Sometimes, when we’re a bit short or just want to pay for the weekly shop or something bigger like a brand new TV, a credit card tends to come in very handy. Millions of us have them, but there seems to be a huge amount of choice in terms of interest rates, perks and so-called benefits. Amid a multitude of cards, is it possible to tell what benefits are actually of use and what are just myths?
Applications affect credit ratings
Thankfully, this isn’t even the slightest bit true. Anyone who’s made countless unsuccessful applications for new cards may feel that rejection could hit their credit score, but that’s not the case. Delayed payments on existing credit cards, on the other hand, can impact on your eligibility for future credit.
Card cancellation improves credit scores
For anyone trying to reduce their debts, this might seem like a sensible, if drastic, thing to do, but it can actually do more harm than good. Doing this will increase your debt-to-credit ratio, thereby reducing the likelihood of you being given a new card should you need it.
Rewards and points are completely worthless
While their worth is often overrated by some providers, perks such as Air Miles and Nectar points might actually come in handy if built up over time. They could pay for a night out, cinema tickets or even give you a discount for your weekly shop. Don’t choose a credit card provider solely because of the perks on offer though!
Credit cards only benefit your score when used
This isn’t completely true. If they’re opened but never used, the fact that little money has been spent can actually boost your rating. Using your card sparingly can help too, as long as you’re able to pay back what you owe in time.
“Set up a regular savings account and shop around to make sure you get the best rate. Ensure that you are on the electoral roll as this can improve your credit score. Review your day-to-day spending to see if you can make any cuts to increase you’re saving, then set up a budget for essentials and stick to it”, said a spokesperson from Yorkshire Building Society.
Paying what you can is always advisable
Sadly, this isn’t true. Even if you can’t afford to meet the full cost of a weekly/monthly payment, paying what you can might not be enough. Paying less than the minimum amount won’t be enough to help keep your credit score as it is, so it’s important to make sure you have enough money to pay it all off before taking out a card.