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Credit card myths Debunked

6 Major credit card myths you should not believe

The term “credit card” instantly brings the thought of debt in people’s mind. It brings some sort of anxiety but wait there is no need to worry about using credit cards. There are some myths people believe about credit cards, I’m sure you too believe those myths. So, today I’m going to tell you the reasons you should not believe those myths.

MYTH No. 1:- DO NOT USE CREDIT CARDS:

You must have heard that not to use credit cards instead use a debit card from your parents, friends but that is wrong. Credit card gives you credit score. Credit score calculates your behavior in repaying your debt duly it is known as Cibil score. In case you need to take some loan in future the lender checks your credit score before lending you the money. But if you don’t have a credit card how will be the lender able to check your credit worthiness.

So, the idea of using a credit card is not to create debt but to improve your credit score.

 

MYTH No. 2:- CANCEL THE CREDIT CARDS THAT YOU DON’T USE:

Now you must be thinking why to keep the credit cards even if you are not using it.

There are 2 major reasons you should not close a credit card is that 15% of your credit score comes from the age of your credit. Suppose you have credit card that you had bought when you were of 20 years and now you are of 30 years and you realize that you don’t use that credit card and you decide to close it. No, don’t do that instead come up with an idea of using it once in 2 – 3 months for small purchases. It will keep that account active. Also it will make sure that the age of your credit is longer and helps to gain credit score under the category – Age for Credit.

The other reason that you should not cancel credit card is that it negatively affects your credit utilization rate. Credit utilization rate refers to the ratio of outstanding balance of credit card to limits of the credit card. The credit score consists 30% of credit utilization rate.

 

MYTH No. 3:- YOU SHOULD NEVER CANCEL CREDIT CARDS:

Now this is controversial to the previous myth. The idea of this myth conveys that you should cancel only those cards which you are never going to use and are burdening your pocket as it has an annual fee which does not suit your budget and you have no other option than cancelling it.

 

MYTH No. 4:- YOUR CREDIT CARD SCORE WILL ALWAYS BE AFFECTED IF YOU MISS ANY PAYMENT:

Well this if true to a certain extent but there is a condition applied with this. Your credit card score will get affected only if you exceed 30 days after the due date. But if you delay the payment by less than 30 days, your credit card score is not going to get affected.

So, if you have forgotten to make the payment on the due date do not panic just make sure you are doing it within 30 days from the due date.

 

MYTH No. 5:- YOU HAVE TO PAY SOME INTEREST ON EVERY PURCHASE:

This is the biggest myth people believe which is completely wrong. Many people think that when you buy something with credit card you have to pay interest on that but that is not true. If you pay the amount which is the part of your credit limit allowed and there is some balance left in your credit limit the bank will only charge the interest on the balance and not on the amount that you have used to purchase. And if there is no balance left on your credit card the bank will not charge any interest.

 

MYTH No. 6:- CARRY ONLY ONE CREDIT CARD

If you are an organized person and make your payment duly than this myth is definitely not applicable to you.

Carrying multiple credit cards can help you to get benefit of cash back rewards.

But if you are one of those who tend to forget making payment then you should always carry one credit card only.

 

So, these were the major myths people have about using a credit card. I hope this article have cleared all your myths about credit card. So, instead of worrying about the debt focus on increasing your credit score it might help you in future.

 

TAX SAVING OPTIONS UNDER SECTION 80C

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