There is a reason why credit cards are so common. From young people to elders, they have made life incredibly comfortable and are available to everyone. They not only provide you access to a variety of benefits and unique experiences, but they also increase your creditworthiness. Hence, there is no better alternative than a credit card for urgent expenditures.
However, there are many widespread misconceptions about handling payments, knowing credit conditions, and maintaining a good credit score, making it often difficult for the general consumer.
Few Widespread Myths Regarding Credit Cards:
Select Credit Cards without annual or Renewal Fees
Although many individuals like credit cards with no annual or renewal fees, should pick a credit card based on their spending habits and needs rather than just the costs. For example- A shopping credit card enables you to collect cashback and reward points on lifestyle, shopping, and grocery bills. On the other side, a fuel credit card gives you savings on your fuel purchases. It is preferable to pick a credit card with an annual charge if it fulfills your demands and provides several perks over a card with no annual cost but provides fewer benefits.
Try not to Increase the Credit Limit
Many credit card users hesitate from raising their credit card limits. This is due to their conviction that a rise in their credit limit will increase their spending patterns. They worry that someday this would lock them into a debt cycle. You must realize that an increased credit limit may assist you with financial difficulties and even improve your financial situation if utilized sensibly. As a result, an increased credit limit will decrease the Credit Utilization Ratio (CUR) and your credit score will eventually rise. CUR is a measure of how much of your overall credit limit you have utilized. Ideally, you need to aim to maintain your CUR below 30%.
To raise your Credit Score, close any unused Credit Cards
Yes, you may save money on the annual fee and renewal cost by canceling your current credit cards. However, this might reduce the average age of your credit account which will in turn lower your credit score. You should be aware that closing a credit card can decrease your total credit limit. In turn, this will lower your credit score and raise your credit utilization ratio. If you wish to cancel all of your cards, close the newest credit card first.
Your financial health will be affected by Credit Cards
Many people hesitate to apply for credit cards out of fear that they could get into a debt trap. Yes, if you use your card carelessly, a debt trap is just around the corner. However, long-term strengthening of your financial situation might come through smart and disciplined usage of credit cards. A credit card offers several discounts and cashback in addition to providing fast credit. Some cards also provide reward points and free entry to airport lounges.
Your credit score will suffer if you apply for a New Credit Card
Two things happen that have an impact on your credit score when you apply for and acquire a new credit card. The process begins with a “pull,” or request, for your credit history. A single pull now and then won’t significantly affect your credit, but several pulls in a short period suggest that you are having trouble with your finances.
Read More: How to Choose the Best Credit Card
Conclusion
Credit cards are frequently utilized, and there is a lot of false information out there. You may use this information to help you decide how to use these powerful financial tools in the best possible way. We believe that these clarifications will make it easier for you to understand frequent credit card myths and how to debunk them.
Jyoti is unique blend of expertise, extensive experience, and a genuine passion for credit cards positions him as an exceptionally well-suited and engaging content writer. His profound insights into the Indian credit and banking sectors have empowered him to craft numerous informative and captivating blogs.