Association touts credit card’s role in MSME sector

THE Credit Card Association of the Philippines (CCAP) believes credit cards can be “a powerful tool” for micro-sized, small-scale and medium-sized enterprises (MSMEs) to gain ready access to funds and manage their finances.

“However, there is still a need to raise awareness on the use of credit cards for business,” Credit Card Association of the Philippines (CCAP) Executive Director Alex G. Ilagan was quoted in a statement as saying.

“We know that MSME owners often mix their personal and business finances. They use their personal credit cards to pay for bills or purchases related to their business, enabling them to manage tight cash flow situations,” Ilagan said through the statement the CCAP issued last

Monday. “Credit cards can be more than that.”

He added that credit cards can serve as available credit line for MSMEs looking for a convenient source of working capital without the need to formally apply for a business loan “which can be a tedious process and may even require putting up collateral that they do not have.”

“MSMEs can also use credit cards to pay for things they need to seamlessly run their business, such as purchasing equipment and supplies and paying for utility bills, among others,” Ilagan said.

Some CCAP member companies issue special types of credit cards for MSME needs such as purchasing or procurement card, distribution card, corporate card for travel and entertainment and fleet card for fuel credit, the CCAP statement read.

Based on CCAP’s quarterly survey of its members comprising the 17 major credit card issuers in the country, there are a total of 11.8 million credit cards issued in the Philippines as of the first quarter of 2023.

Of the total, 65 percent are considered as “transactors” who pay their total outstanding balance in full every month while only 35 percent are “revolvers” who pay only the minimum amount or any amount less than the full outstanding balance, the CCAP said citing data from the Bangko Sentral ng Pilipinas (BSP).

Ilagan said MSMEs must know the billing cycle for proper money management.

“There is a 30-day monthly billing cycle and 21-day payment grace period provided by credit card issuers so MSMEs can enjoy interest-free credit for up to 51 days from the date of transaction,” he added.

“Best to use your card just right after the billing cut-off date indicated in the billing statement because it will allow you to enjoy the longest interest free credit float,” the CCAP official said.

“A credit card can help MSMEs manage their funds and cover their business’ short-term financial needs, but it cannot be used for long-term goals such as business expansion which demands higher capital and is best funded through a bank loan,” Ilagan said. Raadee S. Sausa