5 Myths About Credit Cards

Finance is not everyone’s strong suit; however, it is highly important to be able to manage your money well. Your monetary decisions and spending habits depend on various aspects ranging from income to family debt and much more. Global factors have also impacted our spending patterns and changed how we think about money. This is probably why your ways of managing money differ from your parents’ tried and trusted methods. Every generation has seen a change in the way they perceive money and have adopted unique ways to overcome their financial problems. This is visible in the different approaches the Millennials and Zoomers/Gen Z have toward money. 

Different Ways Millennials and Zoomers Handle Their Finances

If you are a millennial, you don’t mind paying that extra bit for a better customer experience. However, if you are a zoomer, what you are looking for is probably a cheaper alternative to save what you can. As a millennial, you are emotionally attached to the age-old brands you know and trust. On the other hand, as a zoomer, what you need is transparency. You want to know exactly what you are spend your money on and want authenticity. A zoomer will always verify the presence of a brand and its quality before committing to it.  

Millennials are the front runners in budgeting compared to zoomers. They utilise multiple tools like moving money between savings accounts, digital spreadsheets, and personal finance applications for budgeting, unlike zoomers. But here’s what the latter is amazing at! It’s saving through investments. Gen Z has a long-term goal in mind and so their finances are usually multiplying in some investment plan for a better future. Having learnt from the example of millennials, zoomers run away from debt and they are excellent at managing them if they have any.  

Millennials are known to have taken massive amounts of loans and will spend a major portion of their life repaying these. Zoomers do not like debt and hence are vigilant about it. This includes credit cards. Both generations use credit cards, where the millennials are big spenders, while zoomers are wary of it. As per a survey presented by Creditscape in April 2020, millennials make up for the largest portion of people who utilise multiple credit cards. Meanwhile, zoomers tend to have just 1 card. Over 37% credit card owners under the age group of 26 and 35 own more than 2 credit cards. 81% of credit card owners between ages 18-25 own just 1 credit card. 

 Credit cards have the image of being detrimental to your finances. This image of the card is boosted by the myths that mystify its use and impacts on credit scores. Hence, you prefer steering away from it. But what if they aren’t necessarily as bad as they seem? 

5 Credit Card Myths That Need to Be Debunked!

1. Don’t get more than one credit card

Ever been cautioned against applying for multiple credit cards? The thought of possible overspending makes you hesitant to get a new card. However, it is not such a bad idea to get more than one credit card. Multiple cards can help provide additional credit in case of emergencies and bring various rewards to the fore. But what about credit inquiry?  

For every new card you apply for, a hard credit inquiry is reported, which may lower your credit score! If the cards are managed the right way, the deduction can still be minimised. This is because, when calculating your score, the number of cards owned are not considered. 

Try to spread out your card applications across multiple card providers. This can help lower the impact on your score and open more doors for you to acquire funds during an emergency! 

2. Close the cards you no longer use

A common suggestion you might have received from others is to close your unused credit cards. Well, here is a shocker for you. Closing your old credit cards can do more harm than good. Cancelling these will not help improve your credit limit. In doing so, you are reducing your available credit, leading to a rise in your credit utilisation ratio. This parameter measures your usage of the credit available to you. The higher this ratio is the worse your credit score gets.  Rather than closing the cards, it is better to keep them open and avoid using it. With this, you still have a credit option available to you and your account history remains intact, which can help with your credit score. 

 3. Missing a single payment deadline will impact your credit score

Timely and complete payments are always advisable. But has the fear of missing a deadline stopped you from getting your credit card? Let us bust this myth for you! Missing the deadline on a rare occasion is absolutely fine!

Make sure to pay up the amount along with the stipulated late fee within thirty days. This late fee might even be waived off if you are not a frequent offender. Your lending partner will wait for you to make the required payments for about a month before contacting the credit bureau.  

So, go ahead and get your own credit card! Make sure you make your payments on time without any delays. But, if you do happen to miss, don’t worry! You can still pay the bill without losing on your credit score. 

 4. Interest is charged right from the date of purchase

 It is a common belief that you are charged with an interest on every purchase you make using a credit card. This is absolutely untrue! The day at which your credit card billing cycle ends to your next card repayment due date, no interest is levied on your purchases. This period is known as the ‘interest-free grace period’. 

Hence, if you pay your card bill before the deadline, you will not be charged with any interest whatsoever! This applies for all purchases made via your card but is not applicable on the cash withdrawal feature. Interest starts to accrue immediately when you use your credit card to withdraw cash. It continues to add up until the date of payment.    

5. It is essential that you carry forward your balance to build credit!

Actively utilising your credit card is a wonderful way to build credit but carrying forward balance is unnecessary. If you use your card on a regular basis, ensure your balance is not racked up too high. You might be liable to pay interest if you cannot pay the large amount by the due date. Carrying a balance can help you build credit, but you will be required to pay additional interest. Hence, it is advisable to adopt other methods and strategies to build your score rather than carrying forward a balance on your credit card. 

Whether a millennial or a zoomer, your financial decisions are your own. Be cautious but not so much that you miss out on great opportunities like the easy credit available on a credit card. With the right use and proper management, it can be one of the most valuable financial tools in your arsenal. Wield this monetary weapon wisely and enjoy the taste of victory.  

Now that the myths have finally been busted, how about getting yourself a credit card? Well, hop onto Bajaj Markets! No matter what generation you belong to, we have a card that is perfect for you. Browse through the numerous options we have to offer with ease and convenience. Get yours now!