Financial Wellness in the Digital Age: How to Use Your Credit Card for Wiser Online Shopping 

Credit cards have become integral to modern financial transactions, offering convenience and flexibility in managing finances. However, the ease of credit card usage comes with responsibilities. Wise usage of credit cards and safely navigating the online shopping landscape are crucial skills in the digital age. 

With the Bangko Sentral ng Pilipinas (BSP) announcements on retaining the credit card transactions’ ceiling rates, credit card holders and credit card issuers must be informed of the new guidelines to make informed financial decisions.

Here are the ceilings on credit card transactions set by the Bangko Sentral ng Pilipinas (BSP) as of August 2023:

• Maximum interest rate on unpaid outstanding credit card balance (finance charge) – three (3) percent per month or 36 percent per year

• Maximum add-on rate for installment loans – one (1) percent per month

• Maximum processing fee for credit card cash advance – PHP 200.00 per transaction

Any credit card user will only be charged a maximum interest of three (3) percent every month on their unpaid balances, regardless of which bank or branch they are subscribed to.

With this in mind, here are tips on how to use credit cards wisely.

Protect your physical card

Credit card companies have gone above and beyond to issue secured credit cards to any authorized user, from improving the earliest forms of metal cards to EMV-activated chips that store encrypted digital signatures. This eliminates the problems caused by unsecured credit cards, ensuring that any lost or stolen card will not expose card details imprinted on the physical card through automatic deactivation, preventing access to any linked bank account and issuance of cash advances.

Understand your credit card terms and conditions

Before anything else, read and familiarize yourself with your cardholder agreement, including billing cycle, interest rates, credit card fees, grace period, and other benefits. Be aware of your credit line and how to borrow money for emergency fund, and avoid maxing out your card to maintain a good credit score.

Use the credit card for your needs, not wants

Once in possession of a credit card, one must use it carefully. 

Debit cards and credit card issuers offer a lot of enticing promotions. And large retailers are not helping much in this predicament. If you feel the impulse to purchase something, wait at least 24 hours and think about it. You can even ask yourself questions about one’s basic needs and if it is an urgent purchase. For example, if the desired item is not needed anytime soon, ask yourself if it feeds, bathes, or fills out your family’s needs. Perhaps saving up for it for now is better if it does not. Financial literacy is hard climb but will get you a long way.

Pay off your balance every month, and never skip any payments

Be religious with your commitment to pay off any previous balance you might have on time. Always aim to pay your credit card balance in full each month to avoid accumulating interest charges. If you cannot pay the entire balance, fund more than the minimum payment to reduce interest costs, otherwise you will find yourself in a regrettable financial situation.

Monitor your statements

Review your credit card statements regularly for transaction amount errors, unauthorized payments, or fraudulent charges. Report discrepancies to your credit card issuers promptly to resolve issues and protect your financial security.

Stay under 30 percent of your total credit limit

This is the rule of thumb regarding your credit utilization rate. The utilization rate is a ratio that measures how much credit you are using compared to how much you have available. This rate looks at your credit card balance and your credit card limit. If you want to know more about immunizing against unnecessary consumerism, click here.

Put your balance alerts and notifications on to prevent overspending

Balance alerts inform you, whether by text, email, or in-app message, about the level and status of your balance. You could customize your alerts for when your balance exceeds 30% of your credit limit.

Think twice if you plan on canceling your credit card, especially your first one

One should think twice before canceling a credit card due to potential consequences. Canceling can impact positive credit history by reducing available credit and shortening credit history, which may hinder future loan approvals or result in higher interest rates. Additionally, most major credit cards erases any rewards or benefits associated with canceling. 

Instead, consider keeping the card open with a zero balance or using it sparingly to maintain a positive credit history. If determined to cancel, evaluate the overall impact on credit, long-term financial goals, and alternatives like downgrading the card to avoid potential drawbacks.

Here are tips that can help you make better decisions when shopping online:

Secure your online account and personal information

Securing online funds and personal information like your social security number, during electronic commerce is essential for protecting yourself against identity theft, fraud, and financial loss. 

One of the ways to do this is to enable your two-factor authentication (2FA) to enhance security. This adds an extra layer of protection to your logins by having a verification system, such as having a one-time code sent to your phone or your number. Also, update strong, unique passwords for each online shopping account regularly. 

Being cautious of phishing attempts and verifying website security adds to your safety. Stay wary of unsolicited emails, links, odd domain names, or messages asking for personal information. Do not click on suspicious links, and look for “https://” and a padlock icon in the address bar before entering your personal or payment information on a website. Never share sensitive information through email or pop-up windows. Secured cards can keep you from unwarranted transactions.

Tip: Avoid making online purchases over public Wi-Fi networks, which may need to be more secure. Using a VPN (virtual private network) can also help if you use a public Wi-Fi network to shop.

Set up a budget

Having an online budget can help you manage your purchases. There are applications dedicated to daily, weekly, monthly, and even annual financial planning so you can keep track of your spending habits. Using a dedicated credit card exclusively for vendors selling online can also help you track your online expenses and limit your exposure to unauthorized use. This way, you are able to achieve financial freedom.

Compare prices and check reviews carefully

Verify customer reviews and ratings for a positive shopping experience. Sometimes, the photos of certain products on websites do not match how they look. To avoid purchasing traps like this, you can look into things such as:

• How many purchases and stars has this item received?

• What are the reasons for customers rating this high/low?

• Are the customers satisfied with the product?

• Is the merchant responsive to the customer, whether they are giving a positive response or a complaint?

Also, shop with well-known and reputable online marketplaces with secure websites. They have established trust and credibility that attract customers, which can reduce your chance of getting into fraudulent transactions. Online stores with certain websites can also protect your personal and financial information, ensuring that your purchases and information are confidential and safe.

Use e-coupons, vouchers, and discounts, and look for deals and online sales

Whether ordering from major retailers or shopping from department stores, you can save money using store cards, gift certificates, vouchers, and e-coupons. You can also save more money by carefully looking at a physical store or different shops selling the same item for higher or lower prices. For example, e-commerce platforms in the Philippines, such as Shopee and Lazada, have flash deals every so often and usually last for a short time.  

Look at shipping costs

Some shipping costs are more expensive than others, depending on where your desired item is shipped. Delivery costs from international shops are usually more expensive than local stores. 

The size and weight of your purchase can also increase your shipping prices. For example, if you buy a large computer table from an international store, the fees from the shopping platform alone could be higher. Some deliverymen might also ask for extra charges upon the delivery of your items, especially if they had to handle the parcel with high maintenance.

Using secured credit cards while you shop online is an essential skill in the digital age. Through all these advice and tips, individuals can make the most of modern financial tools while safeguarding their financial well-being.

AllEasy and AllBank both offer a holistic approach to financial health as other financial institutions in the country, offering various programs for those seeking to manage their own money wisely. AllBank provides specialized financing products such as a debit card and a checking account while AllEasy, as a fin-tech solutions provider, makes mobile commerce much more secure.