The little piece of plastic in our wallets is the source of our joyous shopping and also comes with major myths. The misinformation about our credit cards can cost us money and also affect our credit scores. We have busted some of the most common myths about credit cards.
Myth 1 - Carry a credit card balance to build credit
To improve your credit, you don't need to carry a balance. That simply implies you're paying monthly interest that isn't necessary. To prevent the interest, it's always preferable to pay your bill in full. You need to use your credit card regularly in order to have a good payment history, because that is what impacts your credit score the most. However, you can achieve this by simply charging at least one transaction per month and paying it off before the due date.
Myth 2 - Checking credit report hurts score
Checking your credit report has no negative impact on your credit score. According to ClearTax, an income tax e-filing platform- keeping check of credit reports and scores at regular intervals is a smart habit. It offers the opportunity to change one's financial behavior if necessary.
Myth 3 - You should only have one credit card.
This is common advice when you are initially beginning to develop your credit. It is a good way to limit your spending for your wallet, but you don't have to limit yourself to just one piece of plastic. Multiple cards are OK if you can control your spending and make timely payments. If you're acquiring a new credit card, choose one that offers benefits and incentives that are applicable to your spending patterns.
Myth 4 - The more you spend, the more your credit score goes up.
Unfortunately, how much you spend does not directly affect your credit score; rather, it depends on how carefully you spend your money and whether you pay your bills on time. What does affect your credit score is maintaining your credit utilization (how much of your available credit you're using) low across all of your loan accounts and paying your bills on time every month to establish a positive payment history.
Myth 5 - You should only pay the minimum due each month.
There will be times when the minimal payment is all you can afford, and that's okay. But make an effort to pay as much off each month as you can. The smallest monthly payment your lender will accept is known as a minimum payment. It is always advised to pay more than the minimum amount required when you are able to do so in order to pay off your credit card debt because interest charges may still accrue and your debt may continue to grow as a result.
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