Pennywise
Common Credit Card Myths
by: Sahil | last updated: December 07, 2009
Category: Standard Credit Cards | Tags: Credit card myths, credit cards facts, credit cards
Category: Standard Credit Cards | Tags: Credit card myths, credit cards facts, credit cards
As credit cards have become ubiquitous, many myths and misunderstandings have cropped up over the years. Some of these myths are so deep-rooted that they can deprive a person of lucrative credit options. The intense competition among credit card companies and the easy availability of credit have increased the misconceptions and added more wrong information to the grapevine.
The most common myth is that consumers cannot get a credit card if they have a bad or poor credit history. This is often not the case since there are many smaller banks and financial institutions that offer credit even to those with an awful credit history. However, the interest rates and other fees may be more in such cases. The best option is to enquire with your local bank about the various credit card options available to someone with a bad credit rating.
Another common myth is that high limit credit cards are better than those with a lower credit limit. This is entirely false and in fact credit card issuers want their consumers to spend more so that the chances of using up the credit and paying interest increases. Many credit card companies will offer an increase in credit limit when you contact them. It is advisable not to increase the limit unless it is an emergency since the offer will always remain there to be availed of at any time you want in the future (in spite of what the rep. says).
It is true that a person needs at least two credit cards but the fact that many people keep all the four major credit cards with them just in case is the result of another common misconception. The misconception is that you need all the four (Visa, American Express, Discover, and MasterCard) credit cards just in case some of them are not accepted. You only need two major brands of credit cards since at least one of them is usually accepted everywhere.
Another common belief is that closing a credit card will adversely affect your credit report. This is entirely false since a person in dire need of money will never close an account. If you have closed an account in the past it will be shown on your credit report, however the creditors may look at it in a positive perspective. If you feel that there is a credit card that you rarely use and do not need then it is better to close it. It may even improve your credit score.
It is true that your credit score determines whether you get any credit or loans in the future. However there are exceptions to this case; for example if you have paid your landlords bills or some other specific owing in a timely manner in the past then a similar lender may see you in a positive light. Although a low credit score may mean higher interest rates in the future, it does not completely close the doors for a borrower.
The more credit cards you have, the richer you are. This is completely false since credit cards are liabilities and not assets. In fact the more credit cards you have the more indebtedness you may face due to unexpected events or emergencies. Thousands of people in many countries have succumbed to credit card debt and have come to know the perils of credit cards the hard way. Although it is not advisable to shun credit cards completely; keeping them in check is financial prudence.
If you are at fault, you have to pay the applicable fees or penalty. This is not true since you can contact the customer service to waive off the fees or penalty on your card. Many companies will waive off a fee rather than have an unsatisfied customer. However the interest is usually not waived off. If you feel that you are not able to make ends meet or if you think that you need to be a little greedy (like credit card companies) then you can contact the customer service of the card and ask any fees or penalty that you see to be waived off. It works most of the time.
There are numerous ways to find out about the truth behind credit card myths - by contacting your financial advisor or counselor, by researching over the internet, and asking questions directly to the customer service representative on the phone. Misconceptions and lack of proper knowledge has helped credit card companies to gain the upper hand and make money by preying on peoples weaknesses.
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