FIRST-TIME credit card users are seen to drive growth in the country’s credit market as the product can serve as their entry point to other financial services, according to a TransUnion study.
“The study emphasizes that credit cards are more than payment tools — they represent the first step towards financial mobility, offering consumers access to additional liquidity and flexibility when needed,” TransUnion Principal of Research and Consulting for Asia Pacific Weihan Sun said in a statement on Thursday.
“Beyond enabling greater financial inclusion, they also provide an opportunity for lenders to build loyalty and trust through long-term relationships with new-to-card consumers, yielding stronger returns as their confidence and credit needs grow.”
According to TransUnion’s study, even amid the growing use of digital wallets and online financial services in the Philippines, only one in 20 consumers in the country owned a credit card.
“This highlights that while financial inclusion has advanced rapidly with the expansion of digital wallets, many Filipinos might still be credit invisible without access to traditional credit products, including credit cards. Being credit invisible makes it difficult for consumers to successfully build and leverage credit to start businesses, buy vehicles, invest in property — or even to access the liquidity they need for emergencies,” it said.
It added that 88% of the 1.46 million new-to-card borrowers in 2024 — or those without any credit card prior to opening one — used these as their first credit product. First-time cardholders accounted for about 50% of newly opened card accounts in the Philippines.
“As commerce in the Philippines becomes more digital, along with greater e-commerce adoption, credit cards are likely to become the preferred method of payment, especially for larger-ticket purchases.”
Based on the study, 73% of first-time card users were given credit limits below P50,000, while 5% of them were assigned limits above P300,000.
“Typically, new-to-card borrowers start with lower credit limits than established cardholders. Even when compared by borrower risk levels, they receive lower access to credit due to their limited credit history,” TransUnion said.
“Despite the lower limits, new-to-card consumers used their credit similarly to established cardholders and in a responsible manner, with utilization rates of 28.8% and 27.9%, respectively, after 12 months. This healthy comparison indicates that new-to-card borrowers are not eager to overuse their credit lines, which can lead to overburdened financial situations.”
However, payment behaviors after 12 months differed among new and established cardholders, it said, with nearly 30% of them falling behind on payments versus the industry average of 13.5%.
“Given their higher likelihood of early-stage delinquencies, lenders should invest in proactive engagement and education initiatives to help consumers build responsible credit management habits early in their credit journey, ultimately fostering long-term financial health that benefits not only the consumers but also strengthens the overall credit ecosystem,” Mr. Sun said.
Meanwhile, the study also showed that new-to-card borrowers are likely to tap other credit services to access liquidity, with 9.5% of them getting other products just six months after getting their first card.
“Among the new-to-card consumers who opted for a subsequent product, two thirds (67%) opened a second credit card as their next product, 27% chose a personal loan, 5% opened an auto loan, and 1% opened a mortgage. This indicates that new-to-card borrowers quickly learn how to use credit lines to meet their needs, and may find it easier to open similar credit facility as subsequent products in their credit journeys,” TransUnion said.
Most of them also choose products that are offered by the lenders that gave them their first credit card. Those who got second credit cards also recorded steady growth in balances and credit limit utilization, with delinquency rates also similar to those seen for when they were new card users.
“The performance observations in subsequent products underscore the critical need for enhanced monitoring and predictive risk management approaches by lenders, along with greater efforts to educate consumers on responsible credit use,” it said.
“New-to-card consumers are not just entering the credit market — they are shaping its future. By recognizing their potential and supporting them with the right tools, education and responsible lending practices, we can unlock long-term value for both consumers and lenders, while driving inclusive and sustainable growth across the Philippine credit ecosystem,” Mr. Sun said. — K.K. Chan
