Top Credit Card Myths Scattered
1) Credit cards make you a shopaholic
MYTH
Credit cards make spending any and cardholders can get carried away.
REALITY
A credit card certainly makes it convenient to spend. Also, users are not very bothered when swiping a card or shopping online because they don’t feel the pinch of paying hard cash However, a lot also depends on how financially disciplined an individual is If there is a budget for expenses and shopping trips are planned in advance, there is no reason why a person will end up spending more than he should.
SMART TIP
Use a budgeting app to understand your spending pattern. These apps alert the user if he overshoots the budget under any head.
2) Gives access to instant cash at low cost
MYTH
In emergencies, interest of 2-3% a month is not prohibitive.
REALITY
Credit card debt is the costliest form of borrowing. When you withdraw cash using your credit card, the interest charged is 2-3% a month (or 24-36% a year). Apart from that, there is a cash advance fee which is often a flat 200-500. Also, interest is charged on all purchases made during the billing cycle So, if you withdrew only 10,000 cash and used the card for other purchases worth 20,000, interest will charged on the entire 30,000.
SMART TIP
Withdraw cash only if you are facing a real emergency. Even then, make one big withdrawal instead of several small ones.
3) One card is more than enough
MYTH
Having too many cards does not help and only complicates your finances.
REALITY
Credit card issuers tie up with retailers, brands and service providers to offer attractive deals to custom ers. An online retailer may give a discount on one card, while a travel portal might offer on another.
Having more than one card increases your chances of grabbing such deals as and when they are available.
SMART TIP
Get credit cards from 3-4 different issuers so that you are eligible for all the discounts being offered by various merchant outlets.
4) No benefit at fuel stations anymore
MYTH
Cashback has ended so you pay more for using a credit card,
REALITY
Though oil companies have discontinued the 075% cashback at fuel stations, there are still several benefits in store for users of co branded petro cards. Some co branded petro cards offer reward points that can be used to buy fuel Others waive the surcharge or annual fee if the spend on fuel exceeds a certain threshold The discontinuation of the cashback does not make a big difference.
SMART TIP
Get multiple cards of different petroleum companies to be eligible for benefits at the maximum outlets pan India.
5) Free cards offer greater value
MYTH
Avoid cards with high annual fees and go for free options.
REALITY
Why should anyone pay an annual fee when credit cards are available free? The answer lies in the benefits they offer. A free card may not give you access to an airport lounge or make you eligible for airmiles. Others won’t give any discounts at restaurants and merchant outlets.
The benefits accruing from these cards far outweigh the annual fee. What’s more, many cards even waive the fee if the US age exceeds a threshold.
SMART TIP
Select credit cards that offer discounts and benefits on the purchase of products and services you normally use.
6) Get free credit when you swipe
MYTH
You will get 45-50 days of free credit when you use a card.
REALITY
This is only partially true. A credit card offers free credit till the end of the 30-day billing cycle and the payment is due in about three weeks. So, if the pur chase is made on the first day of the billing cycle, you get an interest-free period of almost 50 days. But this interest-free window gets smaller with every passing day. Purchases made 15 days into the billing cycle will get only 35 days of free credit. On the last day of the cycle, the user will get only 20 days of interest free credit. Keep in mind that there is no free credit if you rolled over the balance in the previous month.
SMART TIP
Having more than one card with a different billing cycle helps you juggle expenses and maximize the interest-free period benefit.
7) Keep away from children
MYTH
Children will become spendthrifts if given easy liquidity.
REALITY
This is not true in fact, ietting feenagers manage their own money helps them Understand the value of money more effectively Give your child an add on credit card linked to your own card AS the primary cardholder, you can set limits on the card given to the child Don’t forget to teach her the importance of maintaining privacy of the card details.
SMART TIP
Review and discuss the monthly statements with your teen. This will also help you monitor your child’s spending pattern as well.
8) Reward points offer terrific value
MYTH
You accumulate can points and get great benefits.
REALITY
Reward points are aimed at luring customers to spend more It doesn’t make sense to spend more only to earn reward points Spend only when you must and as per your but also don’t wait too long to accumulate a fuge number of reward points Reward points are the cash and More value over time in many cart reward points even lapse if not used within a specified period.
SMART TIP
Encash reward points periodically. If the credit card company allows, adjust the points against your bill payments.