Credit cards can help with money management if they are used sensibly and paid back on time. Like the great majority of financial products, credit cards are the subject of many false beliefs and myths. Some myths prevent people from making the most of their credit cards, while others promote improper american express membership rewards credit card use that can harm your credit score and stability financially.
We’ll debunk a few myths to help you gain clarity before you apply for a credit card.
Credit cards appear to be a doorway to an endless cycle of debt.
Many people are reluctant to use credit cards because they are worried about getting into debt. They never apply for credit cards as a result. Only those who lack self-control over their spending and finances are likely to accumulate significant debt. To maximise credit card usage for the remaining balance, prudent credit card selection, use, and repayment are necessary.
Furthermore, for people who are just getting started with credit, getting a credit card can be a wise decision as it can help them build a history of timely credit repayment and gradually work towards building a high credit score. Timely credit card payments have the same positive effects on your credit score as timely repayment of any other type of loan because credit card transactions are processed similarly to loan applications.
While using a card you can approach american express customer Care service if you have any doubt about bill, offers, rewards, credit score etc. Also, be aware that if you have no credit history or a credit score of zero, your chances of being approved for inexpensive loans with reasonable interest rates are reduced.
It’s best to refrain from raising your credit limit.
Because they think that applying for new credit cards or raising their credit limits will lead to increased spending and eventually american express membership rewards credit card debt, many credit card holders are reluctant to do so. Increased credit limits can significantly improve your financial situation if you use them wisely.
A higher credit limit not only makes managing financial emergencies easier, but it also lowers the user’s credit usage ratio—that is, the portion of the credit limit that the cardholder has really used. As your credit utilisation ratio declines, your credit score rises and you become more eligible for credit cards in the near future. Keep your credit utilisation ratio at or below 30%. People who use more credit than they can afford are penalised by credit bureaus by a specific percentage point because banks consider these individuals to be credit-hungry. If someone consistently goes over this limit, they can apply for a second american express membership rewards credit card or ask their current credit card issuer for an increase. You can also contact american express customer Care service to get credit limit increased.
The lateness of payments and credit score are unrelated.
When evaluating a loan application, lenders frequently start by looking at your credit score, which is a three-digit numerical representation of your credibility. Any instance of irregular credit payments may result in a lower credit score, late payment fees, and high financing charges because your credit score is based on your credit repayment history as reported in your credit report. The borrower may find it more challenging to obtain loans and credit cards in the future if their credit score is lower.
It is sufficient to pay the bare minimum bill amount
One prevalent misunderstanding among american express membership rewards credit card users is that they can relax knowing they will be able to make the minimum payment even if they are having trouble paying off their entire balance by the due date. This is untrue. By paying the very minimum amount due by the bill due date, the cardholder can avoid late payment fees; however, any amounts not paid by the due date will still result in high financing costs, which can range from 23 to 49 percent annually. Keep in mind that even a minor late payment on your debt can lead to additional penalties and a decline in your credit rating. Furthermore, if credit card debts are not settled in full, the interest-free period may expire on subsequent credit card transactions.
Therefore, you might want to think about putting all or part of your credit card debt into a monthly payment plan if you are having trouble making your payments on time and in full. A person can avoid finance charges on subsequent purchases and, in the unlikely event that they are unable to pay the entire balance, make repayments at a significantly lower interest rate if they choose to convert a credit card bill, either in full or in part. They may also choose to gradually reduce their payments over time, contingent on their ability to repay the debt.
Your credit score will drop if you have multiple credit cards.
The idea that having a lot of credit cards will lower your credit score is another common misconception in the credit card industry and among credit card applicants. However, a credit score is influenced by the way a american express membership rewards credit card holder uses and pays back their credit cards. A high credit score can be attained and maintained by paying off credit card debt completely early, avoiding a lot of credit inquiries, especially in a short period of time, and maintaining a credit utilisation ratio (CUR) below 30%.
Additionally, having multiple credit cards can help you in a number of ways, such as providing a safety net in the event that your primary credit card is lost or stolen, letting you schedule your expenses based on the interest-free periods on each card, and increasing your rewards when you use multiple cards due to their various reward point systems.
When applying for a credit card, you should be aware of all these myths because blindly believing them can negatively impact your finances in a variety of ways. Also, dont forget that you can always utilize the facility of enquiring with american express customer Care service whenever you have any query or doubt about your credit cards.
