4 Credit Card Myths Explained
Credit Card Myths Explained - Common myths busted about Credit Cards
Below is a list of some commonly believed myths about credit cards that are easily overlooked and misunderstood.
Spending on a credit means I do not have to pay it back
It is one of the most dangerous myths and lead many to complete financial mess before they even realise what had hit them. Credit card companies want you to borrow and their main income comes from you paying interests on the outstanding balance. Although they earn a small percentage from the retailer you spend the money with, interest income is a huge chunk of their main revenue stream. You cannot avoid the bills once you have made a purchase with a credit card and you should not because this will leave a long lasting mark on your credit scoring (ability to get further credit).
It is one of the most dangerous myths and lead many to complete financial mess before they even realise what had hit them. Credit card companies want you to borrow and their main income comes from you paying interests on the outstanding balance. Although they earn a small percentage from the retailer you spend the money with, interest income is a huge chunk of their main revenue stream. You cannot avoid the bills once you have made a purchase with a credit card and you should not because this will leave a long lasting mark on your credit scoring (ability to get further credit).
I can avoid paying the bills for as long as I want
You can spend money on a credit card and put your long awaited holiday on it and try and forget about paying the bills. This will create more trouble than it is worth certainly. Treat all credit card debts as a high priority as this will not stop following you until you pay it off and can only add interests and charges to make matters worse.
Using credit card is not a good idea
This can be argued both ways. Using a credit card properly and in a planned manner can benefit you in many ways. Some of the benefits can be listed such as improve your credit scoring if you pay off your balance in a timely manner. You can earn points and rewards such as airmiles, vouchers etc.
It can also buy you valuable time and work as a short term loan to pay for emergency expenses.
All the points above, however, applies if you only use your credit card sensibly.
Missing one credit card payment is not a big deal
It may not sound like a big issue but it is in reality when you come to analyse it more. If you miss one payment, it is highly likely that you will get charged ‘late payment fees’ which can be a very unreasonable amount. Furthermore, it affects your credibility which is credit scoring adversely and prevent you from getting any further credit limit increase in the future. Therefore, if you do possess credit card(s) then it is very important that you keep a close eye on the payment due dates and if possible set up a direct debit or a reminder of some sort.
This can be argued both ways. Using a credit card properly and in a planned manner can benefit you in many ways. Some of the benefits can be listed such as improve your credit scoring if you pay off your balance in a timely manner. You can earn points and rewards such as airmiles, vouchers etc.
It can also buy you valuable time and work as a short term loan to pay for emergency expenses.
All the points above, however, applies if you only use your credit card sensibly.
Missing one credit card payment is not a big deal
It may not sound like a big issue but it is in reality when you come to analyse it more. If you miss one payment, it is highly likely that you will get charged ‘late payment fees’ which can be a very unreasonable amount. Furthermore, it affects your credibility which is credit scoring adversely and prevent you from getting any further credit limit increase in the future. Therefore, if you do possess credit card(s) then it is very important that you keep a close eye on the payment due dates and if possible set up a direct debit or a reminder of some sort.
Beleiving in myths can be very entertaining however, when it comes to credit card myths, it is better to understand them and make informed decisions. Credit card myths are everywhere, therefore, we should try out best not to let them affect our judgement in choosing the right cards and most suitable credit card deals.
