Quindoza, Neil Jaden P.

WATCH, REACT, APPLY:

The Credit Card Faults, Schemes,
Scams, and Extinguishment
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Credit card can be a great tool to stretch your cash. It can be used to your advantage. If
you are literate enough about using credit cards, it is like having an interest-free loan. Other than
the convenience it can provide and its incentives, it also offers better protection against frauds
compared with debit cards that are linked to bank accounts. With these benefits, it is very
tempting to use credit cards. It seems like using credit cards for transactions look and feel much
easier. But not having credit card literacy would put you at such a huge risk of being buried in
this huge pile of debt. A lot of people have fallen into this false mentality of ‘I can use my credit
card as many times I want, but only until I have reached my credit limit’. Yes, the purpose of the
credit limit is for us to not overcharge, but it doesn’t mean that we should spend it up to the
credit limit because we will have a really difficult time paying off our credit card debts. There
are a lot of people who are already in their 50s or 60s that are still paying off their loans from 20
to 30 years ago. What makes it difficult is that the interest compounds and monthly payments
increase as the balance increases. That is why it is advised that our account balance should be
less than 30% of our available credit limit, or that we should keep it as near to zero as possible.
To be honest, this is the first time I actually learned about this. I never knew the intensity of the
credit card users’ struggles of facing their huge credit card debt until I had watched the videos.
Initially, I had this mentality that ‘You can pay using your credit card as much as you want, and
as long as you do not exceed your credit limit, and as long as you pay your minimum due on
time, you’re just going to be fine’. But little did I know, if I were to have my first credit card now
with that mentality, I think I would be broke for the next 20 or 30 years–or in the worst case
scenario–for my entire life. I have also learned that paying credit card debts regularly in
minimum amounts due would not reduce the debt. In fact, you might be paying it regularly but
you are actually just a sliver of your debt every month. Learning about how credit cards work is
really an eye-opener for me, and I am thankful that I have learned about this before I even have
my first credit card. With this information, I would start to apply this knowledge in the future. I
am going to be mindful of how much I am going to charge my credit card, because I don’t want
to carry this huge burden throughout my life.
What makes it really hard for people to pay off their debts is because of what is stated in
Article 1253 of the Republic Act 386 (also known as the Civil Code of the Philippines), where it
is stated that “If the debt produces interest, payment of the principal shall not be deemed to have
been made until the interests have been covered”. We know that using a credit card doesn’t
involve real money, instead, you are only loaning from the bank. We also know that a loan is
interest-bearing. Thus, the law provides that your payment will be applied to the interest first
before the principal amount. As such, if you cannot pay the full amount, you will never be free of
debt because your interest will continue to accrue until you pay in full. That is why a lot of
people are having a difficult time paying off their debts. It is because as the time goes by, the
interest continues to grow, up to the point that the card holder can now only pay for the interest
and not for the principal amount anymore. If only we could outright deduct our payment to the
Quindoza, Neil Jaden P. WATCH, REACT, APPLY:
The Credit Card Faults, Schemes,
Scams, and Extinguishment
Related Videos

principal amount, payment of credit card debts would be much easier. But doing it is impossible
because of what the law states.
When the debtor cannot pay for his/her debt anymore, he/she can now apply for a debt
repayment scheme—where the bank and the debtor will restructure its repayment agreement
according to the convenience of the debtor. Thus, it is a win-win situation for both the debtor and
the creditor. But sometimes, there are cases where the collection agents of the bank would scam
its debtors into entering in a repayment scheme without the approval and consent of the bank. It
is stated that only the bank can give its final approval of any type of repayment scheme reached
with a collection payment. Some collection agents would also perform unfair collection practices
by using threats or insults to its debtors. So in this case, these collection agents will be guilty of
dolo causante because of their fraudulent desires that happened before the perfection of the
contract; obtaining the consent of the debtor. These collection agents would also be liable for
moral damages since they may have caused emotional distress and mental anguish to its debtors.