Here are 8 Credit Card Myths Busted:
Credit Cards have made shopping a pleasurable experience. Moreover, these seem very convenient to use. However, a lot of confusion looms around about discharging the accumulated balances. Cardholders have got a lot many myths in their minds. It may disrupt their interaction with the product. They might end up highly indebted with low credit scores.
You might also have perceived the credit card differently than what the facts say. Each bank may have its set of credit card guidelines. Before using the card, you need to read the repayment instructions carefully. When it’s about credit scores, you can’t be negligent. Delay in payment even by a single day may jeopardise your credit scores substantially.
At this juncture, it becomes extremely relevant to bust the myths.
Read on to get enlightened.
Myth 1: My credit score will increase if I pay off more than what I owe to the bank.
Fact: Discharging more than total outstanding debt only creates a positive balance in your account. Such an amount would be adjusted in the next credit card transaction. Your time of repayment determines your credit score. A delayed payment of even the entire outstanding balance won’t push the scores any high. Remember to pay off the credit card debt before the due date.
Myth 2: Paying off minimum balance is good enough & won’t attract interest.
Fact: “Minimum balance” is simply a trap that you should avoid. When you pay off a minimum balance, two things happen. First, interest keeps compounding on the remaining unpaid balance. It puts an end to the facility of grace period that you once enjoyed. Ultimately, your credit score takes a back seat. The bank wants to earn continuous interest on your rolling balances. So, drop the bad habit of paying just the minimum balance. Always pay off the entire debt timely.
Myth 3: the Higher number of credit cards would improve my credit score.
Fact: Flaunting too many credit cards may look stylish. It may even render a higher spending limit. But it has nothing to do with credit score enhancement. In fact, it may make things worse. Management of too many cards may become burdensome. Additionally, you may give in to the temptation of spending recklessly. It would ultimately increase your unsecured debt exposure. Just act wisely. Don’t hold more than 2 credit cards.
Myth 4: I can improve my credit score by using a debit card.
Fact: Believe me it doesn’t. Debit card and credit card may look alike. But usage of each plastic card entails different implications. When you use the debit card, there’s no involvement of debt. You are withdrawing your money from your bank account. So, the matter of credit score is impertinent. However, using a credit card is equivalent to availing a short-term loan. And, you need to repay what you have borrowed. So, your repayment behaviour is reflected in credit score.
Myth 5: Nobody knows CVV of my credit card, it’s secure.
Fact: If you still live in this fantasy, then it’s time for a reality check. Who says CVV is mandatory for using credit cards? Many online transactions can be conducted even it. You just need card number, expiry date and cardholder’s name. That’s why bank urges you to keep your card in safe custody. Moreover, you should not reveal the intricate details of the credit card to anyone. There are circumstances when the swiping machine is some distance away. Always be physically present when your card’s being swiped.
Myth 6: It’s impossible to duplicate my credit card.
Fact: Your credit card bears a magnetic strip which stores the financial details. Swiping the card automatically gives access to the data. Fraudsters have got smarter these days. They are aware of the vulnerabilities of the EMV technology. They can copy the data using “Cloning” and produce a duplicate card. Your financial safety always remains at risk. As far as possible, defer use of credit cards to emergencies. Whenever you need it, use your credit card at trusted merchant establishment. While making online payments, do check the originality of website and payment gateway.
Myth 7: Nobody knows PIN and password of my card, it’s safe.
Fact: This is yet another worrisome issue about credit cards. Using the card even without the need of PIN is possible. In India, RBI has made it compulsory to input PIN as a layer of authentication. This mandate may not be followed elsewhere outside India. There are foreign websites which don’t require PIN to conduct online transactions. If someone gets to know your card’s details other than PIN, then matters can turn fishy. Remember to confirm genuinity of the international website. Moreover, ensure that it’s using recognised safety standards.
Myth 8: I don’t need to sign at the back of my credit card.
Fact: Just look at the back of your credit card. Have you signed it?
Like most of the cardholders, you might have found it unimportant. But get a reality check. Signing at the back of the card makes it valid. It makes you the authorised user. Initially, the bank and merchant enter into an agreement regarding credit card usage. The merchant needs to cross-check the sign at the back with the sign on the bill. In the case of a mismatch, he can refuse to accept the payment. Things remain happy till you have the card.
The problem arises when your unsigned card is lost. Suppose the one who finds it signs at the back and uses it. It will be charged to your account, and you can’t refuse to make payment. On the contrary, if signed card is used fraudulently, you get a narrow escape. You can ask for a comparison of signatures and defend your position.
So, without any delay, take out your card and sign it.
Credit card happens to be the most incredible financial innovation. It gives you the power to purchase anything that money can buy. You think of doing away with cash. But, it can put you in danger as well. You need to get a hold of the intricacies. Rise above the myths. Become an informed card user today.