Are you a first-time credit cardholder? Congratulations on getting approved for your very first credit card! It is an exciting milestone, and it opens up new opportunities for building your financial future. However, owning a credit card also comes with responsibilities that every new cardholder should understand.
Before you activate your card and start swiping, remember that with each transaction, you are borrowing money from your credit card issuer. If you do not manage your spending wisely, you could find yourself in a cycle of debt that is difficult to escape.
The good news is that being a responsible first-time credit cardholder is not complicated. We have put together a comprehensive guide with practical tips that will help you make the most of your card while avoiding common pitfalls. If you are still deciding which card to get, check out our list of best credit cards in the Philippines to find one that fits your needs.
Understand the terms and conditions
When you apply for a credit card, it is natural to focus on the perks and rewards. However, as a first-time credit cardholder, it is equally important to read and understand the terms and conditions that come with your card.
A credit card’s terms and conditions are often a lengthy read, so many people skip this part. However, you need to fully understand the rules and guidelines of your credit card issuer if you do not want any unpleasant surprises down the road.
For instance, you might think your card’s interest rate is 2.75%, but you may be shocked to discover that it only applies to certain purchases, like supermarket transactions. Every reward and benefit comes with specific limitations, so read the fine print carefully and do not be intimidated by financial jargon.
Some of the important things you need to know include the cardholder agreement, interest rates, late fees, foreign transaction fees, cash advance fees, and the terms and conditions on bills payments and the rewards program. For a deeper understanding of how rates work, read our guide on credit card rates in the Philippines.
Always pay more than the minimum amount due
One of the biggest mistakes a first-time credit cardholder can make is paying only the minimum amount due each month. While it keeps your account in good standing, you will end up paying significantly more in interest charges over time.
The minimum payment is typically just 3% to 5% of your total outstanding balance. If you carry a large balance and only pay the minimum, it could take you years to pay off the full amount. The accumulated interest can easily double or even triple what you originally spent.
To avoid this, aim to pay your credit card balance in full every month. If that is not possible, try to pay as much as you can above the minimum amount. This strategy helps you reduce interest charges and pay off your debt faster.
Keep track of your spending
As a first-time credit cardholder, it is easy to lose track of how much you are spending. Unlike cash, where you can physically see the money leaving your wallet, credit card transactions can feel less real.
Create a habit of reviewing your credit card transactions regularly. Most banks now offer mobile apps and online banking platforms that make it easy to monitor your spending in real time. Set up alerts so you receive notifications for every transaction made on your card.
You should also create a monthly budget and stick to it. Write down your essential expenses and set a limit for discretionary spending. This way, you will always know exactly where your money is going and can adjust your habits before things get out of hand.
Keep your credit utilization low
Your credit card utilization ratio is one of the most important factors that affect your credit score. This ratio measures how much of your available credit limit you are currently using.
Financial experts recommend keeping your credit utilization below 30%. For example, if your credit limit is PHP 100,000, try not to carry a balance higher than PHP 30,000 at any given time.
A high utilization ratio signals to lenders that you may be relying too heavily on borrowed money, which can negatively impact your ability to get approved for loans or additional credit cards in the future. As a first-time credit cardholder, building a strong credit history from the start will benefit you for years to come.
Pay your bills on time, every time
Late payments are one of the fastest ways to damage your credit standing. Your payment history is a critical factor in determining your creditworthiness, and even a single late payment can stay on your record for a long time.
Set up reminders or automatic payments to ensure you never miss a due date. Many banks in the Philippines allow you to set up auto-debit arrangements so your credit card bill is paid automatically from your savings or checking account.
Late payments also come with penalties. Most credit card issuers charge late fees ranging from PHP 500 to PHP 1,500 or more per occurrence. Over time, these fees can add up and significantly increase your total debt.
Take advantage of rewards and perks
As a first-time credit cardholder, do not forget to maximize the benefits that come with your card. Many credit cards in the Philippines offer rewards programs, cashback, air miles, and other perks that can help you save money on your everyday purchases.
However, do not fall into the trap of overspending just to earn more rewards. The key is to use your credit card for purchases you would make anyway, such as groceries, fuel, and utility bills, and then pay off the balance in full each month. If you want to earn more from your spending, explore the best cashback credit cards in the Philippines for better options.
Some cards also offer welcome bonuses and sign-up promotions that can be quite valuable. Take the time to research what promotions are currently available and choose a card that aligns with your spending habits. You can explore our roundup of the best credit cards for new cardholders in the Philippines for recommendations.
Avoid cash advances
While your credit card allows you to withdraw cash from ATMs, this is one feature that every first-time credit cardholder should avoid using. Cash advances come with extremely high interest rates that start accruing immediately from the day of withdrawal. There is no grace period, unlike regular purchases.
