from annual and late-payment fees, says the group, which recently launched a financial education exposition in Cebu City.

Bangko Sentral Deputy Governor Diwa Guinigundo also warns credit card holders against paying only the minimum amount due on their transactions because they open themselves to many charges. The Financial Consumer Affairs Group says they should pay their bills in full and on time to avoid penalties and finance charges.

“If you cannot pay your total amount due in full, pay as much as you can,” the group says.

“If you maintain more than one credit card, pay the one with the highest interest rate.”

People use their credit cards mainly for shopping and to pay for their restaurant and hotel bills and airline tickets.

Credit card transactions in the Philippines amounted to P136.6 billion in the fourth quarter of 2009, up 4.5 percent from P130.7 billion a year ago.

But the ratio of non-performing credit card receivables has been on the rise, hitting 12.7 percent in the fourth quarter from 11.7 percent a year ago.

Credit card receivables represented about a third of the total consumer loans extended by banks in the fourth quarter that amounted to P413 billion. –Roderick T. dela Cruz, Manila Standard Today