Contrary to popular belief, a credit card is not your free money. It's a piece of plastic that promises to pay your purchases at a later date. Think of it as your loan – your utang. Before you get one, it's highly recommended that you establish your own emergency fund first.
Now, I know you probably don't want to hear this, but not all credit-card companies want you to pay your loans as soon as possible. Sometimes, they want you to delay your payment so they can charge you a higher interest rate. Some companies may view you as a money machine instead of as a lovely customer. Sadly, some – not all – are there purely for the money. Gasp!
What to do, then? If some credit-card companies don't make the effort to disclose the fine print or reveal your privileges, then read up. It's for the good of your sanity and your bank account balance:
1. You can fire them if you want to.
You're still your credit-card company's boss. So if you've been a loyal and responsible customer, you can actually call them up and negotiate your current interest rate. You can tell them about your clean track record – you pay in full and in time – and nicely ask them to lower your interest rate.
Hey, you can even tell them about their competition's current rate! You can say that your new card can offer a lower rate and can even give you freebies such as a free Despicable Me! Minion keychain or a free meal at a nice restaurant.
Tell them you'd really like to keep their card, but if they can't offer you better terms, you might be “forced” to switch. It doesn't hurt to try this.
2. They need you more than you need them.
Competition in this credit-card market is tough – this is why a lot of them display enticing advertisements and give out lots of freebies, right? This is why you get spam emails on credit-card applications. This is why a well-dressed credit-card representative gives you brochures and even asks for your contact information right on the get-go.
That said, if you just do your part and be a great customer, you can negotiate for almost everything! Yes, you can negotiate your card's annual fee. You can even have it waived.
Yes, you can negotiate a late fee, provided that you've been paying in full and in time every time.Yes, you can even change your due date to the date of your convenience.
3. The teaser rate isn't going to be permanent.
Getting a credit card is like getting married. At the early stages, you're so happy and so satisfied with your spouse – everything about him is perfect! His hair, his abs, and even his cute dimple on his cheek. After six months has passed, then, boom! You think his hair is bad, his abs are only one-pack, and his cute dimple looks like a worm.
This is the teaser rate that credit card companies give you if you “sign up now.” In the beginning, you'll enjoy low interest rates. After six months, when you're already in a fixed contract, they'll increase the interest rate to immense amounts! (Naturally, you can't protest because this is included in the fine print that you never bothered to read because it made your nose bleed).
4. You're allowed to pay only the minimum charge so that your interest will be maximized.
Let's say you have a balance of Rp 1,500,000 on your credit card right now. The minimum payment is 10% according to Bank Indonesia's requirement, so you pay Rp 150,000.
Ayos! Deal! You already paid the minumum due so you've paid everything, right? Wrong. If you pay only the minimum amount due, the remaining balance will be carried over to the next statement. So, if you've paid Rp 150,000 right now, you still have a loan of Rp 1,350,000, yes? No.
You will also be charged another interest on the remaining balance. The more minimum amount you pay, the higher your total payment will be in the future. If you can afford to pay the total balance in full and on time, then go! Enjoy – you can even take advantage of the freebies!
If you can't, then no! You'll get stuck in a difficult debt cycle. Think twice before you swipe that credit card. Your sanity and wallet will thank you for it.
Lianne Martha M. Laroya believes in better days and enlightening experiences. She founded The Wise Living to educate fellow 20-somethings on money management and early investing without boring them to girly tears. She loves to hear from you. Connect with her now on Twitter!
*This story was first published in Rappler.com, a Manila-based social news network where stories inspire community engagement and digitally fuelled actions for social change.
** Illustration by Leo Blanchette