8.24.2020

Philippines Expat Credit Card Basics

Credit Card Basics For Philippines Expats






Table Of Contents:

 

Be Careful About Closing Cards


Maintaining credit cards from your home country may be a hassle, but think twice before closing credit cards when you move permanently to the Philippines or any foreign country.

We closed all but two of our credit cards within a few years of moving to the Philippines. That is not necessarily the bad thing. The bad thing was when we eventually closed the other two cards. We reasoned that we could just use a local card from a Philippine bank.

Then the time came that we began thinking about what we would do if we ever returned to the US. We would need a US credit card for flights, hotels, rental vehicles and lots of other things.

It is also important to note that not maintaining at least one credit account while you are overseas could hurt your credit rating. What I noticed is that my credit score was unaffected even after years with no active accounts. This might be due to several longstanding accounts that I had closed, but which remained on my credit reports.

According to Equifax, accounts for which you have a good record will remain on your credit file for up to ten years after they have been closed. These positive marks on your record will continue to give you a bump long after they have been closed.

However, when I did apply for a new us card the initial credit limit was only a small fraction of any card I had previously held. This may have been an issue if I had been in a hurry and needed a higher limit due to an upcoming return home.

Maintain A US Street Address


Consider how your cards will be delivered to you overseas. Before I ever thought of the question, one of my card companies mailed a renewal card to me through regular mail. The card arrived with no problems, but for personal peace of mind this is not an option that I wanted to repeat.

I now maintain a US address with a mail forwarding service. The card company mails the credit card to that address and the mail forwarding service sends the card to me via courier, such as FedEx or UPS. It costs about $100 to ship a card from the US to the Philippines via UPS, but it allows me to track the shipment and gives me greater peace of mind that the card will not be diverted AND the card arrives in about one week.

The mail forwarding service also comes in to play for the US bank account that you will want to keep open to pay your credit card bill. Due to Patriot Act requirements you may have a problem maintaining an account with some banks when they discover that you have a foreign permanent address. There may not be any way for you to even input such an address into your bank account's online profile and you may have issues when you contact them by phone. A mail forwarding service can provide you with a real street address (not a PO Box), as many banks require.

To set up an account with a US based mail forwarding service you must download Delivery of Mail Through Agent form 1583 from the US postal service and have it notarized. You will give this form to the mail forwarding service so they can prove to the USPS that they have legal right to receive mail on your behalf. We had our form notarized here in the Philippines by an attorney. Be sure that you pick a trustworthy attorney to notarize your form.

Maintain A Text Capable US Phone Number


When you live overseas and use US based credit cards it is essential to have an SMS text capable US phone number. Many credit card companies cannot send one time passwords and other security messages to foreign numbers. You may be able to make everything work with a single number or you may need a combination of services to be able to get messages from all of  your cards. We have provided some ideas for international voice and text.

Patriot Act And A Foreign Address


When you apply for a new credit card or bank account you might see a Patriot Act notice similar to this one:
Federal law requires that we obtain, verify and record information that identifies each person who opens an account, including joint owners. Within this application, we will ask for your name, address, date of birth and other information that will allow us to identify you. We may also ask to see your driver's license or other identifying documents. Approval of your application may be delayed pending further verification of your identity.
It's worse when you are living abroad and your US bank tells you that they must terminate your account because you do not have a US address. One bank in which I held an account, upon learning that I lived overseas, did not close my account, but told me that I would need to obtain a US mailing address soon or they would have no choice but to close the account. Not all banks are this accommodating.

Rules for US banks, as they pertain to private accounts, can be found under Section II of the USA Patriot Act Section 312 Fact Sheet:
(3) What are the general due diligence requirements of the private banking portion of the final rule?
U.S. financial institutions covered by the final rule are required to establish and maintain a due diligence program that includes policies, procedures, and controls that are reasonably designed to detect and report any known or suspected money laundering or suspicious activity conducted through or involving any private banking account that is established, maintained, administered, or managed in the United States.
Specifically, financial institutions covered by the final rule must take reasonable steps to: (1) determine the identity of all nominal and beneficial owners of the private banking account; (2) determine whether any such owner is a senior foreign political official and, thus, is subject to enhanced scrutiny (described below); (3) determine the source(s) of funds deposited into the private banking account and the purpose and expected use of the account; and (4) review the activity of the account to ensure that the activity is consistent with the information obtained about the source of funds, the stated purpose and the expected use of the account, as needed to guard against money laundering, and to report any suspicious activity.
If you have a foreign address some banks may not be able to maintain your account under the current federal requirements, because their processes are focused upon Continental US clientele.

Some Banks Are Strict About Foreign Addresses


If you attempt to open an HSBC checking account online you will see this notice under "what you need to apply":
"Current U.S. residential address and a U.S. residential address for the past two years ."
If you attempt to apply for an HSBC credit card you will receive this message:
"You must have a current U.S. address to apply online. Please call 1-800-975-4722 or visit your local HSBC branch to apply."

Some Banks Accommodate Foreign Addresses


Pentagon Federal can accommodate foreign accounts. When you go to the Penfed link you will discover many ways that you can be eligible for membership. If all else fails, then there is that last option in the drop-down list:
"None of the above apply, but I would like to join PenFed"
If you are commercially attractive, i.e. have an income and decent credit score, then you probably have a good chance of being granted a membership. 

