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Since there is so much information available when it comes to credit cards, it can be easy to start believing myths that become attached to using a card without getting all the information. Some common myths include:

  • Credit cards lead to large debts
  • No credit means you have good credit
  • Multiple credit cards are bad
  • Credit cards harm your credit score
  • Cancelling unused credit cards helps my credit rating

Understanding the truth behind these credit card myths will give you a lot more confidence around applying for and using a card regularly. It will also allow you to use a credit card to your advantage, rather than being stung by hidden fees or charges. Read on to find out more.

Why choose a credit card?

A credit card comes in handy for many circumstances, but for most part allows you to make purchases and then pay back the total balance over an extended period.

You can also get specialist credit cards to assist you in managing your finances or building your credit score, amongst other things. They include:

  • 0% balance transfer card – consolidate multiple debts onto one card with no interest to pay for a limited time
  • 0% purchase card – make purchases and spread the cost without paying any interest for a limited time
  • Rewards card – spend on the card every month to earn rewards such as supermarket loyalty points and air miles
  • Credit builder card – make sure you make repayments every month and stay within your credit limit to boost your credit score
  • Gold or Premium card – unlock exclusive perks and benefits just for being a member, though you usually pay a monthly or annual fee
  • Travel card – avoid foreign transaction fees and get better exchange rates spending on the card, as long as you avoid withdrawing cash from an ATM
  • Low rate card – get a permanent low rate of interest to pay on your credit card, avoiding higher rates on standard cards
  • Cashback card – earn cashback the more you spend on your card, with limited offers giving you a higher interest rate for a limited time

Some credit cards will actually feature a few of the above uses, meaning that you could potentially get a balance transfer card that also allows you to have a limited period of purchases at 0% too. Looking at credit cards in this way and weighing up their potential benefits to your finances will help you find the one for you.

Read more in our ‘getting your first credit card with confidence’ post.

Credit card myths

Whether you’re new to credit cards or have had many in the past, the likelihood is you will have come across at least one of the following myths:

Credit cards lead to large debts

While a credit card can give you access to money, if you overspend without thinking about paying back the amount you owe, you’re bound to build up a large debt. Whilst this myth has an element of truth, it is ultimately reckless spending that can lead to a large debt, so should be avoided at all costs.

As tempting as it can be to spend, if you remind yourself that the balance on a credit card is not your money, you can plan ahead and always aim to repay the balance in full. Frequent spending is encouraged, but make sure you set up a direct debit to repay every month, allowing you to manage your credit card effectively.

No credit means you have good credit

Spenders often avoid credit cards as they believe it will give them a better credit rating. Unfortunately, this is a common misconception.

If you’ve not borrowed any money before you will probably have what is known as a ‘thin credit file’. This means that there isn’t any evidence to show that you’ve borrowed and repaid funds before, so why should a lender or card provider trust you?

In this instance, having a credit card and spending anything on it is better than not having a credit card at all, as you’re displaying your ability to easily manage financial products.

Multiple credit cards are bad

Another common myth is that having multiple credit cards is a bad thing. As long as you are effectively managing your credit cards and haven’t maxed them all out, you would still be deemed to have a good credit score.

The thing that does negatively impact your credit score is applying for multiple credit cards and being rejected. This is a sign that you already have a poor credit score and are not considered creditworthy, so it might be worth looking at bad credit products instead.

Credit cards harm your credit score

It is a common myth that just having a credit card can harm your credit score, but this is simply not the case. Having a credit card and failing to make payments will negatively impact your credit score, but if you manage it well, you are more likely to improve your credit score over time.

Your credit score is often based on how successfully you’ve managed credit in the past. For example, if you take out a credit card and make repayments every month, you will get a tick against your name to show that you are successfully managing the borrowed funds.

Cancelling unused credit cards helps my credit rating

Whilst it is tempting to cancel an old credit card once you’ve repaid the full amount, it could actually be more beneficial to keep it going, but without spending any further.

As explained above, even if you have a credit card and don’t spend on it, you will display trustworthy behaviour as you are managing a financial product effectively. Remember that you need to show evidence to lenders and providers that you are trustworthy, so cancelling a card completely won’t aid your credit rating at all.

Compare credit cards

Now that we have debunked the most common credit card myths, why not start browsing for a credit card to suit you? Better yet, our free online comparison tool moneymatcher can point you in the right direction, simply by entering a few personal details. The best part? It won’t affect your credit rating.