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Common Misconceptions About Credit Cards: Check Now

The use of credit cards can be an effective tool for strengthening your financial health when used properly. Although credit cards are a financial product, they are also surrounded by various misconceptions. 

The wrong use of credit cards may be caused by some misconceptions, while others may restrict the use of credit cards. Here are five common misconceptions about credit card interest rates you shouldn’t buy into.

Misconception No. 1 – Credit Cards Can Negatively Affect Your Financial Health

Due to the fear of falling into a debt trap, many of us avoid applying for credit cards. You can fall into a debt trap if you misuse credit cards irresponsibly, but if you manage them responsibly, you can benefit greatly from your overall financial well-being.

Credit card issuers generally report account activity to the credit bureaus, so those with no credit history can build it by using credit cards. Repaying outstanding credit card dues will impact your credit score similarly to any other type of loan since transactions via credit cards are like taking loans and having credit card interest rates.

Related Article: RBL Credit Card Apply Does not Have to Be Hard. Read These 6 Tips

Misconception No. 2 – Payment Of The Minimum Due Amount Does Not Incur Finance Charges

It is generally believed that cardholders will not incur finance charges if they pay their minimum due amount on time. It only reduces the late payment charge if you pay the minimum due amount. If the credit card bills remain unpaid, finance charges will accumulate. If an Bajaj Finserv RBL Credit Card account isn’t paid in full, interest-free periods can be revoked, or fresh credit card transactions can be made until the outstanding balance is paid in full.

If you cannot pay your credit card dues in full by the due date, consider converting the outstanding balance into EMIs. By converting credit card bills into EMIs, either in part or in full, you can make repayments in smaller instalments in the form of EMIs at a much lower interest rate than the finance charges.

Misconception No. 3 – It Is Best To Avoid Enhancing Credit Limits

Credit card holders generally avoid increasing credit limits because they fear it will lead to increased spending and debt. In contrast, what they fail to realize is that if used judiciously, an enhanced limit can not only improve their financial health but can also help them meet immediate financial needs.

In the first place, a higher limit would lower your CUR (Credit Utilization Ratio). This is the percentage of your total credit limit that you use. By reducing your CUR, you will gradually improve your credit score, enhancing your credit card and loan eligibility. Furthermore, you can also get a higher loan amount when you apply for a loan against your credit card if you require money in times of financial crisis.

Maintain a credit utilization rate below 30%, so your credit score does not suffer and you do not appear as someone who is credit hungry. CUR can be lowered by requesting an enhancement to your existing credit limit or applying for an additional credit card.

Misconception No. 4 – Closing Old Or Unused Credit Cards Improve Credit Scores

In the short term, closing your existing credit card could save you money as it would reduce your annual or renewal fees, but it will also reduce the average age of your credit account, which would reduce your credit score. Closing any of your credit cards will also decrease your total available credit limit, which may further result in a drop in your credit score due to a rise in your CUR.

Therefore, you should avoid closing older credit cards. Those with multiple credit cards and who would like to close any of them should close relatively newer ones first. Before closing any credit card, try increasing the credit limit on your existing card since closing a credit card can improve your credit rating.

Misconception No. 5 – No-Fee Credit Cards Are Better.

Even though many consumers highly prefer zero-fee credit cards, one should choose them based on their spending pattern. Credit cards usually cater to a specific target audience and reward them based on their transactions with specific benefits. Shopping cards, for instance, offer higher discounts and cashback on groceries, lifestyle, and other retail purchases.

On the other hand, Fuel credit cards provide higher discounts and cashback on fuel purchases. On the other hand, a travel credit card is designed to attract frequent travellers by offering higher reward points, cashback, travel discounts, hotel stays, and dining.

Read also: The Best Credit Card For Travelling With Minimum Costs


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