Blog /Credit Cards/ 4 Myths and Facts about Credit Cards You Need to Know [August,2023]
4 Myths and Facts about Credit Cards You Need to Know [August,2023]
By Aravind Pai -
When it comes to managing money and understanding the basics of credit cards, many misconceptions can lead to financial trouble down the line. Understanding the truth behind these common credit card myths can help you make smart decisions about when and how to use your credit cards.
In this blog post, we will explore 4 credit card myths and facts about credit cards that you need to know.
Myth 1: Credit Cards Are Not Secure as Cash
When it comes to making purchases, many people think that cash is safer than credit cards. This couldn’t be further from the truth. Credit cards offer several layers of protection that cash simply cannot. If your credit card is stolen or lost, you can easily contact your credit card company to report and cancel it. In most cases, you are not responsible for fraudulent purchases made with the card. On the other hand, if cash is stolen or lost, it is much more difficult to recoup those funds.
Fact: Credit Cards Are More Secure Than Cash
When it comes to making purchases, credit cards are often considered a more secure option than cash. With credit cards, you can easily dispute fraudulent charges and get your money back, which is much harder to do with cash.
Credit card companies also provide extra security measures like fraud protection and fraud alerts that help keep your money safe. On top of that, credit cards offer a much higher level of security regarding online purchases. If you use a secure website and avoid entering your personal information on suspicious websites, your credit card is usually safer than cash for online purchases. When you enter your card information, the merchant will securely verify it with your credit card issuer and process the payment.
Myth 2: Credit Cards Are Only Helpful for Certain Purchases
One of the credit card myths is that it may only be used for certain kinds of purchases. However, this couldn’t be further from the truth. Credit cards are a versatile payment option that you can use for almost any purchase. From buying groceries to booking a vacation, there is no limit to what you can buy with your credit card.
Fact: You Can Use Your Credit Card for Anything
Credit cards are incredibly versatile and can be used for various purchases. Using your credit card also makes tracking your spending easier and ensures you don’t exceed your budget. Because all your purchases are listed on one statement, you can quickly and easily review how much you spent and where.
Using your credit card for business expenses is beneficial, as it helps you track and record your spending. You may also find that using your credit card gives you access to deals and discounts that wouldn’t be available if you used cash or another payment method. Many retailers offer special promotions, discounts, or cash back when you use a credit card.
Myth 3: All Credit Cards Have the Same Interest Rates
One of the most common credit card myths is that they all have the same interest rate. Credit card interest rates vary widely between issuers and can depend on your credit score. Some issuers may even offer promotional rates for some time. There are also different types of credit cards, each with its specific interest rates.
For example, a rewards card may have a higher interest rate than a regular credit card, while an introductory APR credit card might have a lower rate. It’s essential to read the fine print on any credit card offers to ensure you understand what interest rate you will be charged.
Fact: Your Credit Cards Could Have Multiple Interest Rates
If you have a few credit cards, you may be surprised that you may be charged varying interest rates. Depending on your purchases, your credit card issuer may assign a different interest rate for each transaction.
Here are three types of interest rates on credit cards:
Balance Transfer APR: This is the interest rate you will pay when you transfer a balance from one card to another. This rate is typically lower than other APRs and can help you save money on your debt.
Cash Advance APR: This is the interest rate you will pay when you make a cash advance with your credit card. It is usually much higher than the regular purchase APR and can be as high as 30%.
Penalty APR: This is the interest rate you will pay if you miss a payment or are late. The penalty APR is much higher than the regular purchase APR and can remain in effect for several months.
Knowing the different types of interest rates that apply to your credit card can help you make informed decisions about how you use your credit card and save you money in the long run.
Myth 4: Credit Cards Are Only for People With Good Credit Scores
This is one of the credit card myths that is far from true. People with good credit scores can undoubtedly benefit from using a credit card, as they may get access to better rewards and interest rates. However, a lower credit score can also get approved for a credit card, which can greatly improve the credit score.
Fact: You Can Use a Credit Card to Build a Credit Score
Using a credit card responsibly can help you build and maintain good credit. When you use a credit card, you borrow money from a lender and pay it back over time. Your credit score will benefit you if you pay your bills on time.
If you make all your payments on time, you can improve your credit score by showing lenders that you are responsible for borrowing and repayment. When you use a credit card, you also demonstrate that you can manage debt responsibly.
Credit card myths can be a significant source of confusion and misinformation. Knowing the facts behind the myths can help you make the best decisions regarding your credit card use. Remember, the key to using credit cards is to do so responsibly and with an understanding of how they work. By educating yourself on these common myths and understanding the facts, you can ensure that you use your credit cards best for your financial well-being.
Q. Do only people who have a high-income qualify for a credit card?
Among several credit card myths, this one is well-known; while it is true that some credit card issuers may prefer applicants with high incomes, there are also credit cards available for people with lower incomes.
Q. Is Credit card interest rates always high?
It is one of the credit card myths. As a matter of fact, Credit card interest rates can vary widely, and it is possible to find cards with relatively low-interest rates too.
Q. Are Credit cards always a bad financial choice?
While it is true that credit cards can be a source of debt if not used responsibly, they can also be helpful financial tools when used wisely. Credit cards can help you build credit, earn rewards, and make convenient purchases.
Q. Why have a credit card if fraud is common?
While credit card fraud does occur, it is relatively rare. Credit card companies have systems to protect against fraud and usually work with you to resolve fraudulent charges on your account.
Q. How many credit cards can one have?
There is no limit to the number of credit cards you can have if you manage them responsibly. However, too many credit cards can signify financial instability and negatively affect your credit score.
Aravind Pai is a passionate blogger and content creator who has been writing extensively on technology topics since 2020, with a focus on Online shopping deals and product reviews. He graduated as a B.Tech 4 years ago and enjoys road trips and exploring latest gadgets.