Sunday, July 22, 2012

An Expat's Credit Statement

As a retired bill collector who worked in this profession for many years in the U.S., I'm leery about charge cards, and I caution people to use them judiciously, if at all.   In fact I devoted a chapter to this topic in my ebook "Green Monday".  However,  there are times when having one may be practically a necessity, especially if you're traveling or living abroad. In fact, unless you carry a big wad of cash around with you (not advisable in the Philippines)  they are essential for such emergencies as sudden major medical expenses.

But if you make a transaction outside the States with a credit or debit / ATM card issued by American financial institutions, chances are many (most?) of them will assess a 3% currency conversion fee along with whatever other charges they levy. So it behooves expatriates to open a local bank account along with an ATM/ debit card and if possible a credit card as well.

For this and other reasons of convenience, I applied for a charge card at a bank here in Metro-Manila where I have a savings account and an ATM / debit card. Another reason I did this is out of curiosity  There are no credit bureaus in the Philippines, so aside from my business history with this financial institution I wondered how lenders gauge creditworthiness, especially on unsecured debt, which is the usual type obligation that is incurred with cards. What compounds the matter is the high degree of risk that financial services undertake when approving credit cards and other lending activity because the default rate is much higher than that in the U.S. And of course, like with American card issuers  interest rates and fees are also quite high (unless the cardholder pays in full each month) .

Yet credit cards have become a staple of the banking industry here and are very popular among consumers. Nevertheless, as a foreigner without employment or any other local means of support, I would have understood if I had been turned down.  To my surprise, however, the bank granted my application. I inquired about the basis for this decision (I Just can't leave well enough alone) and was informed  it was indeed the result of my account relationship with this institution which goes back a number of years.

Familiar amenities such as on line statement and payment options along with promotion bonuses are offered by many card issuers.  On the other hand, there is one big difference between U.S. and  Philippine financial institutions in the matter of recourse if the customer is dissatisfied with a purchase made using a credit card. Here the cardholder is on his/ her own in resolving this type of a dispute. The card issuer acts only as a billing agent and does not become involved in such complaints.

Like in the States, common sense should prevail in tending to one's financial matters.  So expats need to handle their credit dealings here just as aboveboard and conscientiously just as much or more so than they would back home. For one thing, In the Philippines, penalties for charge card fraud and abuse may include the lender's filing a criminal complaint of estafa (swindling) that could not only lead to a fine and / or imprisonment, but for  foreigners, deportation as well.  Another example of how serious Philippine financial institutions are when it comes to these matters, skipping out while owing a credit card balance of over 10,000 pesos is considered a criminal offense (intent to defraud).  In the U.S., a corresponding misuse of a card would be ordinarily  (but certainly not always) be treated as a civil matter.

In short responsible use of credit, like virtue, is its own reward no matter where you are. But for practical reasons of avoiding unexpected civil and / or criminal penalties while in a foreign country,  playing it straight is especially prudent.


jbushkin said...

a good warning.

Secular Guy said...


Thanks. I've always said that if my posts help just one person, then I've accomplished my goal.