Teach Children about Credit: Credit awareness key to falling credit card delinquency rate — CCAP

Credit awareness key to falling credit card delinquency rate — CCAP

Dad bloggers in the Philippines and Dad Influencers in the Philippines like me have a powerful advocacy -- and that is to teach kids how credit works in the Philippines. The reason for Filipino's having large debts with their credit cards is due to the fact that this topic was not usually taught in schools and at home.

While it does not see Filipinos’ revenge spending letting up soon especially as inflation eases, the credit card industry expects the delinquency rate to continue to fall if more Filipinos become responsible credit card users. One way for Filipino's to become more responsible is if their parents actually took time to explain how borrowing money truly works.

According to the latest figures from the Credit Card Association of the Philippines (CCAP), the association of 17 major credit card issuers in the country, credit card delinquency rates have been on a downtrend since the pandemic. From 4.36% in the in the fourth quarter of 2019, the delinquency peaked to 8.37% during the pandemic in 2020 before falling to 4.03% in 2021 when mobility restrictions started to ease. The rate continued to drop to 3.32% in the same period in 2022 and to 3.26% in the first quarter of 2023. Card delinquency refers to the payment of less than the minimum amount of credit card debt for least three billing cycles.

Delinquency has been dwindling despite the 47% surge in gross billings to P410 billion during the first three months of the year compared with 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.

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

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,” Mr. Ilagan said. 

In its seminars, CCAP shares these tips on how to use credit cards wisely:
These are also things that we Parents should teach our kids and teens.

• Do not use a credit card 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.  

• Keep an eye on one’s total monthly spending to avoid exceeding the credit limit, as this can 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 your credit score.

• Settle credit card bills on time every month. Failure to meet payments results in late fees and other penalties. It is best to pay the total amount, or at least more than the minimum required payment, to prevent debt from ballooning due to accumulating interest. 

• Track billing cycles and due dates. Avoid accumulating interest charges and debt to maintain a good credit score. A credit card helps track one’s spending and spot any budget guzzlers one can do without.

This goes to show that making sure that our kids are aware of good and bad debts, should have been instilled from a very young age. It is the task of parents, dad bloggers in the Philippines as well as dad influencers in the Philippines to make sure that the next generation of children will not fall into heavy debt. We owe it to our kids to teach them to manage credit properly.

As part of its awareness campaign, CCAP also marks Credit Consciousness Week every April 24 to 30, as per Presidential Proclamation No. 568, series of 1995. For those interested in its credit awareness programs, CCAP can be reached at https://www.ccap.net.ph/contact-us/