5 Credit Cards Myths You Should Know About
Most people have a fear of using credit cards because they think that this will put them into serious debt and slowly kill their savings. Well, this is possible for those who don’t know how to handle debt. Those who do, on the other hand, will get to enjoy the benefits of having a card that they can utilize when they are short of cash. In order to ease the fear of those who are scared of the plastic card, here are a few credit card myths that you shouldn’t believe.
Having More Than 2 Credit Cards Is Too Much
This really depends on how you manage your cards. The benefit of carrying a lot of cards is that you can enjoy the benefits of each. For example, one card may have big rebates on grocery shopping while another will have big rebates on dining. This all depends on how you use your card. If you can’t control your spending, then keep only one card. However, if you can handle credit cards well, you can use as many as four.
Applying for a New Card While You Have an Existing One Lowers Your Credit Score
Yes, your credit score might drop a little when you get approved for a new card but not that much. They have to factor in your credit history which may drop it by a bit. However, if you diligently pay your bills on time over a long period of time, your credit score will soar. Once you know how that part works, you won’t be so scared of getting a new credit card.
Increasing Your Credit Limit is Bad for Your Credit Score
Why do providers offer an increase in your credit limit? Well, it’s because they want you to spend more, simple as that. If you do that, and you can’t pay your credit card bill on time, then obviously, your credit score will drop like crazy. If you still keep your spending to a minimum even if your credit limit increases, then your credit score will go up.
Let’s say your existing credit limit is $1,000 and your monthly spending is $600. If you increase your credit limit to $2,000, and your spending is still $600, then your credit score will go up since you are a controlled spender.
Credit Cards Always Charge Additional Interest
Your interest rate is a fixed amount; however, credit card companies will charge you additional interest if you don’t pay on time. The interest will then accumulate into a tremendous amount which can be a burden in the long run. The key here is to pay your bills on time.
Having a High Credit Balance Will Increase Your Score
A very dangerous credit card myth that circulated is that having a high credit balance increases credit score. This is not true! In fact, it will even lower your score. The reasonable credit balance is around 30% and below of your credit limit. If you spend more than the 30%, you’ll notice that you lose some of your credit score.
The thing about cards is that they are double edged swords. They can be a significant danger or a big help depending on how they are used. Use them well and they can benefit you.
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