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5 Credit Card Myths that may be Hurting your Credit Score


With cashless transactions gaining momentum, the popularity of credit cards has surged in recent times. How you use your credit card will have an impact on your credit score. A three-digit figure, ranging between 300-900, your credit score reflects your creditworthiness and is one of the most important financial metrics. However, there are many myths associated with credit cards, and giving into these may adversely affect your credit score. Here are 5 such myths.


Myth 1: Borrowing up to the maximum approved limit on a regular basis is healthy

Every credit card offers you a maximum limit up to which you can borrow in a month. While borrowing up to the maximum permissible limit when needed is prudent, making this a regular habit can adversely affect your score.

It will increase the credit utilisation ratio, that can severely dent your credit score. Credit utilisation ratio is the ratio of outstanding credit to the maximum limit offered by a card. A high ratio shows you as a credit hungry borrower, affecting your score.

Myth 2: Paying less than the minimum amount is not a missed payment

There’s a minimum amount which you need pay to avoid a penalty. It’s a myth that paying less than this specified amount is not considered a default. In case this amount is not paid, it can bring down your credit score.

Paying the minimum amount can not only prevent late payment charges but also help you keep your credit score intact. Ideally, you should pay the entire bill amount if you can.

Myth 3: Payment of the minimum amount is sufficient

While paying the minimum outstanding amount can bring temporary relief, doing it on a regular basis will see your credit score hitting a new low. The outstanding amount will keep on piling and the same will be reflected in your credit history.

Thus, it’s important to pay the full outstanding amount within the stipulated period to prevent any negative impact on your credit score.

Myth 4: Carrying the outstanding balance builds credit history

It’s a myth that carrying the outstanding balance of credit card builds credit history. In fact, it does more harm than good. Carrying this balance can not only severely take down your credit score, but also prevent you from resetting the original limit.

You may also lose out on the benefit of interest-free credit in case you roll over the outstanding balance. Hence, it’s vital to pay off the entire outstanding balance within the due date to avoid unnecessary penalties.

Myth 5: Having multiple cards helps in improving credit score

In fact, possessing more than one card can put additional pressure on you to keep your score healthy. When you use more than one card, you need to pay the outstanding balance of all your cards that may strain your finances.

Additionally, a payment default on a single card will adversely affect your credit score. Thus, it’s important to choose cards with caution and avoid having more than one card, unless absolutely required.

Credit cards like the Bajaj Finserv Platinum Credit Card offer interest-free withdrawals from ATMs for up to 50 days, charging only a processing fee of 2.5%. The card also allows you to convert your limit into an emergency personal loan.

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