In our ever-evolving world, where technological advancements shape our daily interactions and decisions, credit cards have seamlessly woven into the fabric of our financial behaviour. As Credit Cards offer convenience, rewards, and flexibility, their popularity has understandably skyrocketed.
However, the growth in Credit Card
usage has been accompanied by the rise of numerous myths and misconceptions. This article aims to demystify these tales, ensuring you harness the full potential of your credit card while sidestepping potential pitfalls.
Myth 1: Pay only the minimum amount due
Most credit card users believe that making just the minimum payment due every month is a savvy financial strategy. It seems like an effortless way to juggle immediate financial commitments, especially when the monthly budget feels tight.
Reality:
While appearing cost-effective initially, this short-sighted approach lays the groundwork for financial challenges down the road. When you opt for minimum payments, the remaining balance doesn't remain static. Interest accrues on this amount, leading to an escalating debt that can prove challenging to manage.
Also Read: 6 benefits of using a Credit Card
Myth 2: Higher card usage means more rewards
Many cardholders believe that the more the card is used, the greater the reward accumulation. This simplistic perspective often pushes them to increase their transaction frequency and volume, believing every swipe pushes them closer to substantial rewards.
Reality:
Credit card rewards, as enticing as they are, come with their set of intricacies. Spending without a well-defined strategy, driven by the allure of accumulating rewards, can lead to substantial bills at the end of the month. If these bills are not managed effectively, the interest and potential debt could far outweigh the benefits of the rewards.
Myth 3: Balance transfers can help reduce high interest
Balance transfers often present themselves as the magic elixir for those grappling with high-interest costs. The proposition seems simple: shift your existing debt from a high-interest card to another card offering a lower interest rate.
Reality:
Balance transfer credit cards do offer a breather, especially if they offer a lower interest rate, at times 0%, an introductory offer. However, it's essential to remember that the debt doesn't evaporate—it merely shifts its residence. Many times, the fine print reveals transfer fees, and once the initial period ends, cardholders might find themselves facing interest rates even steeper than their original card.
Myth 4: Using more number of cards is good for credit history
When it comes to Credit Cards, many cardholders go by the principle of the more, the merrier. Applying for and saying yes to every Credit Card they are offered, is their idea of efficient expense management. They believe this can help keep the credit utilization ratio on each card low. In other words, the total spend amount spent on each card as a percentage of the total credit limit available remains low.
Reality:
A low credit utilization ratio helps in improving credit score. However, keeping track of the due dates and amounts on multiple credit cards can become a tedious job. If you are not careful you may miss payments and end up with unpaid balance outstanding amounts on your Credit Cards, which in turn means higher interest costs. Having two or three credit cards can help manage your expenses and keep your credit utilization within the limit.
Also Read: 6 Credit Card Mistakes to Avoid
Mastering the Credit Card game: Strategies for success
For an optimal and rewarding Credit Card experience, consider adopting the following strategies:
1. Deep dive into details: It's paramount to understand every facet of your card. Every card comes with its set of features, benefits, charges, and credit card fees. Being aware of these ensures that there are no unwelcome surprises later on.
2. Aim for total payments: Whenever your financial situation permits, strive to clear your entire credit card balance. This dual-pronged strategy not only keeps interest at bay but also fortifies your credit score, making future financial endeavours smoother.
3. Judicious spending: The temptation of rewards and cashback is undeniable. However, let these incentives act as pleasant bonuses, not primary motivators. Base your expenditure on genuine needs, aligned with your budgetary constraints.
Further, proactive habits can significantly enhance your Credit Card experience. Regular and detailed reviews of credit card statements can quickly pinpoint any anomalies, enabling timely intervention and prevention of potential unauthorised activities. Setting up alerts for specific transaction thresholds or when you're nearing your credit limit can provide an additional layer of oversight, ensuring you remain in control of your finances.
Conclusion
Credit Cards can be formidable allies in your financial journey when wielded with knowledge and strategy. The benefits they offer, ranging from facilitating seamless transactions to offering attractive rewards, can significantly enrich your monetary experiences.
Axis Bank offers a diverse range of credit card options, each meticulously tailored to cater to different demographic needs. Whether it's a card optimised for the frequent traveller, one for the shopping enthusiast, or a business-oriented card for streamlined expense management, there's a solution for every requirement.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision
