Ever wonder how banks make money through credit cards?
When you walk around large malls such as SM Malls or Ayala Malls, you will notice some bank representatives asking if you would be interested for a credit card. Most people brush off the offer, but some would stop and entertain them. Why? Because of enticing rewards, rebates and other welcoming freebies for new cardholders.
With all these benefits, have you ever wonder if the bank can actually earn from credit cards? Of course they make money through various ways. Read on to discover how EastWest Bank can earn money aside from charging interest rate.
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There are various kinds of credit cards offered by EastWest bank. They will depend on your preference, but they all have various fees discussed in terms and conditions. Honestly, do you take time to read those finely written thick paragraphs? I simplified the fees so you can understand them in just a few minutes.
- Annual Membership Fee
Certain cards have annual fees whether you use them for payments or for thickening your wallet. Certain cards have waived annual fees such as the EastWest Priority Banking Visa Infinite Credit Card and EastWest Platinum MasterCard. However, the other card’s annual fees cost from Php1,400 (EastWest Practical MasterCard) up to Php2,800 (EastWest EveryDay MasterCard). You need to pay this fee every year on your card’s anniversary date.
- Interest Charge
Interest rates are not charged if you pay your balance on or before your due date. If you missed your payment, then you can get charged from 1.99% per month (EastWest Priority Banking Visa Infinite Credit Card) up to 3.50% per month. You will continuously be charged as long as you don’t settle the bill. Though EastWest advertises the monthly interest rate, what you should consider is the annual effective interest rate which is from 23.88% to 42%.
- Cash Advance Service Fee & Interest Charge
Like most banks, EastWest Bank advertises that you can instantly get cash through your plastic card. Just put it in the ATM and (VIOLA!) you’ve got cash in your hands. Whether you believe in magic or not, cash advance through your credit card is not magic at all. You are bound to pay for it with a stiff fee.
The cash advance fee for EastWest credit cards is 3% of the cash you withdrew. Therefore, if you borrowed Php10,000, then the fee will be Php300. Seems small? Well, the terms and conditions says that the cash advance fee is 3% of the amount or Php500/Php600, whichever is higher. So if you withdrew Php10,000, then your cash advance fee is either Php500 or Php600, depending on the credit card.
But wait, there’s more! Aside from the cash advance fee, you will also be charged with an interest rate starting from the date you availed the service. You interest will be kept charged on the daily balance basis until you pay the full overdue. Cash advance interest charge ranges from 1.99% to 3.50%.
This simply means it keeps on ballooning until you settle the whole amount. Cash advance will be a financial trap if you can’t afford to pay it off as soon as possible.
- Cash Advance Over-the-Counter Fee
You will be charged with a fix amount of Php500 if you get a cash advance over the counter. However, you will still be charged with its interest rate.
- Minimum Payment Due Computation
In case you can’t settle the whole bill in time, you are encouraged to pay the Minimum Payment Due. Each card has a different amount. It may seem very small and affordable, however if you pay only the minimum payment, you will still be charged with the interest rate. You just managed to avoid the late payment penalty but the interest rate will be continuously charged as long as you don’t settles the whole amount.
- Late Payment Charge
This is the 6.50% of the Minimum Payment or Php200 up to 7.50% of the Minimum Payment or Php500. Whichever is higher, you’ve got to pay it if you can’t even manage the minimum payment due.
- Returned Check Fee
You can pay your credit card bill through postdated checks, however, if it bounced, you will be penalized with Php1,000 for every returned check. Aside from that if no payment has been recorded in your credit card account, then you will be charged with the interest rate and the late payment fee. So, make sure your account has enough funds to cover you credit card balance.
- Card Replacement Fee
If you lost your card, you need to pay Php400- Php500 to replace it.
- Foreign Currency Conversion Fee
Some say it is better to spend in cash when you are abroad. In case you’ll need to use your credit card, remember that you are going to be charged more than the amount you purchased. The foreign currency conversion comprised of the EastWest’s Service Fee and Visa’s Assessment Fee. So do not be surprised to see the additional 2.50% of the amount you charged.
- Gambling & Gaming Fee
Are you into gambling? Major casinos in the country now accept credit cards. If you think you are winning but you have run out of cash, you might be tempted to use your credit card. Before you swipe the plastic card, think of the 5% service fee so you won’t be surprise when you see your next bill.
- Multiple Payment Fee
If you are really into shopping, you must know that an additional P50 will be charged on your credit card for your payments beyond your third transaction.
- Installment Pre-Termination Processing Fee
Credit card gives you the freedom to pay an expensive item in installment. Let’s say you wanted to buy a new laptop but you neither have enough cash nor the ability to pay the whole amount on the next bill. You can pay the whole amount in installment though it will be wholly charged on your credit limit. So if the laptop you want costs Php30, 000 and you want to pay it in 6 months, then you do so. What if you wanted to settle it on the 5th month? Wouldn’t the bank be grateful to have the cash as soon as possible? Unfortunately, you will be penalized. You will have to pay the Installment Pre-Termination Processing Fee which is 5% of the remaining balance or Php500.
- Closed Card Account Service Fee
In case you want to ultimately close your credit card account, expect to be charged with a monthly service Php200. This is why you need to settle your balance as soon as possible.
Having a credit card is a serious responsibility. Though it comes with rewarding benefits, it also serves as your personal financial trap. One wrong move and you’ll be charged. Avoid bill shock by being well informed.
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In case you just need to make a major purchase, you can just get a personal loan. Need a quick cash loan? Apply in Cash Mart and expect transparent charges, terms and conditions.