What is a Credit Card?
- Any card or other credit device used to obtain goods or services on credit.
- Usually used on a revolving basis.
- A consumer-credit arrangement between the issuer and the cardholder.
- Enables the cardholder to procure goods or services on a continuing basis as long as the outstanding balance does not exceed a specified limit.
- Gives the cardholder the power to obtain present control of goods or services on a promise to pay in the future.
- Considered an access device.
- A means of account access that can be used to obtain money, goods, services, or any other thing of value or to initiate a transfer of funds (other than by paper instrument).
From a legal standpoint, a credit card falls under the definition of an “access device“. An access device is broadly defined as “any card, plate, code, account number, electronic serial number, personal identification number, or other telecommunications service, equipment, or instrumental identifier, or other means of account access that can be used to obtain money, goods, services, or any other thing of value or to initiate a transfer of funds (other than a transfer originated solely by paper instrument)”.
The “credit card issuer” is governed by the “terms and conditions found in the card membership agreement”. However, the “submission of statements of account alone is not enough to establish that the cardholder incurred the obligation to pay the purchases appearing therein”. A legal case involved unpaid credit card charges, where the court considered different statements of account to determine the final amount of the obligation. This highlights the importance of proper documentation beyond just account statements in proving a credit card debt.
Benefits of Credit Cards
Here are the benefits of credit cards based on the sources:
- Buy now, pay later: Credit cards allow you to obtain goods or services on credit with a promise to pay in the future. This gives you present control of what you need.
- Revolving credit: You can continue to make purchases as long as your outstanding balance stays within the credit limit.
- Reduced risk for businesses: Businesses that accept credit cards through non-bank companies can avoid the risk of customers not paying. The credit card company pays the business and then handles billing and collecting from cardholders.
- Convenient payment: Credit cards are used to obtain goods or services on credit.
- Considered an access device: A credit card is defined as an access device.
- Used in commercial transactions: Credit cards are widely used for sales of goods and services.
Credit Cards and the Law
Several acts related to unauthorized or counterfeit access devices, including credit cards, are strictly prohibited under Republic Act No. 8484, the Access Devices Registration Act of 1998.
- Counterfeit Access Device is defined as “any access device that is counterfeit, fictitious, altered, or forged, or an identifiable component of an access device or counterfeit device”.
- Unauthorized Access Device includes “any access device that is stolen, lost, expired, revoked, canceled, suspended, or obtained with intent to defraud”.
Offenses involving credit cards:
- Attempting to purchase goods using a counterfeit credit card can lead to charges under RA 84848
- Credit card companies have obligations to disclose certain financial information to applicants. Failure to do so can result in penalties.
- Delay in a credit card approval, without bad faith, malice, or gross negligence, may not constitute a breach of contract. However, credit card providers have an obligation to act on purchase requests with “timely dispatch”.
- Having no pre-set spending limit on a credit card doesn’t mean charges will be approved instantly; the company still assesses the cardholder’s ability to pay.
- The “possession and use of a counterfeit credit card is considered access device fraud and is punishable by law”. To secure a conviction, the prosecution must present the counterfeit access device and evidence proving its counterfeit nature. A case illustrates this, where an individual was found in possession of and used a counterfeit Citibank Visa credit card.
Furthermore, it is illegal to “fraudulently apply for a credit card using another person’s identity”. One case involved an individual who fraudulently obtained another person’s identification documents and subsequently applied for and received a Metrobank credit card under that false identity, demonstrating the criminal liability associated with such actions.
Business establishments may utilize credit card facilities provided by non-bank credit card companies to “avoid the risk of uncollectible accounts from their customers”. In this system, the establishments record receivables from the credit card company and periodically send credit card drafts. The credit card company then pays the establishments, typically at a discounted rate. The credit card company then bills its cardholders and bears the loss if the cardholders fail to pay.
Interestingly, credit cards can also be used for “purchasing and selling securities online”. A specific example mentions a resident of Makati using an American Express credit card to trade U.S.-listed securities through an online platform.
There is a “1% withholding tax on the amount paid by any credit card company to any business entity representing the sale of goods or services made to cardholders”. This indicates the tax implications for businesses accepting credit card payments.
In summary, the provided sources paint a picture of credit cards as convenient tools for obtaining goods and services on credit, subject to agreements with the issuing companies. They are legally classified as access devices, and their unauthorized or fraudulent use carries significant legal consequences. Credit cards also play a role in business transactions and even in online financial activities, with associated tax considerations.
English