High credit card rates continue

We’ve heard a lot of tragic credit card tales; in fact, these have become too many that we’ve forgotten the moral lesson that accompanies each and every one of them. Were you one of those who had gotten so addicted with swiping those plastic cards that your debts had piled up beyond your capacity to pay?

Or if you are past that, you are probably one of those who have fallen victim to collectors’ modus operandi of threatening and sending shameful demand letters through your office’s fax machine. Before you were even aware of it, everyone in your office already knew how delinquent you are as a credit card holder.

Or you are perhaps one of the many who dutifully pays a tenth of his/her salary to the credit card company, but remains puzzled why your level of debt doesn’t seem to decrease.

Scandalously high credit card financing charges

Well, good for those who learned early enough that at a monthly interest rate of 3.5 percent a month, most credit card companies – with the exception of the Ayala-owned Bank of Philippine Island, which has slashed its rate further to 2.75 percent – charge a whooping 42 percent interest annually! Pretty big when you know that interest earned on a regular savings account is just at two percent and a housing loan with Pag-ibig is just six percent – both annually.

The big question really is why credit card rates can’t fall when all other yields have fallen. The benchmark 91-day Treasury bill, which banks use in pricing loans, had fallen to a record low of 2.86 percent. Another benchmark for cost of money, the central bank’s overnight borrowing rate, has been steady at 7.50 percent since October 2005.

Well, it’s either that the meaning of the word "benchmark" has been changed or, most likely, that these benchmarks are meaningless from credit card companies’ point of view as they plot to extract as much as they can from the card users.

A ‘growth’ sector

Overdue credit card receivables had reached P16.3 billion in the quarter ending December, up two percent from the same period a year earlier to account for 16.4 percent of all credit card receivables totaling P99.6 billion at the end of last year. Bet you, a big chunk of these overdue amounts are unpaid interest, financing charges and late payment penalties.

At a monthly interest rate of 3.5 percent, just imagine how much money a P100-billion industry makes! Surely, income from credit cards is starting to become a solid revenue driver for banks and credit card issuers.

With almost P100 billion in receivables, the local credit card industry had grown a whooping 20 percent from end-2005’s P82.8 billion. This just plainly indicates the increasing popularity of plastics among Filipinos, now estimated at about six million.

It is interesting to note our credit card interest and financing charge rates compared with other countries in Asia. Singapore-based card firms, I hear, charge an annual interest rate of about 24 percent; this is about the same rate in other countries. If this is correct, what is the reason for the disparity?

It is noteworthy that senatorial candidate Mike Defensor, knowing only too well how sensitive it is as an issue for many Filipinos, has called for new legislation "to check excessive and burdensome card interest rates." Particularly, he has been talking about an imposition of a cap on credit card rates.

I hope that this is not just an election campaign tactic that usually gets forgotten once votes are cast.

Excessive extra charges

Another thing we consumers should watch out for is whether extra charges are collected from customers who use credit cards for payments. If I recall correctly, the Department of Trade and Industry has reinforced the, "One Price, One Tag" policy under which a customer pays the same price for goods or services whether the payment is made for in cash or through card.

Nowadays, merchants have grown wiser and some stores charge a higher sales discount for cash purchases. These merchants – mostly those selling computers and computer supplies – continue to maintain a two-pricing policy; their basic complaint is the high fees that credit card companies charge on transactions that becomes a burden in a cutthroat pricing industry.

With the prevailing high merchants’ fees, many establishments feel that they might as well stop offering payment convenience through credit cards. Unless, of course, with all the income that credit card firms are amassing with their high interest rates, these card companies would come to their senses and reduce the merchant fees that they impose.

Deafening silence of banks and card companies

While BPI has made a small adjustment in its interest charges for credit card transactions from 2.99 percent per month to 2.75 percent, this is still way off the Bangko Sentral ng Pilipinas’ suggested cap of 1.5 to 1.67 percent per month. But at least BPI is moving, albeit in very small steps.

What is deafening is the silence of the other major players like Citibank and HSBC. How long will they ignore the outcry over the scandalously high credit card interest and financing charges?

Popularity of poker satellites

Satellite poker tournaments are becoming the most popular route for those poker enthusiasts who have the necessary skills and are keen to join major poker tournaments but may not have the backing of a sponsor nor the resources to cover the tournament and registration fees.

The Philippine Poker Tour (PPT), the leading proponent of major non-wager poker skills tournament, is conducting regular qualifying/satellite tournaments nationwide to give poker players opportunities to join major tournaments that offer attractive prizes.

Winners of these competitions are given FREE seat certificates to the grand finals of the 3rd PPT Million-Peso Hold’em Championship where the champion is guaranteed to receive P1 million plus the coveted gold bracelet.

Satellite/qualifying competitions for the 3rd Philippine Poker Tour (PPT) Million-Peso Hold’em Philippine Championship for next week are scheduled as follows: Wednesday, April 25 at Airport Casino Filipino Parañaque; Friday at San Mig Alabang Town Center; and Thursday at Elbow Room, Metro-Walk, Pasig.

Visit the official PPT website, www.PhilippinePokerTour.com for more details. Or call the PPT secretariat (c/o Cindy) at 817-9092 or 812-0153.

Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street , Salcedo Village , 1227 Makati City . Or e-mail me at reydgamboa@yahoo.com or at reygamboa@linkedge.biz. For previous columns, you may visit my website at http://bizlinks.linkedge.biz.