Académique Documents
Professionnel Documents
Culture Documents
A Thesis Presented to
The Thesis Committee
UM Tagum College, Graduate School
Tagum City
In Partial Fulfillment
Of the Requirements for the Degree
Master in Public Administration
May 2016
CHAPTER I
INTRODUCTION
Rationale
In our society today, there seems to be a great preoccupation with money and
ownership of material possessions. While this seems like an assumption, the idea of
In the past 25 years, credit card has become almost universally held product as
shown by an increase in credit card ownership from 4% to 77%. Credit card ownership
countries that penetration rates are approaching 100%. Credit cards are similarly
reflects the growing popularity of the credit card as a preferred mode of payment for
goods and services in lieu of cash, checks, and other (Johnson, 2007, Abdul-Muhmin
In Asia, the liberalization of the financial sectors has resulted in the rapid
increase of credit card companies. In the Philippines, credit cards provided by the
banking industry are an emerging source of household credit. The credit card
outstanding loans in the country grew to Php 190.55 billion at the end of the year 2013,
with an average annual increase of 7.89% from 2008 (Gan et al., 2008, Tan, 2009,
Using credit cards as a substitute for cash has benefits such as convenience in
paying goods or services, immediate source of financing and facility for online
automated teller machines very frequently to withdraw cash nor do they have to carry
a lot of cash; both actions could reduce the risk of theft. However, the misuse and
abuse of using credit cards can have many negative consequences, ranging from
spending beyond what the budget allows to, paying high interest rates on past due
On the part of the credit card providers, defaults on consumer payments may
ensue. Among the specific negative impacts of credit card misuse on the part of the
cardholder are the penalties applied for failure to live up to the terms of use, years of
financial debt resulting to low credit scores, personal bankruptcy, and increased level
devastating impact is that high levels of debt have been reported as major stressors
that have led credit card users to commit suicide (Holub, 2002, Norvilitis & Santa
The study focuses on the use and awareness of credit cards among Filipinos
from different sector in Tagum City and the risk associated in using credit card
payments. In addition, this study will also test if there is a relationship of overspending
RESEARCH QUESTIONS
This research study basically aims to know if credit cards are beneficial or not,
and if it encourage consumer spending among Filipinos. Specifically, this study hopes
Tagum City?
2. How do the credit card owners cope up with the stress of increasing loans
The results of this study will enable the growing number of credit card owners
cards.
On the other hand, this study may also provide insights for lawmakers on the
implications of consumer debt on the country’s welfare and their constituents, and
thus, provide regulation and legislation that is more appropriate in ensuring the
consumers rights.
Further, this study may provide an understanding for the general public on the
problems that result from overspending, or spending beyond what one can afford.
Finally, this study may spread awareness on the new threats in credit card
safety.
Definition of Terms
For the purpose of clarification, the important term used in this study
Credit. Refers to a money that a bank or business will allow a person to use
Credit Cards. Refers to a small plastic card issued by a bank, business, etc.,
Credit Card default. Refers to a person who has been delinquent on his/her
amount borrowed.
Risk. Refers to the uncertainty of a return and the potential for financial loss.
Delimitations and Limitations
This study is limited to the City of Tagum where the selected respondents are
located. The testimonies and concerns of the cardholders were described and
documented.
The scope of the study focused on the challenges and experiences of the
cardholders and their ability to cope up in different situations they were in. The factor
that might serve as a limitation to this study is vast number of credit card holders in
the city.
This study is a data gathering about Credit Card Owners and their perceptions,
insights, and sentiments they have been with. This would be primarily based on in-
depth interview and focus group discussion that will be conducted by the researcher.
Chapter 1 features the salient points of taking the perceptions, insights and
sentiments of the Cardholders. The said purpose will be answered by the research
questions posted. It also includes the significance of the study, definition of terms,
study to justify the need of the study, the research questions that will be answered
based on data that will be gathered from in-depth interview and focus group
discussion.
comprise the research protocol utilized for the study which includes the research
design, the role of the researcher in the conduct of the study, and the research
participants. The research procedure is also discussed in detail including the data
Chapter 4 discusses the results of the study based on the views, perceptions
and benefits gained by the children respondents under the said program collected
through an in-depth interview and focus group discussion. The data collected were
then categorized according to its emerging themes with tables and supporting
statements.
as the conclusions. Attention was given to addressing the implications for practice, as
Many had resisted taking out a credit card for a considerable length of time,
shunning the idea of taking on debt for as long as they could. Eventually, however,
many found themselves giving in to the bombardment of offers that came their way
and so it was often a far from conscious or considered decision (Jigsaw, 2014).
Credit cards tended to be used to fund ‘treats’ such as clothes, holidays and
home improvements or furniture and for any larger unexpected expenses such as car
or home maintenance (indeed for those who took a conscious decision to take out a
credit card, it was the larger unexpected expenses that were often the trigger). The
insurance that came with many cards gave consumers peace of mind when making
larger purchases and many enjoyed the loyalty points/rewards earned through high
The card very quickly became a support in emergencies and helping with cash
flow problems. For many, a credit card allowed them to access a certain ‘lifestyle’ that
would otherwise not be possible. However, this living beyond their means could trigger
feelings of guilt over their use of the card and worry as to how they were going to make
the payments long after the treat has been enjoyed. Further, with many consumers
just making the minimum payment each month, they were making little progress in
reducing the balance or ever paying it off totally. This carried balance inevitably meant
that those not on 0% or low interest rates would be paying considerable interest on
their balance, but most were unaware of the implications of their behavior (Jigsaw,
2014).
