You know that piece of plastic you keep inside your wallet or purse? It can make or break your financial status. That plastic in question is popularly known as the credit card. It’s no secret that there are still people these days figure the credit card is the root of financial evil. But the reality is, a credit card isn’t the real enemy. It is actually the person him/herself to blame if they misuse the card irresponsibly. In fact, credit cards are actually useful as long as you manage your spending carefully. Here are the 6 common myths about credit cards below you should know.
1) Credit Card = Instant Debt Problems
Not if you have a serious credit card mismanagement issue. This typically happens when you develop an ugly habit of using the credit card on expensive purchase or dining that you can’t really afford. It all comes to your own self-discipline. You can manage your debt better if you learn how to use your credit card wisely. So, the next time you are planning to apply for a credit card, do a research and choose the right one that helps you save money and earn some cash back rewards.
2) Monthly Minimum Payment Is Sufficient Enough
Well, this is only true if you are cash-strapped during the particular month(s). But it’s always best to pay as much as you can or better yet, settle the total amount that you used for your purchase every month. Here’s why: The more you pay your outstanding balance every month, the more you can save your credit card’s interest rate in a long run. Put it this way: If you insist on paying only the minimum every month, you will end up paying more than you should.
3) Having More Than One Credit Card Is A Bad Idea
There is a common misconception that owning more than one credit card can cause you fall deeper into the debt trap. This is not necessarily true, especially if you misuse your credit card like nobody’s business. Otherwise, here is why it can be beneficial to own more than one credit card.
First, it helps to increase your credit score so long you never failed to make your monthly payments on time. A healthy credit score means you will have minimum problems taking up a loan in the future.
Having two or more credit cards also help when comes to different kinds of spendings. For instance, an A card offers 2% cash back on petrol and groceries while the B card enables you to earn 5% on selected restaurant or cafe dining. Each credit card company has their own unique features and perks. You will definitely get the best bang for your buck (ringgit) if you are making good use of them.
4) Interest Rate Is Normal Whenever You Use Your Credit Card
The words “credit card” and “interest rate” often go hand in hand with each other. Yes, this is how the credit card companies make money from the likes of interest rate charges and penalty fees. But one should know that using a credit card doesn’t mean you will be immediately charged with an interest rate. You can actually enjoy 0% interest charges as long as you pay your balance in full prior to due date. In fact, most banks in Malaysia offers a 20-day grace period from your credit card statement date.
5) Avoid Credit Cards With Annual Fees
(Some) people tend to stay away from credit cards that come with an annual fee. Imagine you have to pay the annual fee every year on top of the monthly payment that you owed from using the card. Doesn’t sound like a good idea, right? But know this: credit cards with annual fees actually have their bigger advantages. Depending on the bank you end up choosing, these cards offer you attractive rewards like cash backs, exclusive deals and air miles. You don’t have to dismiss this type of credit card altogether. Do a thorough evaluation of your spending habit every month and determine whether or not this annual-fee credit card is worth paying for.
6) It Is Usually Not Safe To Use Your Credit Card Online
The online world can be a scary place if you are not careful enough. This is especially true when it comes to making a purchase using a credit card. But this only happens if you end up purchasing from an unreliable website that turns out to be a scam. Never ever use your credit card to do your online shopping using a public WiFi either. It’s a huge no-no because public WiFi tends to be insecure, vulnerable and prone to hackers. In order to prevent credit card fraud and identity theft, always ensure the websites that you visit have the secure path displaying “https://” and “Secure” with a lock icon in green colour. Also, make a habit of doing your online shopping using private Internet connection (e.g. your home) and always make sure the anti-virus software on your PC/laptop or mobile device is up-to-date.