9 Credit Card-Related Terminologies First-Time Cardholders Should Know

Avoid common pitfalls associated with credit use.

January 16, 2025

Share this article

facebook

twitter

Take the chance to discover your new favorite spot for coffee in Bacolod!

Image: Pexels

For sure, getting your first credit card will be an exciting experience. It will essentially unlock a multitude of features that can enhance your financial flexibility beyond what that entails today. For one, credit cards will allow you to make cashless transactions, which means that shopping both in-store and online will be a breeze. You can also use your credit card to earn reward points that can be used to redeem vouchers, gifts, and other perks.

A credit card can also be invaluable for your budget management, as credit card statements offer a detailed way to keep track of your expenses. The rundown can help you evaluate your spending habits. All these benefits are things credit card Philippines holders can look forward to if they want their lives to be more pleasant and convenient.

Before you swipe your new credit card, however, it’s important to know the details of how it works. Your knowledge of credit card terminologies will be essential towards making wiser purchasing decisions and avoiding unpleasant surprises when using your card.

Here are some terms that you should definitely keep in mind to make the most of your credit card experience:

1. Credit Limit

Your credit limit refers to the maximum amount you can spend with your credit card. Credit limits can vary depending on multiple factors such as income, credit history, and the type of card you have. For instance, as a first-time credit card user, you may find that your credit limit is currently set at a modest amount.

However, frequent use of your credit card, as well as your effort to pay your bills on time, often helps convince your card provider to increase this limit eventually. Try to avoid exceeding your limit when using your card, as doing so could lead to overlimit charges.

2. Billing Cycle

The billing cycle is the time frame during which your credit card transactions are recorded, typically lasting about 30 days. All purchases, bill payments, and other card transactions made during this period are recorded in your statement, which is then released at the end of the billing cycle.

Knowing the dates of your billing cycle allows you to plan your card usage strategically. For example, purchases made at the start of your billing cycle won't be due for payment until the end of the next cycle's grace period, giving you more than a month to settle the bill without incurring interest.

3. Due Date

The due date is the deadline for you to pay at least the minimum amount due on your billing statement to avoid penalties. Missing this date can result in late payment fees, so it’s best to pay on time to avoid having to shell out more money on top of your card payments.

4. Minimum Amount Due

This is the smallest payment you must make to keep your account active. Depending on your credit card provider’s terms, this is usually a fixed percentage of your outstanding balance or a set minimum amount, whichever is higher. Keep in mind that while paying only the minimum amount due may seem like a convenient course of action—especially if you’re on a tight budget for the month—it can also lead to higher finance charges down the line.

5. Finance Charge

This term refers to the interest charged on any unpaid balance after your due date. This interest varies depending on your credit card provider and the type of card you have, so it’s best to always check your card terms first to know how much you’ll incur in terms of finance charges if you missed a payment. The best way to avoid finance charges is to simply pay your balance in full every month.

6. Annual Fee

Annual fees are the yearly charge for using the credit card. Fortunately, many credit card providers in the Philippines are willing to waive this fee based on conditions such as meeting a certain spending threshold within a few months of activating your card. Always consider this cost when choosing a credit card program to join, as it affects your overall savings.

7. Cash Advance

A cash advance allows you to withdraw part of your credit as cash directly from an ATM. This can be especially helpful during emergencies or when dealing with establishments that only accept cash. However, cash advance interests are often higher than regular credit card purchases, so it’s best to only use this method when necessary and within moderation.

8. Reward Points

Credit card issuers often offer reward points for every peso you spend, such as 1 point for every PHP 100 spent. These points can then be redeemed for discounts, travel miles, gift vouchers, or merchandise. Some cards offer more points for specific spending categories such groceries or travel, so make sure to choose a card that will reward your particular lifestyle.

9. Statement of Account

Your statement of account is a summary of your credit card activity during the billing cycle. It includes your total balance, minimum amount due, due date, and a detailed list of all the transactions you’ve made. Make it a habit to review your statements regularly to track spending, spot any errors, and (in the worst-case scenario) detect fraudulent transactions.

Again, knowledge of these key credit card terms will enable you to use your new card wisely and efficiently. This information can also help you avoid unnecessary fees such as late payment or overlimit charges. Shop, pay bills, and make transactions with your credit card with ease while building good financial habits at the same time.

Discover essential consumer tips and guides at Yoorekka to empower your purchasing decisions!

Check out this video:

About -

Learn more stories on:

credit card

Location Tags:

Manila

Disclaimer: All articles in the Consumers Magazine of Yoorekka are for general information and entertainment purposes only. Although careful research has been made in writing them, Yoorekka does not make any warranty about the completeness and accuracy of all information presented in our articles. Our content is not intended to be used in place of legal, medical, or any professional advice.