The use of plastic money has increased and has now become a popular debt instrument.
A credit card, a form of plastic money, allows you to avail of short-term credit. The debt may then be cleared at a later date. However, not many are aware of the working and the implications of such a debt instrument. Many have pre-conceived notions that are not entirely true. Following are five popular myths about credit cards:
- Getting such a card is not a good option
Quite many individuals do not opt for such a card as they believe that it will lead to damaging debt. This is not the case. These cards become an issue only when bills are not paid on a timely basis. It is, therefore, important to manage your spending wisely and pay off your debts on time. In order to apply, you may check the credit card eligibility criteria, either through the issuing company’s website or by visiting their branch.
- Such cards may hurt credit scores
It is a common misconception that having such a card may affect your credit score in a negative manner. The truth is, it helps you build a good credit history. Making your bill payments on time will help you establish an excellent credit history, which will then reflect on your credit score. This, in turn, will increase your chances of getting approval on a loan.
- Having more than one card is not advisable
It is often believed that having multiple cards may cause a negative financial impact. However, if you manage your spending responsibly and make timely payments, you may apply for more than just a single card. Make a choice between multiple options, right from standard cards with no frills, to cards that offer numerous perks and benefits.
- It is completely okay to go over the credit limit
Many believe that spending more than their credit limit will not do any harm. Though your card issuing company may allow you to go over your limit at times, going over your pre-defined limit will impact your finances in a negative manner. The card issuing company may either levy a fee or decrease your credit limit. It is, therefore, important to avoid over-the-limit transactions.
- It is not necessary to sign at the back of the card
Many are of the opinion that signing at the back of the card does not hold any importance. However, a card without a signature is considered as an invalid card. The card issuing company and the merchant enter into an agreement, in which the merchant is supposed to check whether the signature provided on the bill matches that on the card. The chances of misuse of your card, in case of theft, increases to a great extent if you have not signed your card. To avoid any kind of misuse, it is important to sign on the back of the card.
A credit card is a great debt instrument. If such an instrument is not used with care, it may endanger your financial position. Keep in mind the aforementioned myths and become a well-informed card user.