Credit Card Myths Busted: What First-Time Cardholders Need to Know in 2024

Credit cards can be both exciting and overwhelming for first-time users, especially with so many myths clouding their true value. If you’re new to credit cards or considering applying for a credit card, it’s crucial to understand what’s fact and what’s fiction. In this guide, we’ll debunk common myths about credit cards in 2024, empowering you to make informed financial choices and build a solid credit foundation.

Myth 1: "Having a Credit Card Will Put Me in Debt"

Reality: Credit cards themselves don’t cause debt—mismanagement does. When used responsibly, credit cards can be valuable tools to build a strong credit history and earn rewards. The key to staying debt-free is spending within your means and paying off the full balance every month. This way, you’ll avoid interest charges and create a positive credit history that opens doors to more credit card offers and financial opportunities.

Pro Tip: Set a monthly budget for your credit card spending and stick to it. Use your credit card for routine expenses like groceries and always aim to pay the full balance on time.

Myth 2: "Carrying a Balance Improves My Credit Score"

Reality: Many believe that carrying a balance improves your score, but this isn’t true. Your credit score benefits most from on-time payments and a low credit utilization ratio. Carrying a balance only leads to costly interest charges and doesn’t directly boost your score.

Pro Tip: Keep your credit utilization—the amount you owe compared to your credit limit—under 30%. For example, if you have a ₹50,000 limit, try to keep your balance below ₹15,000.

Myth 3: "Applying for Multiple Credit Cards Hurts My Credit Score"

Reality: Applying for multiple cards in a short period can slightly lower your score due to hard inquiries. However, spacing out your applications over time won’t significantly harm your credit score. In fact, having several cards with low balances can improve your credit utilization ratio, which may help your score.

Pro Tip: Research carefully and apply for a credit card that meets your needs. For beginners, one or two good credit cards are a great start. You can diversify as you build your credit history.

Myth 4: "All Credit Cards Charge High Fees and Interest Rates"

Reality: Not all credit cards come with high fees or interest rates. Many beginner-friendly cards have no annual fees, and some even offer low-interest options. Charges like foreign transaction fees or cash advance fees apply only in specific cases, so they’re avoidable with proper planning.

Pro Tip: Look for a new credit card with no annual fees and low-interest rates. Some recommended credit cards offer fee waivers or cashback that can offset potential costs.

Myth 5: "Closing a Credit Card Will Improve My Credit Score"

Reality: Closing a credit card, especially an older one, can actually hurt your credit score. Credit history length and credit utilization ratio are crucial score components, so closing an account reduces your available credit and may increase your utilization ratio.

Pro Tip: If a card has no annual fee and poses no risk, keep it open even if you rarely use it. Consider setting up a small recurring payment, like a subscription, to keep the account active without impacting your budget.

Myth 6: "Only People with High Incomes Can Get Credit Cards"

Reality: Many credit cards are accessible to people with various income levels. Entry-level, secured, and student credit cards often have lower income requirements, helping new users establish credit.

Pro Tip: Check out credit cards designed for students or beginners. These cards usually have lower credit limits but are a great way to build credit history and gain experience managing online credit.

Myth 7: "Rewards Programs Are a Gimmick and Not Worth It"

Reality: Rewards programs can offer real benefits if they align with your spending habits. Cashback, travel rewards, and dining discounts can save you money. To make the most of rewards, choose a program that fits your lifestyle rather than one that sounds too good to be true.

Pro Tip: Assess your regular expenses and select the best credit card for you that rewards your spending categories. For example, if you shop online frequently, look for a card offering cashback or extra points for e-commerce purchases.

Myth 8: "Credit Cards are Unsafe, and I’m at Risk of Fraud"

Reality: Credit card companies have made strides in security features, including two-factor authentication, transaction alerts, and biometric verification. In 2024, features like dynamic CVVs and virtual card numbers make credit card transactions safer than ever.

Pro Tip: Use your card’s security features, like real-time alerts, to monitor transactions. If your card supports virtual numbers, use them for online purchases to add an extra layer of protection.

Myth 9: "Credit Cards Are Only for Emergencies"

Reality: While credit cards can be useful in emergencies, they also provide day-to-day benefits, like convenience, rewards, and security. Using your card responsibly for everyday purchases can help build your credit history and unlock long-term benefits.

Pro Tip: Use your credit card for regular, manageable expenses like groceries or subscriptions. Make full payments each month to avoid interest and build your credit score.

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The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.testmycard.com for latest updates.