In the Philippines, rumors make their rounds fast. More often they’re harmless, but other times, such as when they concern credit card ownership, these incorrect myths keep people from applying for their own and maximizing their credit lines to their benefit.
So let’s break down these tall tales and set the record straight about owning a credit card.
“Credit cards will only drown you in debt.”
While the allure of splurging is there, owning a credit card per se will not cause you to accumulate debt.
The key here is discipline and a sense of responsibility. With the right mindset — not to mention the right card — you can build the right habits while making the most of your purchases without running your savings to the ground.
“You shouldn’t own more than one credit card.”
In reality, this depends more on the how than the what. That’s because credit standings aren’t just determined by how many cards you own, but also by how well you maintain each of them.
Sure, owning multiple cards might be a red flag because you technically have more debt. However, it can also help increase your overall credit limit by spreading out your balances, as well as paint you as a person who can manage various combinations of credit.
“You should always aim for zero balance in your card.”
Again, it depends on the scenario. If you have zero balance because your credit card has been dormant for months, then this might negatively impact your credit score.
To banks, this is an indication to stop sending credit history to agencies, or even cut that card off altogether. This increases your credit utilization, or the ratio of your overall credit limit to your total debt, and may negatively impact your credit score.
The solution? Make small, intermittent purchases and pay the balance in full and in time to maintain good standing.
“Close old credit cards ASAP to avoid further debt.”
Not so fast! Just like the argument against inactive credit lines, closing old credit accounts reduces available credit, which again increases your credit utilization ratio.
If you’re thinking of closing a line to steer clear of debt, then just cut the card in half or stash it away, but keep the account alive.
“Only rich people own credit cards so don’t bother.”
It may be true way back then, but the tables have turned since.
Just like any other financial instrument, credit cards are slowly being made accessible by big banks all across the world so that more people get to make more versatile financial decisions.
Just look up the product offers of the major banks and you’ll see that there’s a credit card tailor-made for young professionals, low to middle-income earners, and even students of legal age.
“You need a credit history first before getting one.”
This is technically accurate; most credit card providers will need to look into your credit standing to determine your eligibility.
However, some banks now provide special credit cards to those who have yet to start their credit history. These can be student credit cards, store-based credit cards, or secured credit cards that ask you to place money into a security deposit account to serve as collateral.
“Credit card terms and rates are set in stone.”
While you can gather everything about the credit product from the pamphlet, this doesn’t mean you can’t negotiate the terms when you apply for one.
Find a bank that welcomes a discussion about your credit card rates and conditions. Who knows, they may even waive fees and transaction charges for you!
Credit cards should feel liberating, not intimidating. To prove these and other credit card misconceptions wrong, the most important part is knowing the right bank whom you can sit down with and discuss all your concerns.
And pronto, because the sooner you ask your pressing queries, the sooner you get to enjoy the perks of using your card!