First-time credit card applicants hear about the horrors of owning a credit card, or the absolute care-free, breezy life one can live by just swiping these plastic cards. However, neither of those beliefs are true. Here are some common myths regarding credit cards, and their related facts.
- Myth: Just one credit card is enough
Reality: A lot of people tend to believe that owning more than one credit card is a matter of luxury, and oftentimes, it can end up hurting your credit score. The reality is not quite the same. Owning more than one credit card is usually quite beneficial in terms of cashback, discounts, and rewards. This is because different credit card companies partner with different air travel, entertainment, and lifestyle companies to provide offers. Hence, it is quite likely that one credit card of yours can bag you discounts from a certain airline, while the other one can help you earn air miles on another airline.
Additionally, owning more than one credit card can also decrease your credit utilization ratio, which in turn amps up your credit score.
- Myth: Applying for a new credit card is bad for your credit score
Reality: Applying for only one credit card in a time period of 8 to 9 months has no significant effect on your credit score. When you apply for a new credit card, the issuers make a request for your credit history; this is called a “hard pull”. One hard pull can never hurt one’s credit score. Only multiple pulls in a very short period of time imply that you are going through a financial crisis, and could hurt your credit profile.
- Myth: Checking your credit score can bring it down
Reality: This is one of the biggest misconceptions amongst the majority of credit cardholders. Inquiring about your credit score is what is known as a “soft pull”. Inquiring about your credit score from legit sources like the credit bureaus themselves won’t hurt your credit score.
- Myth: Having a credit card can make anyone a spendthrift and shopaholic
Reality: A credit card certainly makes spending easy and convenient, by letting you spend money on credit. This is the basic difference between credit cards and debit cards. But the reality is that responsible usage of credit cards can actually improve your finances, help you get discounts, cash back, and rewards, and strengthen your credit score. Additionally, if there is a strict budget set up for your monthly expenses and plans, there is no reason why any responsible adult will end up being a spendthrift.
- Myth: Old credit cards must be closed
Reality: Credit Utilization Ratio is a measure of the amount of credit you’re currently using compared to your credit limit. A high value indicates that you are in some financial trouble, and thus has a negative impact on your credit history. Usually, a ratio below 30% is considered fine. Just as multiple credit cards help one to lower that ratio, having older cards can also help one reduce their credit utilization ratio. Therefore, closing older accounts can actually lower your total available credit, and consequently, increase your credit utilization ratio. Additionally, older credit cards are also considered beneficial for your credit profile, as they help you add to the length of your credit history.
- Myth: Selecting the ‘credit’ option while purchasing on your debit card increases your credit score
Reality: No purchase on your debit card is reported to the credit bureaus, and hence, it can never have an impact on your credit score. When you select the ‘credit’ option for your debit card, it just means that your transaction will be lengthier, and you will have more benefits than on a usual debit card purchase.
- Myth: Make your monthly settlements as soon as you can
Reality: This is often tricky. Paying the entire amount every month may be counter-intuitive, as even a small balance being carried forward can have a positive impact on your credit score.
With the power of 4 cards in 1, the Bajaj Finserv RBL Bank SuperCard is one of the most innovative credit cards in the market today. It can be of great help during financial crises, as it lets you avail a personal loan for 90 days on your cash limit with a nominal interest rate of 1.16% per month, and zero processing fees. To get hold of this helpful credit card apply online and get it approved instantly.