Perhaps due to the way credit cards are marketed and portrayed by a very vocal minority, there is a lot of misleading information about credit cards in the general public which can cause some confusion. In this article we aim to debunk some of these myths about credit cards.

Common credit cards Myths:

Credit Cards are Evil

This is perhaps one of the most commonly expressed views about credit cards, yet credit cards have been around for decades and are more popular than ever.

While it is hard not to sympathise with someone struggling to pay off a credit card debt, it is important to remember that credit cards are also a life saver for many people, and in fact, there are ways to make or save money by using credit cards.

The bad rap that credit cards get stems largely from the high interest rate that credit cards tend to charge, but this is somewhat necessary because unlike mortgages, credit card loans are unsecured loans that do not require you to put forward any collateral in case you fail to pay back the loan. To mitigate this risk credit cards have to charge a larger than usual interest rate, but unlike mortgages, when you fail to pay back your credit card debt nobody comes knocking on your door to take your house or belongings.

There are also balance transfer credit cards that charge 0% interest for 6 to 24 months on balance transferred to help individuals pay back their credit card loan.

Credit cards are an important financial tool that can be used to one’s advantage or disadvantage. Credit cards are not be suitable for people with bad spending habits or gambling problems, but credit cards serve a very important role in society and make it easy for people to do business.

You can keep transferring from one 0% balance transfer card to another

While you can transfer from one balance transfer credit card to another once the interest free period lapses on the first credit card to save on the interest rate, there is no guarantee your application for a 3rd, 4th and 5th balance transfer credit card would be approved, but even if it is approved, you still have to make the minimum monthly repayments or you would incur a fee or even worse your balance transfer interest rate could go up as a result of the missed minimum monthly repayments.

So, while it is true that you can keep transferring from one 0% balance transfer card to another, you still have an obligation to make minimum repayments and there is no guarantee your next transfer would be approved.

Getting a credit card would hurt your credit score

While it is generally not be advisable to get a credit card just before applying for a mortgage, applying for a credit card barely makes a dent in your credit score. I wouldn’t worry about it especially if it is your first or second credit card.

As long as I pay off my debt before the interest free days lapses I should be OK

This is true for purchases made on your credit card, but if you make a cash withdrawal the interest is almost always charged from day one, plus the interest rate for cash withdrawals is even higher and you might even be charge a cash withdrawal fee.

Credit card interest rates are fixed and do change

Some credit cards have variable interest rates which can change if the reserve bank increases or decreases the interest rate. Balance transfer interest rates can also change if you fail to make your minimum monthly repayments.

I can’t use my credit card after chopping it up

Chopping up your credit card would not stop any reoccurring payments you have setup and if you have linked it to payment facilities such as PayPal these would continue to work.

It is okay to go over my credit limit

Going over your credit limit could incur a fee and could damage your credit score, but most credit card providers would allow you to go over your credit limit. If you think you might go over your credit limit you might be better off applying for your credit limit to be increased.