The Credit Card Association of the Philippines, a group of 17 major credit card issuers, reported a decline in delinquency rate since the onset of the pandemic.
CCAP executive director Alex Ilagan said in a statement that from 4.36 percent in the fourth quarter of 2019, the delinquency rate peaked at 8.37 percent at the height of the pandemic in 2020 before falling to 4.03 percent in 2021when mobility restrictions were relaxed by the government.
The rate eased further to 3.32 percent in the same period in 2022 and to 3.26 percent in the first quarter of 2023. Card delinquency refers to the payment of less than the minimum amount of credit card debt for at least three billing cycles.
Ilagan said delinquency has been falling despite the 47-percent increase in gross billings to P410 billion in the first three months of the year from P279 billion a year ago.
The first-quarter 2023 growth rate was the highest since the pandemic started in 2020 as Filipinos took to shopping, traveling and buying goods after being on lockdown for nearly two years.
“The jump in credit card billings is an indicator of higher consumer spending, a major driver in the economy’s post-pandemic recovery,” Ilagan said.
Ilagan said Filipinos should be responsible owners of credit cards. “We must bear in mind that a credit card is not ‘free money.’”
Ilagan said he expects the delinquency rate to continue to fall if more Filipinos become responsible credit card users.
To convert Filipinos into responsible borrowers, CCAP has been conducting credit awareness programs for colleges and universities as well as companies since 2017 to educate everyone on the proper use of credit cards.
CCAP said credit card users should avoid their use beyond one’s capability, only to repay the debt late. Spending beyond one’s means will result in unmanageable debt and additional charges that further inflate the balance, it said.
It advised credit card users to keep an eye on one’s total monthly spending to avoid exceeding the credit limit, as this could result in steep fees. A maxed-out credit card can also cause financial strain, especially for people who can only manage to make minimum payments each month.
The minimum monthly payments will likely grow past the cardholder’s paying capability, causing them to miss their dues. A constantly maxed-out credit card will also hurt a user’s credit score, it said.
Credit card users are reminded to settle their bills on time every month and track billing cycles and due dates.