Typical myths about credit card benefits

August 24, 2017

Chasing to attract new clients lenders use all creative marketing tools to convince people that they offer the best credit card deals. Of course, aggressive advertising and competition has created myths, fears and conjectures in this field, some of which may hurt your credit score and budget. Lets take a look at the most popular misbeliefs about the benefits of credit card exploitation:

Myth #1 Lower credit limit means better credit score

When you get the proposal from your lender to raise the credit limit for your card, you may consider this as a trick to make you spend more, but it is also a chance to improve your credit score.

One of the key components of your credit score which accounts for 30% of the total calculations is the so-called utilisation ratio — the share from available credit that you actually use. The lower this figure is — the better it is for your credit score. Just remember that increased credit limit is your friend only when you keep your actual spendings unchanged, because it makes your utilisation ratio fall. This is also the reason why it makes no sense to strive for your credit limit reduction. Unless you are a shopaholic and can not control your spendings consciously! The alternative to credit limit increase is applying for another card, which brings us to the second myth.

Myth #2 Holding two or more credit cards is risky

This myth is mostly based on the prejudice about the impulsive nature of all human beings. But if you have enough self-discipline to control your spendings, holding several cards in your wallet won’t bring harm. Moreover, cash back benefits from different cards may help you save money. Take a look at your habits and expenses and check credit websites to find card bonuses that fit your lifestyle ideally.

Some people take out low interest credit cards especially for emergency and keep them just in case. If something unexpected happens and you will not be sure about the ability to repay in time, of course, it is better to use a credit card with lower interest rate.

Myth #3 Credit card miles and points are senseless

The myth occurred thanks to lazy minds who just don't want to dive in the magical world of bonuses. However, there is a solid community of travellers around the globe who grab any credit card opportunity to accumulate extra free miles, get free hotel stays and leisure bonuses. Same for cash back programs and reward point systems. Just remember to compare the amount of rewards with the amount of interest payments. The only advise here — don't confuse the means and ends. If some credit product serves your particular goals why not to use it?

Myth #4 You can not carelessly sign-up for a credit card just for a sign-up bonus

Oh, yes, you can! If you got attracted by a promising welcome bonus and issued a new credit card just to take the bonus and never use it again, it wont hurt anybody. But if you collect a huge number of such cards it will, eventually, lower your credit score, so don't forget to get rid of extra burden in time.

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