The UK Card Association’s 2013 report noted that 58.9 million credit cards were
in circulation at the end of 2012. This had fallen from a peak of 71.5 million in 2005,
as consumer spending both fell and tended to be switched to debit cards during the
recession. However, data released by the UK Card Association covering the first three
Quarters of 2013 suggest that consumer spending on plastic cards is on the increase
2014).
Steady growth was recorded in the Filipino card payments channel during the
Compound Annual Growth Rate (CAGR) of 7.65%, rising from 40.8 million in 2008 to
54.8 million in 2012. This growth was primarily driven by the prepaid cards category
which registered the highest growth rate at a CAGR of 17.26%. The card payments
Oro, Bank of the Philippine Islands (BPI), and Land Bank of the Philippines.
In the Philippines, the rate of consumer defaults almost triples the average in
Asia (Estayo, 2008). For the last five years, the average non-performing loans or past
could lead to higher credit expense due to compounding interests and penalties.
Worsening the problem, the credit card interest rates in the country are currently
among the highest in the world (Tan, 2009). On average, consumers end up paying
3.5% interest rate per month or 42% per annum on past due accounts while the
average lending rate of commercial banks only ranges from 6.21% per annum in the
start of first-quarter of 2013 to 5.72 % per annum at the end of the forth-quarter of
2013 (BSP, 2014). The high-interest margin is imposed by banks on credit cards
because credit risk is inherent in the industry; credit card transactions do not require
collateral and high transaction costs can be incurred if banks go to court in the case
of defaults (Cayanan & Ledesma, 2005). Therefore, the credit card industry becomes
problematic if credit cards are given to the consumers who do risky credit card
activities. Despite the situation, there is still an immense marketing campaign among
credit card issuers in the country. Credit card defaults became a consequence of the
expansion of the credit card market beyond the select professionals and members of
the Philippine elite. The increase in credit card usage among consumers is due to the
In Taiwan, the Asian Pacific Post in 2006 reported Taiwanese credit card slaves
committing suicide or turning to crime to pay off their debts. As it were, more than
400,000 Taiwanese were unable to clear their credit card debts entailing heavy
personal costs. The Philippines on the other hand has been relatively protected from
the adverse effects of the recent global financial crisis because of its ‘minimal
exposure to structured financial products (Pasadilla, 2008). Furthermore, the high level
of remittances from Overseas Filipino Workers (OFWs) has propped up the country’s
economy; and Philippine banks have generally been more conservative than their
counterparts elsewhere. Thus, while the Bangko Sentral ng Pilipinas (Central Bank of
the Philippines) noted the increase of credit card related activities, the authorities are
less worried about the rising credit card delinquency rates, confident that increments
in credit card delinquency are still controlled at a low level. But while the conservatism
of Philippine banks and the controlled level of credit card delinquency may make it
unproblematic to the country’s financial community, its impact on those at the brink of
The credit card is a three-way legal relationship that includes: 1) the customer
credit card companies who issue the card and consolidate all transactions made by
the customer through the credit card. Clearly, the credit card system has prevailed and
even expanded over the second half of the 20th century because the advantages
perceived by the actors engaged in this three-way relationship seem to outweigh the
risks. On the side of credit card holders, credit cards are deemed convenient. They
mean doing away with check books and carrying large amounts of cash since a single
card can be used to purchase goods and services. Furthermore, the credit card’s
flexible payment and installment features extends the consumers’ purchasing power,
allowing them to avail of items or services that they could not normally afford with their
salaries or wages. The convenience of credit cards sometimes masks the downside
of relying on them. It takes much discipline, for instance, to plan and budget spending
around payment obligations to ensure that one does not spend beyond one’s capacity
to pay and does not fall behind payment schedules. Many cardholders tend to gloss
over the interest and floats that the revolving credit would incur, as well as the annual
fees that issuing banks/companies require for the continued use of the credit card
(Fuentes, 1998).
For the merchants, affiliation with credit card companies provides a good
opportunity to increase sales. Customers are not only encouraged to buy items and
services from them, but the merchants themselves also need not worry about payment
defaults by the cardholder since the credit card companies, rather than the merchants,
run after defaulting customers. Indeed, once a transaction has been made and the
cardholder signs the statement/receipt, the items and/or services purchased are just
as good as cash. Merchants merely have to present the signed statements in order
for the issuing banks to pay them the amount due, minus the discount fees. The
downside for merchants and merchant establishments consist of the high rates of
discounts which the credit card companies can impose on them. Aside from this, there
is also the risk of fraud and counterfeit cards which are in fact not easily detected by
As Fuentes pointed out, Banks that offers cards to their customers enjoy a
competitive edge. Banks and credit card companies earn very much from the
revolving credits alone. Other sources of revenues would also include annual or
companies do not only lure people into spending through the credit card, but the same
clientele can also serve as prospects for other bank products they offer (i.e. auto loans,
housing loans, etc.). The gains from credit cards that have spurred intense competition
among banks and even their branches seem to outweigh the disadvantages of running
a credit card business 1) the risk of fraud and card counterfeiting; 2) the erratic cost of
rates, inflation, etc.; and, 3) the expensive operations of card centers as well as