Money discipline should precede getting a credit card



Only 7 million Filipinos own a credit card as of 2015, according to data from the Credit Card Association of the Philippines, yet many card-holding Filipinos are deeply in debt. Statistics from the Bangko Sentral ng Pilipinas reveal that credit card debt in the country reached P157.34 billion in 2014.

These numbers suggest that Filipinos who qualify for credit cards on paper aren’t necessarily equipped with the skills to use them responsibly.

Credit cards are helpful financial tools. Besides being convenient, credit cards give you reward points that you can trade for gift certificates or free flights.

But in the same way you wouldn’t give a power drill to a 10-year-old, you wouldn’t give a credit card to someone who couldn’t manage money. A credit card can trap someone in a never-ending debt cycle if placed in the wrong hands.

Before getting a credit card, master these money habits first.

Money Habit 1:
Paying your bills in
full and on time

If you can pay for your own mobile plan, you’re probably ready to own some premium plastic.

The only time you will accumulate credit card debt is if you don’t pay your credit card bill in full and on time. So long as you have the means and the discipline to pay your bills promptly, you never have to worry about debt.

If you are still financially dependent on your parents, or you are unable to pay your own bills because you can’t afford it, stay away from credit cards for now.

Money Habit 2:
Making a budget and sticking to it

There are budgets that suit different personalities or lifestyles. Use whatever budgeting system you want – the important thing is that you stick to it. Some examples include the 50/20/30 rule, Dave Ramsey’s envelope system, and the JARS money management system (Google these to learn more about them).

Instead of thinking of a budget as a “restriction” or “deprivation,” view it as a way to maximize your money’s worth.

Having a budget in place prevents you from spending more than you earn. Your ability to keep a budget is a great indicator of how disciplined you’ll be with your new piece of plastic.

Money Habit 3:
Using credit cards as a method of payment only

The fastest way to debt is to view your credit card as an “unlimited source of cash.” Its opposite viewpoint, “spending money you don’t own,” lets you miss out on the perks of owning a credit card.

Instead, think of your credit card as a method of payment. It’s a convenient way to buy things online or book piso fare tickets. But more than convenience, a credit card can actually save you money.

Most cards give you reward points for every peso you spend on it. If your account is in good standing, you can redeem your points for free things.

As I was looking through my last credit card statement, I noticed that I had 21,000+ unclaimed points. My credit card’s reward catalog stated that I could redeem 4,750 points for a P500 gift certificate. In total, I was able to redeem my points for P2,000 Sodexo certificates—enough to buy me a good pair of shoes. Other items that you can use your credit card reward points on are international roundtrip airfares and meal vouchers, according to’s article on credit card hacks.

This highlights the importance of paying your credit card bill in full and on time. You don’t get these perks if you have any unpaid balance on your card.

Money Habit 4: Saving 20-30% of your salary

If you ever want your financial situation to improve, you must save money. Having savings gives you peace of mind, protects you during emergencies, and opens more options in life.

Master the habit of saving at least 20 percent of your salary, and aim to build an emergency fund of 3-6 months of your income. In case you lose your job or someone in the family gets sick, you can use your savings instead of going into debt.

Money Habit 5: Controlling your impulses

It’s easy to shop impulsively with a credit card because you don’t see cash leaving your hands.

The ability to curb your impulses will help determine whether you’re ready for a credit card. If you’re having trouble staying disciplined and your finances are stretched thin, avoid credit cards for now.

But if you can stick to your budget, then you can enjoy your money without sliding into debt. With your budget as your guide, give yourself some allowances for shopping, dining, and other activities you enjoy.

Owning a credit card is a responsibility.

It’s entirely possible to own a credit card without going into debt. But for this to happen, you need good money habits in place. You can’t use a credit card without discipline and self-control.

Fortunately, it’s not that hard to develop these good habits. As long as you pay your bills fully when they are due and stick to your budget, the rest will follow.

Lauren Dado is a digital marketer for start-ups in Asia. Now based in Singapore, she promotes financial literacy among OFWs in her spare time.


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