PH’s Credit Card Debt Reaches ‘Critical’ Level: How Can You Be a Responsible Cardholder?

A new report highlights the importance of educating Filipino borrowers on the proper use of credit cards. 

Credit card borrowing in the Philippines has reached a “critical” risk level, with a typical borrower’s credit card debt more than four times their monthly income, according to findings by Singapore-based fintech firm Roshi Pte Ltd.

Moreover, the findings show that the average credit card debt in the country is around Php92,800, but the average monthly income is much lower, at Php21,900. 

Roshi’s study reflects a 425% debt-to-income ratio in the Philippines, which is considered the worst in the region and shows “severe financial stress.”

This ratio “far exceeds regional norms and suggests potential financial vulnerability among Filipino cardholders,” the company said, as quoted in ta report. 

Comparisons With Asian Neighbors 

Vietnam also has a concerning debt-to-income ratio—127%—a level Roshi flags as high risk.

In contrast, fellow neighboring country Indonesia was labeled low risk by the fintech firm. Singapore, on the other hand, has a high average credit card debt amounting to Php236,000. However, the country also has the highest monthly income, at Php273,000. 

According to Roshi, this shows that Singapore’s debt levels are supported by strong income capacity and advanced financial infrastructure, positioning cardholders to manage obligations effectively.

More Consumers Rely on Credit Cards

Last year, the Credit Card Association of the Philippines (CCAP) said that more and more consumers have been relying on credit cards to extend their purchasing power. At that time, credit card usage grew at double-digit rates due to increasing card issuance rates. The growth was also attributed to the usage amount per card.

Issuers offering more incentives and access to different types of credit cards is also seen as a significant factor in the growth of the industry in the country. In addition, issuers have also been able to provide more merchant options where borrowers can swipe their cards and make a purchase.

Based on the CCAP’s observation, borrowers tend to use their credit cards for shopping, dining, and travel. 

Responsible Credit Card Use 

As credit cards become more accessible to more Filipinos, one too many Filipinos have been frequently using their cards to pay for purchases, only to realize that they are incapable of paying the money they consequently owe to banks. 

This highlights the importance of properly and adequately educating Filipino credit card users on managing their personal finances, and responsible credit card use. 

Here are some useful tips for smart and mindful credit card use:

Understand Your Credit Card

Responsible credit card use starts with taking the time to learn and understand the terms of your credit card. While this may be a time-consuming process, this will help you understand billing cycles, fees, interest rates, and other aspects of your credit card. 

If there are fees that you do not understand, don’t hesitate to get in touch with your bank to learn more about it. 

Shop Safely 

Keeping your spending to a minimum will be a waste if you engage in fraudulent transactions or with websites and platforms that are not secure. Make sure to check if the person or business you’re transacting with is legitimate and double check any emails you’ve received asking for your credit card details. 

When making online purchases in particular, check whether or not the URL address starts with “https.” 

Do Not Overspend

A cardinal rule when it comes to credit card use is to not spend what you don’t have. As the Bank of the Philippine Islands (BPI) puts it, treat your credit card like cash. This helps avoid late payments as well as racking up interest. 

When it comes to spending, it is highly recommended to set a personal spending limit. Specifically, BPI suggests using only 30% of your limit, which is considered a good practice for your credit history. 

Monitor Your Expenses 

When it comes to expenses you’ve already made, it’s good practice to monitor them, including installment payments you’ve already made and payments you’ve yet to make.

Doing so helps avoid what is known as bill shock, which is the feeling of shock you get when your credit card bill is higher than expected. 

Pay Your Balance—All of It

Paying your credit card balance in full is recommended. While it can be tempting to just pay the minimum amount, this is not good practice in the long run. 

According to Metrobank, doing so will just accumulate interest in the next month/s, which will make paying off your debts more difficult. Remember to pay your bill on time. Not only will this help you avoid fees due to late payments, it will also give you much-needed peace of mind.