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Credit card myths dispelled

If you’re looking at taking out a credit card, you want to be sure of what you’re getting into. Credit cards can be great for managing your cash flow, building your credit rating and also even earning rewards points. But if not used correctly they can also see you get into debt and hurt your credit rating.

Knowing what’s true and what’s not so true is a great place to start when thinking about how to best use a credit card. Here are some common credit card myths that are worth looking a little closer at.

You'll get into large debt if you get a credit card

You’re in control of how much you spend and how you manage your repayments. If you pay off the full amount you owe every month, you won’t get into debt or pay interest charges.

However, if you’re worried that the temptation to spend may be too much it’s worth considering whether a credit card is right for you. Why do you want the credit card and what will you use it for? If you decide to take out a credit card, setting yourself clear rules can help you avoid spending more than you’re comfortable with. You can also look at setting your credit limit at a smaller amount to start so you can reduce the chance of getting into any trouble.

A low APR is the most important thing to look for

If you aren't going to pay off the full amount each month, then the annual percentage rate (APR) is important as you'll be paying interest on the debt. But if you're going to pay off the full amount each month, an APR may not be as important. If this is the case, you want to weigh up the cost of a higher APR against other benefits such as air miles or rewards.

All you have to do is make the minimum repayment

While this is technically true, it is really important this is avoided. Making the minimum repayment on your credit card can mean it takes years to clear a credit card debt and can see you repay a significant amount in interest. You should always try to repay your balance in full and if that’s not possible try to repay as much as possible.

Missing a payment won’t really impact your credit rating

While your credit rating looks at your borrowing history and financial activity over a period of time, even missing one payment on your credit card can negatively impact your credit rating. It’s important to stay on top of things, otherwise you may find that you’re limited in what you can borrow in the future. Setting up a Direct Debit can prevent you from forgetting to make your repayments.

The more credit cards you have the better it is for your credit rating

This isn't necessarily true. Your credit rating is determined by the different types of credit you have (which could include a student loan, a mortgage and credit cards), as well as other things such as the length of your credit history, how many times you've applied for credit recently and the amount of debt you have.

Explore more: How many credit cards should you have?

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