My friend called me last week in apparent distress about his retired mom and dad. He said his family had a little meeting over the weekend and they found out that their parents have four credit cards with overdue payments amounting to P450,000. With his permission, let me share his story with you.

They owned an old house in the province and another one that was being constructed courtesy of my friend and his two siblings. Two of them work here in the country while one is working as an expat Filipino. The one working overseas left his child in the care of the parents. Together, all three siblings send home P30,000 monthly for the retired parents’ living expenses.

An allowance of P30,000 monthly for two adults and one child in the province living in their own home is not something to sneeze at. So how could they have charged so much money to their credit cards?
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So, we make money mistakes. Big deal. What matters is what we do to recover and learn from them.

One MoneySmart reader, I will call him Danny, made a credit card mistake in the past enough to put him on banks’ negative list. The misdeed technically was his brother’s, who used his credit card to buy a computer and promised to pay him monthly.

You probably guessed what came next. His brother failed to pay, and the P18,000 debt ballooned to P30,000 within a year. Danny paid everything by 2004, but by that time, his name was already hot listed.
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My husband and I went crazy at the DIY Handyman shop over the weekend to buy stuff for the house, so we had quite a stack of things to pay for at the cashier. I knew we probably overspent, but the bill still surprised me when it reached P9,000 plus.

I paid for the bill and then asked for the tape receipt. Rugs, check. Two different sizes of hooks, check. Car cleaning stuff, check.

“What’s this item that costs P4,200?” I thought my voice sounded really calm.

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(You wouldn’t want anybody nosing around your personal information but you would like to know if other people think your credit score stinks, and why! Photo courtesy of Aladdin Cordero.)

If you are worried about the smokes and mirrors surrounding your official credit score, or believe that after a bad credit spell banks should give you a chance, here’s something that might cheer you up.

President Gloria Macapagal-Arroyo will sign today Republic Act 9510 or the Credit Information Act, which will create a credit bureau called Central Credit Information Corp.

The CCIC will pool data from banks, quasi-banks and their subsidiaries and affiliates, life insurance companies, credit card firms, government lending institutions and other credit facilities.
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What do you do with expired credit cards when the newer, shinier ones arrive in the mail?

Cut them up. Into tiny pieces. I had a few of them hidden somewhere in the house, not knowing what to do with them. After several years, I finally discovered that the official advice is to make sure nobody can duplicate them and with some, err, creativity, put their shopping bill under your tab.

This is probably one of the little things that credit card companies forget to advise their customers, or perhaps I just didn’t pay much attention. But these days, you can’t be too careful about protecting your identity. Remember that Filipinos are geniuses when it comes to IT crimes! Remember the “I love you” virus?
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Picture this. Assigned bank officers from 38 universal and commercial banks enter names of erring borrowers into their negative lists, send these files to the Bankers Association of the Philippines on a regular basis via file transfer protocol, and the BAP sends the file back to the banks so they can use the database for deciding whose credit application to approve or to junk.

Frightening? What really goes on after these files are modified? Too many points for human errors and no way yet for individual borrowers to conveniently check whether they have hits on their names and whether the hits are justified. That’s why everybody’s waiting for the credit bureau, where transparency will make it possible for people to check their credit score.

I got this email from a reader who is concerned about a hit on his name and interviewed Topper Coronel, executive director of the BAP, to clear things up. The email sender’s name has been changed upon his request.
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This email from a reader spoke of desperation:

I’ve seen your blog in Inquirer.net. And I am one of those people who is trying to fix my life. I’m an accountant, but seems like I am terrible in handling my finances. Last year was the worst year of my life. I incurred huge debt, credit cards & personal loans, due to wrong decisions that I made.

I am now haunted by my creditors. I defaulted in payments, but I am starting now to pay them one by one. Since I incurred loans in different banks and credit card companies, they are charging me huge interest and some are already threatening to sue me in court. I’m willing to pay them all, but I can’t give it in one payment. I want to go on with my life. I have a happy family and I don’t want them to be affected with my problem.

The only solution that I know is to get a single loan to repay all of my debt. But how? I already have a bad credit history. No bank would trust me again. – David (not his real name)

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a) Naïve college freshie –- all of 16 years
b) Cool college senior –- all of 20 years
c) When she gets her first job – maybe 21?
d) When she gets the ripe old age of 25 and beyond

I tried, but wasn’t able to find any formal regulation against giving credit cards to young people. (Even at 25, I will still probably think of my daughter as young!). But as some of you who commented in this blog pointed out, the very young can easily burn that credit card and end up with bad credit at a very young age. It wasn’t too long ago when we all felt immortal…

But we all know why misusing credit cards is a nightmare waiting to happen. Thoughts?

If you’re mired in runaway consumer debt and don’t know how to pick yourself up, here’s something that should give some measure of comfort: you’re not alone.

There are more than five million credit cards out there with P116 billion charged to them based on end-December 2007 figures from the Bangko Sentral ng Pilipinas, the Philippine central bank, and P16.5 billion have fallen past due.

Assuming Filipinos are an android population with identical spending habits, we have an average of P23,219.60 charged to our credit cards. Are you below, or higher than the average?

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(Camilla, the Duchess of Cornwall leaves a blessing at St Georges Chapel in Windsor Castle after her civil wedding Prince Charles 09 April 2005. It’s easy to overspend on weddings, especially on rings when couples don’t know what to buy. Photo from AFP.)

Raising your eyebrows? You’re saying there are only four Cs?

Cut, color, clarity, carat.

Let me add one more.

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