Myths around Credit Cards
Myths Around Credit Cards
1. Checking your credit score lowers the score
When you check your CIBIL or credit score, it’s considered a “soft inquiry,” which has no impact on your credit score.
Soft inquiries are for informational purposes, such as checking your own score or when creditors pre-approve you for offers.
On the other hand, “hard inquiries” made by lenders when you apply for credit may slightly impact your score, but it’s usually temporary.
2. Credit cards serve as an emergency fund
People think as long as they have a credit card, there is no need for an emergency fund. Sorry to burst the bubble, but credit cards do not serve as an emergency fund.
You won’t be able to pay your rent, food expense or a home loan EMI through a credit card for 2-3 months if you lost your job.
Having an emergency fund is a must. It should have at least 6-9 months’ expenses.
3. Multiple credit cards will push you into a debt trap
Having many credit cards can increase the temptation to overspend & rack up debt. But it’s ultimately up to you how you manage your finances responsibly.
If you use your credit cards wisely, pay your bills on time, and keep your balances low. Then having many credit cards can give you a higher credit limit that, in turn, reduces your credit utilisation ratio.
However, if you struggle to manage your finances and consistently overspend, having many credit cards may increase the risk of falling into a debt trap.
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