Steady drop in credit card deliquencies seen

MANILA, Philippines — Credit card delinquency rate may continue to improve if more Filipinos become responsible credit card users despite the ongoing revenge spending, according to the Credit Card Association of the Philippines (CCAP).

Latest data from the association of 17 major credit card issuers in the country showed that delinquency rate further declined to 3.26 percent in the first quarter from 3.32 percent in the same period last year.

The card delinquency rate peaked at 8.37 percent during the height of the COVID pandemic in 2020 and improved to 4.03 percent in 2021 and to 3.32 percent in 2022

Prior to the pandemic, the delinquency rate stood at 4.36 percent in the fourth quarter of 2019.

Card delinquency refers to the payment of less than the minimum amount of credit card debt for least three billing cycles.

CCAP executive director Alex Ilagan said the industry does not see Filipinos’ revenge spending letting up soon as inflation continues to ease but reiterated the need to be responsible credit card users.

“While Filipinos’ spending spree keeps the economic engine chugging along, we must bear in mind that a credit card is not ‘free money’,” Ilagan said.

According to CCAP, delinquency has been dwindling despite the 47 percent jump in gross billings to P410 billion from January to March   compared to P279 billion in the same period in 2022.

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.

To convert Filipinos into responsible borrowers, CCAP has been conducting credit awareness programs for colleges and universities as well as companies since 2017.

“Our aim is to educate them as early as possible so they know what credit is and how they can manage their credit cards well when they get theirs. Any organization, not just schools, can reach us for these enlightening seminars,” Ilagan said.

CCAP urges users not use a credit card beyond one’s capability only to repay the debt late and to keep an eye on one’s total monthly spending to avoid exceeding the credit limit that result in steep fees.

“Spending beyond one’s means will result in unmanageable debt and additional charges that further inflate the balance,” CCAP said.

It added that users should settle credit card bills on time every month as failure to meet payments results in late fees and other penalties.

Furthermore, CCAP said users should track billing cycles and due dates as well as avoid accumulating interest charges and debt to maintain a good credit score.