Credit card- this can be a complicated subject. If you do not agree, then try going through that lengthy list of terms and conditions and you may experience a change in your opinion.
Due to these complex terms and conditions, people may end up misunderstanding some of the facts about credit cards.
At some point or another, a lot of you would have believed something about these plastic cards that is incorrect. We don’t entirely blame you, but it is important to bring to your notice that one wrong advice can fall back on you big time.
It may lead to financial stress of paying extra and unnecessary charges, make your debts increase, and even cause a bad impact on your credit score.
Hence, in this article, we are listing some of the common credit card myths and busting them simultaneously.
1. Terms on Credit Cards cannot be negotiated
There are many credit card customers who assume that they will have to accept all the terms that are offered to them by their bank while applying for a credit card. However, the fact is that your bank wants to keep you as its customer in the long-run and in order to do so; it will sometimes make concessions for you.
If you have been paying a huge amount of interest on your card balance, you can ask your bank to reduce it. In case you think your card is not worthy of the amount of annual fee you are paying, you can check with the bank if they can waive it off for one year or offer you some retention offers such as cashback or bonus rewards to make it worthy.
Knowing what all you can avail of is possible only when you approach the bank and ask. The worst that could happen in this case is that your bank will refuse. So, as such, there is no harm in trying.
2. Skipping even a Single Payment will affect your Credit Report
Missed your card payment- oh no! Panic Alert!
This is what you have been thinking until now. As soon as you receive a notification regarding missing your card payment, you start stressing out thinking your credit score will have a major hit.
The fact, however, is that making late payments may incur damages to your credit report, but this happens only when you miss the payment by 30 days at least.
The reason is that your card provider reports about your card payments to the credit reporting bureaus with the help of codes. The code, which corresponds to the current accounts, includes those payments that are paid on time to those, which are past due for up to 29 days. These codes for the past-due accounts begin with the ones that are late by at least 30 days.
3. Cancel the Credit Card you don’t Use
Canceling products and services one does not use is a common practice. However, this may not be applicable in the case of credit cards.
On canceling any one of your credit cards, you will lose its credit line. Therefore, there will be less credit under your name. If you have been carrying any card balance currently, this may lead to a rise in your credit utilization and that is a considerate part of your credit score.
This is why; when you cancel your credit card your credit score decreases. Generally, keeping a card open is better so that you can continue to have its account history and its available credit.
4. Canceling Credit Cards is never an Ideal Option
At times, people consider that the information given in the previous point means they must never cancel their credit cards. This is not exactly true.
If you never use your card and it has a high amount of annual fee and you are not able to downgrade it into a zero annual fee credit card, canceling it is a better option.
However, if the card gives a boost to your credit utilization or if you have held the card the longest, and its long account history will have a good impact on your credit rating, then do not think of canceling it.
Otherwise, there is no need to keep a card open for no reason at all because it will only add up to the things you have to keep a track of.
5. Carrying a Card Balance is Important for your Credit Score
This is one myth that suggests the absolute opposite of what you must do with your credit cards.
There is no need to carry a balance on your credit card for building credit. This only means that you pay extra charges in the form of interest each month. So, paying your card bills in full every month for avoiding that interest is the best option.
It is not important to make regular use of your credit card for building a payment history, which is amongst the most essential factors for calculating your credit score. However, if you simply charge a minimum of 1 purchase every month and pay it off by the payment due date, then your credit purpose will be accomplished.
6. Multiple Credit Cards are Unhealthy for you Credit
When you have many credit cards, one of the most common questions you come across is, “Isn’t this unhealthy for your credit rating?”
The answer is, No. This is because the number of credit cards you hold is not amongst the criteria used to calculate your credit score.
However, there are some indirect ways in which having multiple cards may have an impact on your credit rating. Every application for a credit card needs a hard inquiry on the credit file. This hard inquiry may lead to a reduction in your credit score by some points.
Since the length of the account history is also amongst the scoring requirements, having several new cards may also have an impact on your credit rating.
But, these are the two not-very significant matters and hence, they should not stop you from carrying more than one plastic card if you wish to. If your credit score is excellent already, then getting some of the best credit cards in the UAE for increasing your rewards sounds like a good idea.
Do Not Trust All that Falls on your Ears or Eyes
Considering these myths about credit cards can harm you financially. You may end up paying interest charges and other fees uselessly, keeping those cards you are not in need of, or being unable to get the cards, which can let your earn huge rewards.
Moreover, misinformation regarding a credit card does not only cost you your precious dirhams but also have a bad impact on your credit score. This article enlists the most common fallacies that you must know about these cards. Before taking anything at its face value, it is important to dig deep for making sure that it is the actual deal.