5 Myths about Credit Cards

Posted on Tuesday, March 14th, 2023 | By IndusInd Bank

Even in today’s digital age, there’s a huge number of people who see credit cards as a debt trap. There are many myths about credit cards that limit people from using them to their fullest potential and extracting the most out of them.

On one side, there are individuals who prefer buying, shopping, or spending only via a credit card to avail exclusive discount offers and claim rewards. On the other hand, there are people who only see credit cards as a form of loan and nothing more.

So, in this blog post, we will debunk five of the most common myths about credit cards and show how credit cards can be your best friend when used wisely.

Myth #1: Credit Cards are Bad for Credit Score

One of the most pervasive myths about credit cards is that they are bad for your credit score. However, the reality is exactly the opposite. Credit cards are a powerful tool for building and improving your credit score. Credit card companies report your payment history to credit bureaus, and this helps in establishing your creditworthiness.

If you use your credit card responsibly by making payments on time and keeping your balance low, your credit score will improve over time. In contrast, if you make late payments or carry a high balance, your credit score will be affected negatively.

Myth #2: Credit Cards are Only for People with Good Credit History

Another common myth about credit cards is that they are only available to people with good credit history. While it is true that some credit cards are designed for people with excellent credit history, there are many credit cards available to people with less-than-perfect credit history or who are looking to build their creditworthiness.

For example, there’s a premium segment of credit cards offered by different providers to cater to high-credit score individuals, but there are specific credit cards that are available to people with no or low credit score as well.

Myth #3: Credit Cards are Too Expensive to Maintain

Some people believe that credit cards are too expensive and there are different types of fees and interest rates that are too high. While it is true that some credit cards come with high fees and interest rates, there are also many credit cards with low or no fees and offer competitive interest rates.

In fact, credit cards offer reward programs that can help offset the cost of using the card and even offer greater benefits. For example, cash-back cards offer cash rewards for every purchase you make, while travel rewards cards offer points or miles that can be redeemed for travel expenses.

Myth #4: Credit Cards Encourage Overspending

Another common myth about credit cards is that they encourage overspending. While it is true that credit cards can make it easier to spend money, they do not necessarily encourage overspending.

The key is to use credit cards responsibly and to only spend what you can afford to pay back. This means setting a budget for your credit card expenses and paying off your balance in full each month to stay on track.

Myth #5: Always Carry Balance on Your Credit Card

And lastly, some people believe that carrying a balance on their credit card is necessary to improve their credit score. This is completely untrue.

In reality, carrying a balance on your credit card can actually hurt your credit score by increasing your credit utilization ratio. This ratio compares the amount of credit you are using to the amount of credit you have available, and a high ratio may indicate to lenders that you are credit hungry or are at risk of defaulting on your debt.

Instead, it is better to pay off your credit card balance in full each month to avoid interest charges and to keep your credit utilization ratio low.

To conclude, there are many myths about credit cards that prevent people from using them to their true potential. By understanding the truth about credit cards, you can make informed decisions about how you can use them to build your creditworthiness, earn rewards, and manage your finances responsibly.

In the blog, we also talked about how there are some credit cards that are not at all expensive to maintain and are available easily. If you’re looking for one such credit card, then do check our collection of amazing credit cards. IndusInd Bank offers lifetime free credit cards with instant approval and offer rewards points that never expire.

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.