If you have  an account with a mail forwarding service that provides you with a US postal address that is not a PO Box, then you will not have to worry about what bank to choose.

If Your Account Is Closed Due To The Patriot Act


Your bank may attempt to talk to you about this matter before they ever close your account, but they might just suddenly close the account without warning. If this happens you can contact the bank and if that fails, then you can contact the Treasury Department to file a complaint.

If you go to the Treasury Department website you will find a link to another government site called "Help Me With My Bank". At HelpMeWithMyBank.gov you will find potentially bad news:
The bank closed my checking account and did not notify me. Is this legal?
Yes.
Generally, banks may close deposit accounts for any reason (e.g., inactivity or low usage) and without notice. Federal banking laws and regulation do not address the closing of deposit accounts.This issue is governed by the Deposit Account Agreement you received when you opened your account. Review that Agreement, and contact your bank directly for more information.
Even though this is the case you still might be able to prevail by filing a complaint:
If you need to file a complaint against a credit union you do so at mycreditunion.gov.

The complaint process does not look like fun. The bottom line is that to avoid Patriot Act snafus and bank account closures or threats of closure simply maintain a US address through a trusted friend/relative or via mail forwarding service. The mail forwarding service that I use is a gem and costs between $0 and $50 per year depending upon what I need to do with it. Others may cost  somewhat more than that for the basic address parking and whether or not you want it to receive post mail.

Using A US Based Credit Card Overseas


Be sure that the bank knows if you will be using a credit card overseas because they may disable the card to prevent fraudulent activity.

Some card companies, like Capital One, do not require you to submit any travel notification:
You don't need to notify us about your travel plans anymore thanks to the added security of your Capital One chip card. You can use your card abroad the same as you use it at home. Please check that your email and phone number are up to date in case we need to reach you. Safe travels!
This is due to the use of an EMV chip. Any credit card that uses the EMV chip should operate in the same way. You may be able to ask your bank to upgrade your old cards to this new standard.

Be certain that your credit card company has current email and phone contact information for you in case they need to contact you about a purchase yo are attempting to make or potential fraud they may uncover. You may find out only too late that the number you gave them for SMS text is not capable of receiving their messages for one reason or another.

Some card providers are implementing the ability to tun the card on and off from the online account. This is a great security feature for added confidence. When you are not planning to use the card it can be disabled online and with a few key presses it can be turned on before you go on a shopping trip.

Many card companies do charge a foreign transaction fee, so I chose cards that do not.

Like the foreign transaction fee, the exchange rate can be another gotcha on your credit card bill. Unlike the foreign transaction fee, the exchange rate cannot be avoided and just happens to be where the card companies pull in their highest earnings per transaction.

Keep An Eye On Your Credit


Identity theft and credit fraud can ruin your expat life. Some people suggest that you contact the credit reporting agencies to have them place a notation in your file that you are living overseas.

Doing that could lead potential future creditors to turn you down.

You could also periodically place a one-year fraud alert on your credit file to prevent fraud. If you do this creditors will be notified to contact you at a phone number you provide. Creditors will be able to contact the number you provide in the event of suspicious activity or whenever an online purchase transaction is initiated. The number that you give in the fraud alert will need to be text capable.

In some cases you must contact a credit reporting agency by phone in order to place a fraud alert. The number you call from will become the contact number for suspicious activity and online transactions. If that number is not text capable, then you may have difficulty receiving alerts and even completing online transactions. Learn more about monitoring your credit while living abroad.

Philippine Bank Credit & Debit Cards


Some Philippine cards offer fraud protection, like US cards, but you may have to pay a relatively small fee for it. Some of them have EMV chips with true contactless capability.

General characteristics of prepaid cards:
  • not covered by PDIC (Philippine Deposit Insurance Corporation)
    • PDIC is just like FDIC in the US. PDIC insures accounts up to 500,000 PHP in case of bank failure.
  • cannot receive remittances
  • not usually under FATCA 
    • as the amount of cash that can be loaded into them is far below FATCA thresholds
  • usually do not have a minimum initial deposit or any minimum maintaining balance
Debit cards attached to savings accounts, on the other hand, may trigger FATCA requirements and are covered by PDIC.

Identification Requirements


For any account type that you open (being a foreigner) you will be required to present both your passport and ACR-I card. You will also likely be asked to submit a signature card and perhaps even passport sized photos. I use fuzzy adverbs like “likely” and “perhaps” because nothing is certain regardless of written requirements.

If you apply for a credit card, then you will probably have to submit a "proof of income" document. There is also the possibility that your US Social Security number will be requested for any type of card or account. If you have no issue with that, then give it to them. If you do not want to provide your Social Security number, then read this post, but do not make a big issue out of it with the banker. They are just following orders from on high and they may not have much choice in the matter. The solution might be as simple as finding another bank, but do so politely.

Summary Of Card Features:



Card Offerings




1PNB also offers a Debit Account Lite w/no initial deposit or maintaining balance.


2BDO does not offer much online information about the Cash Card so inquire at a branch location.


3Pick the card you are interested in and then follow instructions to apply online.


 

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