If utilised and repaid with discipline, credit cards may be a useful financial tool for managing one’s finances. Credit cards, like the vast majority of financial products, are prone to a number of myths and misunderstandings that are not unique to credit cards. While some myths restrict users from maximising the benefits of their cards, others lead to incorrect HDFCmoneyback credit card use, which can be detrimental to your financial health and credit score.
Before you apply for anHDFC diners black credit card, this section will dispel several prevalent myths.
Credit cards seem to be a gateway into a vicious cycle of debt.
Numerous individuals are hesitant to utilise credit cards for fear of falling into the debt trap. Therefore, they shun credit card applications entirely. Individuals who tend not to have the financial discipline and even the capacity to control their spending impulses are the only ones who stand a chance of falling into a debt trap. For the remainder, judicious credit card selection, usage, and repayment would result in maximising its usage.
In addition, for individuals who are new to credit, obtaining a credit card can be a smart decision for creating a credit repayment history and working for the long-term construction of a high credit score. Given that transactions of HDFC diners black credit card are regarded similarly to loan applications, fast payment of credit card balances has the same beneficial effect on your credit score as timely repayment of any other sort of loan. Please note that individuals with no credit history or a credit score of zero have a lower probability of being approved for loans with a low levels of interest rates and even costs.
It is advisable not to increase your credit limit.
Many HDFCmoneyback credit card holders are hesitant to choose a credit card and resist extending their credit limit because they fear that doing it will result in more spending and, subsequently, increased debt on their cards. If used correctly, a greater credit limit can have a big positive effect on your financial status.
Not only is it possible to properly manage monetary exigencies with a higher credit limit, but it also reduces the user’s credit usage ratio, which is the percentage of the entire credit limit that the cardholder has actually utilised. Your credit score will increase as your credit utilisation ratio decreases, which will increase your credit card eligibility in the near future. Maintain a credit utilisation ratio of less than or equal to 30%, as banks regard individuals who exceed their credit limit to be credit-hungry, causing credit bureaus to reduce one’s credit score by a particular percentage point. Those who regularly exceed this limit may request an increase from their existing credit card issuer or obtain a second HDFCmoneyback credit card.
A credit score is unaffected by inconsistent bill payments.
Due to the fact that a credit score is a numeric three digit representation of your credibility, it is usually one of the very first criteria lenders assess when evaluating a loan application. Given that a credit score is dependent on your credit repayment history mentioned in your credit report, any instance of irregular credit payments might result in a worse credit score, in addition to late payment fees and hefty finance charges. A lower credit score might have a detrimental effect on a credit card borrower’s future eligibility for a loan as well as HDFC diners black credit card.
Paying only the very minimum due amount is adequate.
If they are having difficulty settling their complete debt by the due date, a common misconception among HDFCmoneyback credit card users is that paying the bare minimum payment offers a safe harbour. This is not accurate. While prompt repayment of the very minimum due amount by the bill due date prevents the cardholder from incurring late payment fees, the cardholder is still subject to high financing expenses ranging from 23 to 49 percent per annum on any unpaid amounts. Remember that neglecting to pay even little amount of debt will incur additional late payment fees and have a bad effect on one’s credit score. In addition, failing to pay credit card debts in full may result in the cancellation of the interest-free period on future transactions of HDFC diners black credit card until the remaining outstanding money is paid in full.
Therefore, if you are having trouble paying your credit card debt on time and in full, you may want to consider changing the entire amount owed or a portion of it into a monthly payment plan. Converting a credit card bill, either in full or in part, would enable one to make repayments at a significantly lower interest cost if unable to pay full, and it would allow one to pay in smaller instalments based on his or her repayment capacity, as well as avoid incurring finance charges on new transactions.
A high number of credit cards has a negative impact on your credit score.
Another misconception that prevails in the world of credit cards and among individuals applying for credit cards is that having a large number of credit cards will negatively affect your credit score. However, the cardholder’s credit score is impacted by his or her credit card usage and repayment patterns. Habits such as early repayment of HDFC diners black credit card debt in full, maintaining a credit utilisation ratio (CUR) below 30%, and not filing a large number of credit inquiries, especially within a short time frame, all contribute to the creation and maintenance of a strong credit score.
Additionally, having multiple credit cards can be advantageous in a number of ways, including higher rewards on spending across multiple cards based on their reward point structure, helping to spread out expenses based on each card’s interest-free period, and serving as a backup in the event of loss or theft of the primary HDFCmoneyback credit card.
So by now, hopefully, you must have understood the major myths to stay away from when applying for a credit card, and these can harm your financial health in more ways than one.
