8 Shocking Myths About Credit Cards & Credit Card Rewards

By BankBazaar | November 28, 2017

Do you know everything about Credit Card rewards? Let’s find out.

10 Shocking Myths About Credit Cards & Credit Card Rewards

Do you know everything about your Credit Card? There are quite a few myths around Credit Cards that stop people from getting the best out of their cards. Let’s debunk some of the most common myths related to Credit Cards and their reward points now.

  • Myth: ‘Getting a Credit Card drastically affects my Credit Score.’

Getting a Credit Card will have a small impact on your Credit Score as the back will make an enquiry with a credit bureau to check your credit worthiness and this enquiry, also known as a ‘hard enquiry’ will bring your score down a few points. That’s not really anything to worry about. Although the number of cards you’ve applied for does reflect on your Credit Report, that’s not what will have a major impact on your score. What can make or break your Credit Score is multiple Credit Card applications made at the same time. This is because it portrays you as a risky borrower. So, don’t hold back from applying for a Credit Card (paying your bills on time actually improves your score), just don’t apply for too many at one time.

  • Myth: ‘Cancelling an unused Credit Card helps improve my Credit Score.’

If you think that cancelling all your unused Credit Cards is the only way to improve your Credit Score, you’re wrong.  Instead of cancelling your cards, you could try not using the card and still keep the accounts open. Or even better, use them to make utility payments and pay back your bills on time. Those cards being in use might actually improve your Credit Score.

Moreover, if your Credit Card is your only source of credit and you have no other cards or loans, it is not a good idea to close your Credit Card. A big part of your Credit Score takes into account the different types of credit you own. If you have no other loans or credit, it is generally a good idea to keep the only one you have open. 

  • Myth: ‘Those points and miles don’t make any difference.’

Woah! Think again. All the rewards that you earn by using your Credit Cards and paying your bills on time definitely make a difference. You must have heard the saying—‘drop by drop, you break the rock.’ The exact same logic applies here. Your points might initially seem too few to even feel like a reward but if you keep using your card, they’ll add up and you’ll be able to exchange them for cool gifts from your bank’s Credit Card rewards catalogue or even cashback. Trust us, the rewards can be pretty awesome.

  • Myth: ‘I can get a Credit Card just to avail those sign-up bonuses.’

Well, you definitely can apply for a Credit Card and expect to get some attractive sign-up bonuses. But getting a plastic buddy just because you want to avail these introductory offers might not be the best thing to do. No matter how tempting those offers look, you need to look at the bigger picture and see if a card will make sense for you in the long run. Once you’re absolutely sure that you won’t regret getting a particular Credit Card, go ahead and apply for it. Many of us get Credit Cards, exploit all the introductory offers and stop using them. This is called Credit Card churning. And though it may seem like a good idea, it isn’t actually. Credit Card churning could hurt your Credit Score in the long run.

Additional Reading: Is Credit Card Churning A Good Idea?

  • Myth: ‘A lower Credit limit is the solution to all my problems.’

Many people think that lowering their credit limit is the solution to all their financial troubles. Well, it could help control your urge to shop unnecessarily. But when it comes to improving your Credit Score, it doesn’t really work. Having a higher credit limit and using your card carefully might be a better idea. A higher credit limit will bring down your credit utilisation ratio and help improve your Credit Score.

  • Myth: ‘Encashing those reward points can hurt my Credit Score.’

This is one of the biggest myths about Credit Card reward points. There sure are a couple of things that can hurt your Credit Score, like a bad payment history, missed EMIs, multiple inquiries in a short span of time, a bad credit utilisation ratio. But encashing those reward points is definitely not a part of this list.

Additional Reading: 3 Ways To Improve Your Credit Score Quickly

  • Myth: ‘I’m the one actually paying for those rewards.’

No. You’re not the one paying for those miles or rewards. We know you’re used to the fact that good things don’t generally come for free. But things are a bit different in this case. The only thing you’re required to do to actually get those reward points (for free) is—pay your bills in full and on time. If you keep carrying a balance all the time, you could be inviting trouble.

  • Myth: ‘Credit Card rewards will sponsor my next travel plan.’

If you have earned enough air miles on your Credit Card, it might help sponsor your flight tickets. But that’s not the only thing travel is about. There are a couple of other (significant) expenses involved. Your accommodation, fuel surcharge, etc. is not a part of those rewards. These rewards definitely make your travel cheaper, but not completely free.

Check this: Airline Credit Cards in India

Now that we’ve busted a few myths around Credit Cards and Credit Card rewards, just think about one thing—making the most of your Credit Card rewards. You can get it right if you get the right Credit Card.

Need help finding the best plastic mate? We’ve got you covered!

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Category: Credit Cards

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