Financial Blog

Starting out in your career? Chances are, getting a credit card is already on your radar as a key step towards financial independence. 

Imagine effortlessly snagging that new tech, keeping up with the freshest styles, or even exploring incredible travel destinations – a credit card makes these experiences far more accessible. But here’s a truth bomb: for every person eager to apply, there are just as many who aren’t quite sure what they’re stepping into. That little piece of plastic? It comes with major financial responsibility. 

How you manage it has the power to shape your entire financial life. So, before you fill out that credit card application, let’s talk about the essentials you really need to understand.

First, what is a credit card?

A credit card allows you to borrow money from the bank up to a certain limit (your credit limit) to make purchases, which you then pay back. It’s not free money. 

To most people, a credit card is just a piece of plastic that they use to pay instead of cash. But a credit card is more than that. A credit card is a piece of plastic that unlocks specific rewards and privileges based on its type (Travel cards, Rewards Cards).

What’s a “credit score” and why is it important?

Having a credit card allows you to build your credit score, which can determine your chances of getting approved for a loan, negotiating interest rates, negotiating rental agreements, and even employment opportunities, as some employers do credit checks for potential employees as part of their hiring process (especially true for finance-related roles). 

How to improve credit score

• Always pay your bill on time – Your payment history is the single most important factor influencing your credit score. This includes not just credit card bills and loans, but also utility bills, phone bills, and any other regular payments. Set up automatic payments or calendar reminders to ensure you never miss a due date. Even a single late payment can negatively impact your score.

• Maintain a Healthy Mix and Length of Credit History – Lenders like to see that you can responsibly manage different types of credit (e.g., a credit card, a personal loan, a mortgage). A longer credit history with positive payment behavior also demonstrates reliability.

• Regularly Check Your Credit Report for Errors – Errors on your credit report can negatively impact your score without you even knowing. These could be incorrect late payments, accounts you never opened, or incorrect balances.

What are the fees that I need to look out for?

• Annual Fees: Many cards come with an annual fee. While some are waived for the first year or conditionally (e.g., with minimum spend), be aware if it will apply in subsequent years.
• Interest Rate (APR): This is the cost of borrowing if you don’t pay your full balance by the due date. Interest can accrue daily and compound, making your debt snowball quickly if not managed.
• Late Payment Fees: Missing your payment due date, even by a day, can incur significant late fees.
• Foreign Transaction Fees: If you plan to use your card overseas or for online purchases in foreign currencies, be aware of these fees (usually 2.8% to 3.25% of the transaction amount).
• Cash Advance Fees: Using your credit card to withdraw cash (cash advance) comes with high fees and immediate interest charges, making it a very expensive way to get cash.

What are the types of credit cards, and does it matter which one I apply for?

Not all credit cards are “built” the same. Depending on the type of card, they may have different perks, ranging from how many rewards points they earn for every transaction, if they qualify for cashbacks, or even if they can enter special areas or events. 

Here are just some of the types of credit cards that you’ll want to consider.

• Rewards Cards – Let you earn rewards points for every transaction you make, the amount of rewards you earn depends on what type of card you get. An example is our Security Bank Gold Mastercard, which earns you 1 rewards point for every 20PHP you spend, Security Bank Platinum Mastercard, which earns you double rewards points, and Security Bank World Mastercard, which earns you triple rewards points.
• Cashback Credit Cards – Let you earn cashback for every transaction, sometimes at different rates based on what you use the transactions for. Take, for example, our Security Bank Platinum Cashback Mastercard credit card.
• Travel Cards – In addition to rewards, they often come with extra perks like access to airport lounges, additional protection when purchasing abroad, free travel insurance, and more preferred rates when making purchases abroad. 

In order to maximize what you get with your credit card, it’s better if you apply for a credit card that matches your lifestyle. For example, if you tend to shop or dine, a regular rewards card with its recurring promos is best for you. If you travel a lot, a travel credit card allows you to get extra perks every time you travel. If it’s just for simple groceries or daily essentials, a cashback credit card will allow you to save more for every spend.

Parting tips

A credit card can be a powerful financial tool, opening doors to convenience, rewards, and the all-important credit score—your financial reputation. However, this power comes with significant responsibility. Before you dive in, understand that a credit card is a form of debt, not free money, and that fees and interest rates can quickly accumulate if you don’t manage your spending wisely. Take the time to explore the various types of credit cards available, aligning your choice with your lifestyle and spending habits to maximize benefits like rewards or cashback. By being informed and disciplined, you can leverage a credit card to build a strong financial foundation for your future.