Common Credit Card Myths
There are several myths regarding credit cards circulating in the online world. Some of us tend to believe it and act upon them without thinking much. Believing such misconceptions upon a time can lead to our financial suffering. And if one decides that they will not opt for a credit card due to the myths they may get deprived of several financial benefits that a credit card provides.
A cardholder must verify the validity of these misconceptions, in order to avail maximum benefits. One of the most important things to move ahead with a credit card is- Do not trust anything blindly which you hear or read. Believing such myths is foolishness and it’s important to bust them.
Here are some of the common credit card myths persisting among the cardholders that you need to bust.
So, let’s start with some of the common myths and facts regarding a credit card.
Myth: You need to pay annual charges if you have a credit card.
This is one of the biggest myths persisting among a large number of people. People easily believe this myth and stay away from credit cards as they think that by having a credit card they will end up paying an annual fee. However, it’s not always true, you can get many credit cards with zero annual fees. But, to avail such a credit card you need to research well in the market, before opting for one.
There one important fact to be noted is when you go with a credit card with annual charges you get some additional benefits which can be some complimentary rewards or gift vouchers which you get on paying the annual fee.
Truth: Credit cards with zero annual charges are available.
Myth: Paying the minimum amount is a missed payment.
Most of the people believe that making less than the minimum payment for their credit card is counted as a missed payment. But this is not true anywhere. A cardholder is always allowed to make the minimum payment for their credit card. A missed payment is only reported when you don’t pay or when you pay less than the minimum amount for your credit card bill.
When you pay the minimum amount on your credit card, you are safe. Making regular and timely minimum payments for your credit cards can help you build your CIBIL as well. But remember- paying more than the minimum amount clears your debt fast and saves on interest as well.
Truth: Paying less than the minimum amount is a missed payment
Myth: You will always end up paying interest if you use a credit card.
This is also among the biggest misconceptions regarding a credit card as most people think that interest is charged whenever you Swipe your credit card. Fortunately, this is not true, interest is only charged when you don’t pay your credit card bills under a certain time period.
All credit cards have an interest free period, and interest is charged when you don’t pay your full bill under that period.
Suppose you have an HDFC credit card, and you used ₹10,000 from it to purchase something. Now for this use, you don’t need to pay interest if you pay the complete ₹10,000 within 30 days, as 30 days is the interest-free period for an HDFC credit card.
Truth: You only need to pay interest when you pay your credit card bill after the due date.
Myth: Always carry a balance on your card and only pay the minimum amount.
You must have heard people saying not to pay your credit card bill credit bill completely. But, this is a complete myth. The reality is carrying a balance is never good, it adds more burden to your finances as you need to pay interest on your outstanding amount. Not paying your balance in full on the same hand increases your credit utilization ratio which can affect your future creditworthiness. So, always try to pay your credit card bill in full and try to avoid late payments to skip the penalties.
Truth: It’s advised to pay off your credit card in full every month.
Myth: A credit card with a high limit should be avoided.
Well, if you manage your credit cards wisely, a high credit limit can be an advantage to you. People generally think that a high credit limit can act as a debt trap hence, they suggest avoiding it. But the fact is – a high limit credit card can be a great help when managed properly. When you keep your balances low, for a high limit credit card your debt-to-credit ratio becomes low, which can help you build your credit score.
Truth: Having a credit card with a high limit is good.
Credit cards are a great financial tool and it’s ok to have one or two credit cards at a time. But remember the interest charged on a credit card is higher than other loans. So, be careful while using it & try making complete payments on a monthly basis to avoid debt traps.