In addition to the high interest rate, most credit card issuers charge a cash advance fee, typically 2% to 3% of the amount withdrawn. This makes cash advances one of the most expensive ways to access money.
If you need emergency funds, consider other options first, such as a personal loan or borrowing from family or friends. Cash advances should only be a last resort.
Protect your credit card information
In today’s digital age, keeping your credit card information safe is more important than ever. As a first-time credit cardholder, take extra precautions to protect yourself from fraud and unauthorized transactions.
Here are some security tips to follow:
- Never share your credit card number, CVV, or PIN with anyone.
- Activate one-time password (OTP) verification for online transactions.
- Avoid using your credit card on unsecured websites. Look for the padlock icon and “https” in the URL.
- Report any suspicious transactions to your bank immediately.
- Keep your card in a secure place and never leave it unattended.
If your card is lost or stolen, contact your credit card issuer right away to have it blocked and request a replacement.
Understand how interest is calculated
Many first-time credit cardholders are surprised when they see their first statement with interest charges. Understanding how credit card interest works can help you make smarter financial decisions.
In the Philippines, credit card interest rates typically range from 2% to 3.5% per month, or roughly 24% to 42% per annum. Interest is charged on the outstanding balance that you carry over from one billing cycle to the next.
The simplest way to avoid paying interest altogether is to pay your full statement balance before the due date each month. When you do this, you enjoy what is called a grace period, meaning you can use your card without incurring any interest charges on your purchases.
Do not apply for too many credit cards at once
When you are new to credit, it might be tempting to apply for multiple cards to maximize your rewards and credit limit. However, submitting too many applications in a short period can actually hurt your creditworthiness.
Each time you apply for a credit card, the issuer performs a credit inquiry, which can temporarily lower your credit score. Multiple inquiries within a short time frame can make you appear desperate for credit, which is a red flag for lenders.
As a first-time credit cardholder, start with one card that meets your needs and use it responsibly for at least six months to a year before considering a second card. For guidance on the ideal number, read our article on how many credit cards you should have.
Build your credit score from day one
Your credit card is one of the best tools available for building a positive credit history. As a first-time credit cardholder in the Philippines, every payment you make and every balance you carry contributes to your credit profile.
To build a strong credit score, follow these practices:
- Always pay your bills on time and in full.
- Keep your credit utilization below 30%.
- Avoid maxing out your credit card.
- Do not close your oldest credit account, as the length of your credit history matters.
- Review your credit report regularly for errors.
A good credit score will open doors to better financial products in the future, including lower interest rates on loans, higher credit limits, and premium credit card offers. If you are curious about how alternative payment methods affect your score, learn more about whether Buy Now, Pay Later can help build your credit score.
Know when to use credit vs. cash
Not every purchase needs to go on your credit card. As a first-time credit cardholder, it is important to develop good spending habits by knowing when it makes sense to use credit and when it is better to pay with cash or a debit card.
Use your credit card for planned purchases that you can pay off within the billing cycle, such as groceries, fuel, and subscriptions. Avoid using your card for impulse buys or purchases that will take months to pay off.
If you find yourself relying on your credit card for everyday essentials because you have run out of cash, that is a warning sign that you need to reassess your budget. A credit card should be a financial tool, not a lifeline.
Request an annual fee waiver
Most credit cards in the Philippines come with an annual fee that is charged once a year. However, many cardholders are not aware that you can often request a waiver for this fee, especially if you have been using your card regularly and paying on time.
Call your credit card issuer and politely ask if they can waive your annual fee. Banks are often willing to do this for loyal customers, particularly if you threaten to cancel the card. Some secured credit cards even offer waived fees for the first year.
If the fee waiver is not possible, ask about alternative offers, such as bonus reward points, statement credits, or reduced fees.
Learn from common credit card mistakes
Every first-time credit cardholder should be aware of the common pitfalls that can lead to financial trouble. Here are some mistakes to avoid:
- Ignoring your credit card statements: Always review your statements for errors, unauthorized charges, and unusual activity.
- Using your card for emotional spending: Avoid retail therapy and impulse purchases that can quickly add up.
- Lending your card to others: You are responsible for all charges on your card, even if someone else made them.
- Missing payment deadlines: Late payments result in fees, higher interest, and a damaged credit score.
- Only focusing on rewards: Do not let the pursuit of rewards lead you to spend beyond your means.
Final thoughts
Being a first-time credit cardholder is a major financial milestone. With discipline, awareness, and a clear understanding of how your credit card works, you can make it a powerful tool for building wealth and achieving your financial goals.
Remember to spend within your means, pay your bills on time, and always read the fine print. If you are still in the process of choosing your first card, our guide on how to apply for credit cards in the Philippines can help you get started on the right foot.
What was your experience as a first-time credit cardholder? Share your tips and stories in the comments below!