Most credit card critics believe that this financial innovation is a shortcut to a debt trap. However, contrary to this popular opinion, credit cards can be your best financial asset for short-term credit. Using the best credit card in India wisely and repaying your bills timely can boost your credit score and provide you with the credibility to access bigger funds. If you continuously fail to meet your debt obligations, it might lead to a vicious cycle of debts. Most first-time credit card users are not fully aware of the different features of a credit card. Therefore, they often fail to bank on the opportunities. Read on to learn more about the myths associated with getting a credit card.
Myths associated with getting your first credit card
There are various myths associated with getting the first credit card. Most of these myths arise because of a lack of knowledge and general awareness regarding credit cards. One must learn about different features, benefits, and charges associated with a credit card before applying for one. It will help you avoid the debt trap and use the best credit card in India to establish your creditworthiness in the market. Here are some common myths that stop people from getting their first credit card.
1. Owning a credit card can lead to a debt spiral
The first and most common myth about credit cards is that they can lead to a debt spiral. It is far from the truth. You are in control of your expenses if you stay on the right course by avoiding unnecessary purchases. Credit cards offer you a credit limit that can be used to pay for different goods and services. Many a time, people think of their credit cards as reserve money and start spending unnecessarily on goods they don’t even need. Controlling your spending habits will eliminate the chances of getting into a debt trap. Even if you are spending on luxury items through your first credit card, ensure you repay your debt on time.
2. You need to pay interest on everything
The second myth that is commonplace is that users need to pay interest for everything. It is not true at all. Most credit card companies offer a 20-days interest-free or grace period to repay the amount after the statement has been generated. You need to understand your credit cycle and then spend the amount accordingly. Credit card statements are generated after each cycle and users have 20 days interest-free period to repay the amount. One can choose to repay the full amount or a partial balance, i.e., the minimum due amount to avoid excess interest charges.
3. Multiple credit cards can cause damage to the credit-worthiness
Most people believe that owning multiple credit cards can damage their credit profile. It is common among those who are not even holding one credit card. Credit score calculation doesn’t directly get affected by the number of credit cards you own. Credit card companies conduct a hard inquiry on the user’s profile while accepting applications. It has an impact on your credit score, but it’s not very severe. It can also happen when you take a loan and a hard inquiry is required. However, in the medium to long run, this doesn’t affect your credit score as long as you are meeting your repayment obligations timely.
4. The annual fees are high
Most people don’t opt for their first credit card because they feel that the annual fee is high and doesn’t justify the benefits. It is not true at all. Most credit card companies charge a very nominal annual fee nowadays. The benefits offered by a credit card surpass these charges to a great extent. You can save a lot of money on various credit card offers. Some credit card companies also refund the annual fee if you reach a certain spending benchmark. The perks offered might vary depending on your credit card issuer.
5. Terms are non-negotiable
Credit card terms are non-negotiable. It is also a myth among new credit card users who have little knowledge about how credit card companies operate. They fail to understand that credit card users are prime customers of banks and other financial institutions. Customers can try to negotiate the terms that they feel are unacceptable with the bank. If you have a good credit score, your credit card issuer will probably accommodate a genuine request.