How well do you know your credit card rules?

5 MinsJan 11, 2021

"Using a credit card will hurt my credit score". "It’s ok if I am late in paying my credit card dues, as long as I repay it." "I can improve my credit score by closing my credit card."

myths and facts


If you found yourself agreeing with any of these statements, you are not alone. But do realise that these statements are not true. These are some of the misconceptions surrounding credit card usage. 

A credit card is a great financial tool to have if you know how to use it wisely. It can make your life easy in many ways. However, most credit cardholders fail to use their cards to the fullest potential due to the misconceptions about credit cards. We help dispel some of them. Read on to know more. 

Myth: If I hold more than one credit card, it is bad for my credit score: 

Fact: Banks look at a ratio called 'Credit Utilisation' – this is the percentage of credit utilised versus your sanctioned limit. Remember, a credit card is nothing but a line of unsecured loan advanced to you by the bank. If you use bulk of it every month (i.e. your credit utilisation is high), it sends a negative signal as far as your creditworthiness is concerned. This is true even if you pay your entire bill, in full, every month. By using multiple credit cards, you can make sure that on each card, this ratio is kept within healthy limits, as you can spread your spends across your cards. But at the same time don’t have too many cards as then it would become cumbersome to manage the repayments. Ideally, keep one for your regular expenses and one for emergencies or big-ticket items that crop up occasionally.

Myth: Even if I pay credit card dues late it is ok, as long as I repay in full

Fact: Missing your credit card repayment will affect your credit score negatively, even if you pay off the amount in full. It not considered good credit behaviour if you are regularly late in paying your bills. Besides, you will be charged a late payment fee and interest.

Today, with banks offering options to repay credit cards online and via UPI, in addition to cheque payment, there is no reason why you should miss your payments. 

Myth: It is enough to pay the minimum due amount every month

Fact: This is a common myth, but one that many people still practice. Paying off the minimum amount due every month will only save you the late payment penalty. You will be charged interest on the remaining outstanding balance as specified in the terms and conditions of the card. Please note that the interest is calculated from the date of transaction. If you are not careful your outstanding balance may balloon and you may find yourself staring at a huge debt that may be difficult to repay. Avoid this and always try to repay in full. If not, convert your balance into EMIs. This will allow you to repay a fixed amount every month, as per your budget. 

[Also Read: How To Apply For A Credit Card Online And Enjoy Best Deals]

Myth: A hike in credit card limit is bad as I will end up spending more

Fact: If your bank increases your credit card limit on its own, it's an excellent thing. It means that you have been using your credit card in a financially responsible manner and that the lender thinks you are a good customer. As explained earlier, a higher credit limit will help you maintain a lower credit utilisation ratio. Even if you don’t need a higher limit for your regular expenses, it can come in handy if you face an emergency and find yourself in need of extra funds. If you are afraid of overspending, you can set spending limits on your credit card.  

Myth: If I apply for a new credit card it will adversely affect my credit score

Fact: Any fresh application for credit, be it a card or loan does have a marginal impact on your credit score. However, if you service this debt properly, it actually ends up enhancing your score. Bottom line: don't go overboard in applying for new cards, but one or two additional ones won't hurt your credit score, provided you make timely payments.

Myth: A card that charges annual fees is expensive

Fact: Most people are averse to credit cards that charge annual fees. The thought is that why one should go for a card with annual fees when there are credit cards that are free or don’t charge any fees? However, cards that charge fees typically offer a lot more reward points and usually have a lot of tie-ups with other brands for discounts and offers. They might get you access to airport lounges and air miles. Many cards also waive off the annual fee if your monthly or yearly spend crosses a particular limit. If you are smart, you can use this to your advantage. 

Myth: If I cancel my credit card, my credit score will improve 

Fact: This is a very bizarre myth. Merely cancelling credit cards doesn’t improve your credit score. In fact, in the absence of a credit assessment tool (in this case your credit card) lenders may find it difficult to offer you loans. You should cancel a credit card only if you have too many cards and you want to consolidate the outstanding balance into one card. Otherwise, a credit card acts as an easy tool for lenders to monitor and assess your credit behaviour.

Remember, a credit card, if used prudently, will make your life easier. It is just a matter of being disciplined while using it and paying your bills on time.

Axis Bank offers a range of credit cards that come with a variety of benefits tailored to its customers' preferences. Customers are also entitled to Edge Reward points depending on their spending patterns. You can redeem them for a range of attractive deals and offers.

To know more about Axis Bank Credit Cards, visit us.

Disclaimer: The Source, a Mumbai-based content creation and curation firm, has authored this article. Axis Bank does not influence the views of the author in any way. Axis Bank and The Source shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.