Ever wonder why there are still a lot of Pinoys who don’t open their bank accounts?
In January 2017, Bangko Sentral ng Pilipinas (BSP) shared a study that shows 86% of Filipino households don’t have bank accounts. That is more than half of the population.
When we think our country is modernized, most Filipinos are still not open to the idea of transacting with banks. Thus, 39.6% of Filipinos kept their savings at home, perhaps in coin banks.
It is typical for a Filipino not to open a bank account unless it is perceived as a serious need that their benefits outweigh their doubts.
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You see, BSP found out that 9% believe that the banks have high costs of maintenance, 9% do not like how banks treat them, and 17% of Filipinos do not trust banks. Technically, the bank is not robbing you. However, it has a lot of ways to earn money from you.
Credit Card Annual Fee
Credit card membership fee is usually charged every year. It can range from Php 1,000 to Php 4,500 depending on the category of the credit card. Supplementary cards may also have annual fees.
However, some banks charge annual fees in monthly installments. You are required to pay your membership fee is you want to continue using your credit cards; as well as enjoy its benefits, rewards, and rebates.
The more you use your credit cards, the higher the chance that the bank will waive your annual fee. However, this varies depending on the bank’s discretion.
How to Avoid: Ask your credit card provider how to waive the annual fee.
Dormancy Fee Savings Account
Banks may impose service charges and maintenance fees on savings accounts, whether it is active or dormant.
However, this is usually applied to dormant accounts. These are accounts that had no activities for the past 12 months. A savings account is also considered dormant if the account balance falls below the Minimum Monthly Average Daily Balance.
Take note that some banks collect this fee after two months of dormancy. On the other hand, some banks collect the fees after the 61st month it has become inactive. The Dormancy Fee usually costs Php 30 to Php 500 a month.
How to Avoid: Deposit any amount every month or close the account if you think you can’t keep your account active.
Card Replacement Fee
There are times when debit and credit cards get stolen, lost, or destroyed. For whatever reason, you have to pay for the replacement card. This usually costs between Php 110 to Php 400 depending on the type of your credit or debit card.
How to Avoid: Always keep your card in a safe place. Do not bring it if you think you are not going to use it.
The overdraft fee is charged when bank account withdrawal exceeds the available balance. This also applies if you charge more than your credit limit.
Some banks will charge based on the overcharged amount while others have fixed penalty. The minimum charged amount can range from Php 26.25 to Php 500.
How to Avoid: Take note of your bank account balance and your credit limit. Enroll on e-banking to easily monitor your saving and credit card accounts.
Over-the-Counter Withdrawal Fee
An additional fee is charged for services done over the counter. This may not make sense to most of us since it is already inconvenient to visit a bank and wait in line.
Nevertheless, the banks charge Over-the-Counter Withdrawal Fees based on the service rendered. Over-the-Counter fees are charged if you withdraw a cash advance from your credit card or from a savings or checking account.
While savings or checking account can be charged with Php 30 per withdrawal. Cash advance withdrawals over the counter are charged with Php 300 to Php 500 apart from the service fee and interest.
How to Avoid: As much as possible, do your transactions online.
This is charged on loan services and unpaid credit card balances. All loans are charged with interest depending on its term and principal amount. It may also change depending on the bank’s policies.
Remember: Credit cards are not charged with any interest if the cardholder is able to pay the balance on or before the due date of the bill.
How to Avoid: Pay your credit card bills on time. There are times when banks can lower the loans’ interest rates. This will depend on the credit score of the borrower. Ask the bank for their specific policies.
Late Payment Penalties
Banks charge late payment penalties on credit card holders if they fail to pay even the required minimum amount. This fee is apart from the interest which is charged on your current unpaid balance.
How to Avoid: Settle your credit card bill as soon as possible; or pay at least the minimum amount as indicated on the bill.
Service fees, processing fees, or administrative fees are charged on the financial services that you availed. If you apply for a loan, banks usually deduct the service fees from the principal amount of the loan.
How to Avoid: There is no way around this fee; however, you can lower the fee depending on the bank’s discretion.
0% Interest Installment Plans
Banks usually entice their credit card holders with grand offers like gadgets. These offers are payable within 3 - 24 months depending on the amount with 0% interest charge.
But of course, every good offer has a catch!
If you fail to pay your monthly installments on time, an outstanding interest rate will be charged on the remaining balance. There are some banks which make the whole balance due and demandable. This is the way banks can get more money from your mistake.
How to Avoid: If you are planning to get this credit card feature, make sure that you can meet the monthly payments.
Credit Card Cash Advance
Credit card cash advance is a credit card feature that lets you withdraw cash from the bank’s ATM. Usually, you can get a cash advance up to 50% of your credit limit.
How can the bank make money from cash advance? It has a service charge and an outstanding interest rate.
The service charge will be charged on your credit limit the moment you withdraw your cash. Then, the outstanding interest rate will be charged from the day you used the service until you settle it.
Take note that this interest charge is different from your credit card's interest charge. Cash advance fee is usually 3% to 5% of the withdrawn amount, while the outstanding cash advance interest charge ranges from 3% to 3.75% a month.
How to Avoid: If you are not in dire need of cash, it is best not to use this service.
Foreign Transaction Fee
When you charge in foreign currencies on your credit card, expect to pay a transaction fee. Whenever you pay in another currency, it is usually converted first to US dollar before it gets converted to Philippine Peso.
Expect that the converted amount of the item you have bought will be different from the amount you will see on the bill.
How to Avoid: There is no way to waive the fee. If you have enough cash, avoid using your credit card unless you think the rewards are worth it.
0% Balance Transfer
This may help you settle your previous credit card debts, but expect the bank to charge a processing fee and interests. Usually, banks offer 0% or lower interest rates than your previous ones. If you fail to comply with the monthly installments, you have to settle the full amount and pay for penalties. Some banks increase their interest rate for default card holders.
How to Avoid: Pay the monthly installments on time.
Why do you feel that banks cheat you at times?
The truth is your bank is not robbing you. However, you get surprised with some fees charged on you because you did not fully understand how its services work.
What you don't is that banks are taking chances that you will make mistakes. That way, they can legally charge you with fees. Thus, make it a habit to read fine prints and learn financial literacy to protect your finances. Read contracts no matter how pressured you fill and do not hesitate to ask questions.
You will be thankful that you took the time to understand each bank transaction and you have saved yourself from a terrible financial mistake.