Times are gone when the use of Credit Cards was limited to the hands of well-acknowledged Entrepreneurs and Business Men for basic Business transactions. However, today, even start-up businesses hold the power of Credit cards for personal transactions and even have credit cards in the name of startups to make business transactions. When are you getting one? Before you sign up for Credit Card, here are 10 myths you must not believe in:
One Credit Card is enough; number of Credit Cards is an invite to a Financial Crisis.
To the audience who believe the above statement, one credit card is not related to the other credit cards you are holding. Proper management is definitely required for handling multiple credit cards, but there is no probability of financial crisis until or unless the use of credit cards is done according to Law.
To close a Card drives a Credit Score.
Closing a Credit card is never an option or an opportunity to enhance the credit score. Cardholders who do so will only regret it in the future. If you want to drive the credit score through a credit card not in use, keep it open. Why? Because Not-in-Use Credit Cards with balances deduct the utilization rates. Deduction drives credit score.
An Annual Fee is a Compulsion
Many individuals avoid signing up for a credit card because they think an Annual Fee is a compulsion. However, it is not! It is one’s choice to pay an Annual Fee as it comes with extra perks akin to free airport lounge access and free baggage claim. Apart from this, if the credit card’s use is only regular, one should consider paying an annual fee.
Credit Card is ‘Minus’ for Credit Score
To those Entrepreneurs/Businessmen/working individuals who are looking to get a major Loan for a home, car, or for any other purpose, a higher credit score is required. It does not matter if one has two credit cards or three if the credit score is higher; it is unchangeable via any credit card activity.
To Skip Credit Limits is Unproblematic
If any of you are following this Credit myth—don’t! Don’t let yourself dig into a major financial crisis. More often than not, skipping the credit limits leaves the credit card holder with Debts to pay at the end, and there is a 90% probability that the creditor boosts the interest rate. Once the interest rate increases, you can do nothing but pay the debts.
Minimal Payment of Credit Card is No Harm
Indeed, a minimal Payment of Credit Card each month just to avoid getting under the blanket of Dues is not an option. The constant minimal payment each month results in a deduction in Credit score as the assumption becomes simple—you cannot afford to pay dues in full. Apart from this, regular and full payment of credit card dues on consistent basis increases the credit score.
Age does not matter for signing up for Credit Card
However, Age does matter. According to the Law of Australia, the legal age for an individual to sign up for a credit card is 18. However, it is not rigid that one who is 18 will get the credit card issued because he/she must prove their ability to pay their dues each month. Failure to prove will lead to ‘No Credit Card’ as Credit stores and financial institutes run on risk-avoider policy.
Credit Scores is quick to build through Credit Card
You may say that ‘Credit Cards 20% assist in the building of Credit Score’, but not more than that. The issuing of a credit card brings some 100 points to the credit score, but this is it. Next, you know that you have to wait for 3-4 years to build a perfect credit score through Credit Cards. A slight default in your payments leads to a deduction of your credit score.
Online Use of Credit Cards is an invitation to Hackers
Credit Cards are safe to use for online shopping and payments. There is a range of online safety precautions you may need to work on; otherwise, it is all safe. Undoubtedly, the websites could be fraudulent, so precautions can be considered in the first place to take.
Credit Limit Increment is an Offer
A Credit Limit Increment is always a Trap if the lender is offering you so. This is because the Amount owed to the lender affects the utilization rate. Facts say, Higher the credit Limit and lower the utilization leads to higher utilization ratio. Thus, you end up owing more anyhow.
So Next time, do not go with the Myths!
A credit card allows you to pay anywhere, it can be dangerous gateways to debt, but if you use them wisely you can actually make money with them.