Do you need instant money to pay off your utility bill or buy any expensive gift for your loved one? Then, credit card is your one-stop solution. You can carry out any of your transactions using credit card instantly and later repay the amount to the lending institution. By using credit card, you don’t have to carry liquid cash all the time. It makes your payment very flexible and convenient. Credit cards are easy to carry and helps you with immediate financial aid at emergency situations. But there are certain myths regarding credit card which makes you doubtful about its usage.
Lets get in to the credit card myths and their actual facts.
- Myth 1- Credit card lowers your credit score
Usage of credit card brings down your credit score.
Fact- No, credit card does not lower your credit score.
In fact, credit card helps in building a good credit score. If you manage your credit card well and pay your credit card bills on time, you can easily increase your credit score. But if you are defaulting on the payment of your outstanding bill , then your credit score will fall. So, use credit card responsibly and boost your credit score.
- Myth 2- Debit card boosts the credit score
Usage of debit card helps to increase your credit score.
Fact- Debit card has null effect on your credit score
Debit cards helps you to use the outstanding money in your account to carry out your transactions and expenses. But credit card on the other hand, borrows short-term funds which are to be repaid on time. Your repayment gets reflected in your credit score.
- Myth 3- Too many credit cards affect the credit score
Your credit score gets affected by too many credit cards.
Fact- Using several credit cards wisely will not lower the credit score.
If you can manage your cards properly, then you will enjoy the benefits of each cards. A single card might not help you to meet all your requirements. But if you spend without any limit and do not payoff the outstanding bill, then your credit card will have negative impact on the credit score. So, spend wisely and enjoy the benefit of credit cards.
- Myth 4- Credit card charges an annual fee
An annual fee is charged for the usage of credit card.
Fact- Usually, credit cards charges an annual fee, but some providers do not take any annual fee.
Sometimes, credit card company charges an annual fee but can waive it if asked for. You can give it a try and can contact the provider to waive off the annual fee.
- Myth 5- Keeping outstanding amount boosts your credit score
Keeping outstanding balance helps in increasing the credit score.
Fact- An outstanding amount will lower the credit score.
Sometimes to show the usage of credit card, you keep a balance. But that’s wrong. Using a credit card for your payments boosts your credit score. While keeping a balance amount negatively affects the credit score. So, always pay off your outstanding balance.
- Myth 6- Only pay the minimum balance.
Paying only the minimum due is sufficient and won’t affect the credit score.
Fact– Payment of only the minimum due negatively affects your credit score.
Minimum due is a fraction of your total due which if paid will save you from any late payment charges. If you continue to pay only the minimum amount, then your outstanding amount will pile up and increase your financial burden. Most importantly, your credit score will lower down.