Top 10 credit card myths in India debunked

Posted on Saturday, September 16th, 2023 | By IndusInd Bank

Credit cards have become an integral part of modern financial life where the cost of living is rising at a rapid pace. They offer convenience, flexibility and rewards for use. Alongside their growing popularity though, numerous myths and misconceptions have emerged. Thus, it is imperative to debunk all the myths surrounding credit cards. Let us debunk the top 10 credit card myths in India, shedding light on the truth behind each misconception.

10 credit card myths debunked

Myth 1: Credit cards harm your credit score

Truth: One of the most widespread myths is that using a credit card negatively affects your credit score. In reality, responsible use of a credit card can improve your credit score over time. Timely payments and maintaining a low credit utilisation ratio demonstrate good financial behaviour and contribute positively to your credit history.

A credit card harms your credit score only if you fully become dependent on credit cards for all your needs, such that it is always maxed out. Non-timely payments can also be a reason for a dent in your credit score. 

Myth 2: Owning multiple credit cards dents your credit score

Truth: Owning multiple credit cards does not necessarily lower your credit score. While having multiple cards might initially lead to a small dip in your score if you apply for them simultaneously, it is the way you manage these cards that truly matters. Responsible management, such as keeping balances low and paying bills on time, can preserve and even improve your credit score.

Myth 3: Paying the minimum balance due is sufficient

Truth: Paying only the minimum balance might seem like an easy way out. However, this can result in high-interest debt accumulating over time. It can also dent your credit score over time. To maintain financial health, it is best to pay off the entire statement balance each month.

Myth 4: Avoid credit cards with fees and opt only for free ones

Truth: Credit cards with annual fees often offer higher rewards, better cashback, and enhanced security features. These benefits can often outweigh the annual fee, making such cards a wise choice if they align with your spending habits.

Myth 5: You can use your full credit card balance without harming your credit score

Truth: Maxing out your credit card or frequently using the full balance can negatively affect your credit score. This high credit utilisation ratio indicates your undue heavy dependence on credit and poses a higher credit risk to lenders. Aim to keep your credit utilisation below 30% to maintain a healthy score.

Myth 6: You cannot withdraw cash from a credit card

Truth: Many believe you can only withdraw cash using a debit card, which is incorrect. A credit card also allows you to withdraw cash using normal ATM machines. However, cash withdrawals often come with certain fees and high interest rates right from the moment of withdrawal. Therefore, it is wiser to use credit cards online and for POS-based transactions. You should avoid cash withdrawals using credit cards unless there is no other option left.

Myth 7: You should not accept a credit card limit hike if not required

Truth: An increased credit limit can improve your credit utilisation ratio, an important factor in your credit score. It will directly save you from maxing out your credit cards. However, it is crucial not to succumb to overspending due to an increased credit limit. If you can manage your spending responsibly, accepting a credit limit hike might work in your favour.

Myth 8: You should not have a credit card if not required

Truth: Even if not frequently used, a credit card can help build and maintain a positive credit history. Responsible occasional use and timely payments can prove beneficial when you need credit for significant purchases. In fact, a credit card rewards you with multiple offers, helping you save money. You can even choose credit cards based on your lifestyle.

For instance, the IndusInd Bank Platinum Aura Edge Credit Card is a highly flexible credit card that allows you the flexibility to choose a plan that is suitable to your lifestyle and spending needs. You can choose between the shop plan, home plan, party plan or travel plan based on your needs. These plans provide you with Savings Points for different purchases and expenses.  

Myth 9: You must have a minimum credit score to get a credit card

Truth: Eligibility criteria vary, and a lower credit score does not automatically disqualify you. You can now seamlessly get an instant credit card online. Some cards are designed for individuals with lower credit scores and offer a chance to rebuild credit.

However, these cards might come with higher interest rates and lower credit limits. You can always skim through different cards and get a credit card that best suits your needs.

Myth 10: Cancelling your credit card will boost your credit score

Truth: Closing a credit card can actually harm your credit score, contrary to popular belief. The length of your credit history is a factor in your score. Moreover, closing a credit card can increase your credit utilisation ratio, denting your credit score. It is often better to keep the account open with a zero balance. Who knows, when you might need your credit card again? 

In a nutshell

Understanding the realities behind these common myths is crucial for making informed financial decisions. Timely payments, low credit utilisation and informed choices can help you maximise the benefits of credit cards. Always remember that credit cards are tools that, when used wisely, can contribute positively to your financial journey. You can apply for a credit card online from the comfort of your home. But, selecting the right credit card is crucial.

IndusInd Bank offers a range of premium credit cards with an array of features. Some of the best benefits include:

• You can apply for a credit card online and get instant approval.
• You earn reward points that never expire.
• Some IndusInd Bank Credit Cards offer the lifetime-free benefit – there is no annual fee or joining fee.
• You can convert your reward points to cash credit, which can then be used to pay off your outstanding credit card bills.
• You get fuel surcharge waivers, complimentary movie tickets, airport lounge access and more such benefits.

The benefits may vary depending on the type of card you select. You can select the best credit cards based on your needs and preferences. Apply now for IndusInd Bank Credit Cards.

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.