Credit cards have the potential to be a very beneficial financial instrument for those who use them and pay off their balances in a responsible manner. But the rising popularity of credit cards, just like the use of the vast majority of other financial instruments, has given rise to a number of myths and misconceptions around this mode of payment.
While some misbeliefs prevent you from properly using credit cards, which ends up being detrimental to your financial health and Bajaj CIBIL score, some others, on the other hand, encourage incorrect usage of credit cards, which too ends up harming your finances and IIFL CIBIL score.
Before you apply for a credit card online, you should read this section so that you may gain a better understanding of some typical misunderstandings.
Credit cards end up growing your total debt
Because they are worried about being mired in a debt cycle, many people are hesitant to use credit cards. As a result, they never apply for credit cards. However, only those who are unable to control their spending and/or lack adequate financial discipline are vulnerable to falling into a debt trap. The others would frequently profit from using credit cards intelligently, responsibly utilising them, and responsibly paying them off in terms of financial savings, convenience, and lifestyle advantages.
Online credit card applications can also be a terrific first step for people who have never used credit before toward building a solid credit history and score over time. Since credit card transactions are treated the same as loan applications, paying off credit card bills on time has a similar beneficial effect on your Bajaj CIBIL score as quick loan payback does. Please be aware that individuals with no credit history or a credit score of 0 have a lower likelihood of obtaining loans with reasonable interest rates and fees.
Never raise your credit limit
Because they are concerned that doing so may encourage greater spending and, eventually, more debt on their cards, many cardholders are reluctant to raise their credit limits or even decide whether to apply for credit cards online. A bigger credit limit, however, can significantly improve your financial circumstances if used correctly.
A higher credit limit not only makes it easier to handle monetary emergencies, but it also reduces the credit usage ratio, or the proportion of the entire credit limit that the cardholder actually uses. As your IIFL CIBIL score gradually increases and your credit usage ratio declines, you will become more eligible in the future for credit cards and loans. Maintain a credit utilisation rate of about 30%. Credit bureaus will reduce a person’s credit score by a certain percentage point if they decide that they are credit-hungry and have gone over their credit limit. People who frequently go over this limit may ask their current card’s issuer for a credit limit increase or think about acquiring a second card through credit card apply online.
Failure to pay bills on time has no impact on Bajaj CIBIL score
One of the first factors that lenders take into account when examining any loan application is a person’s credit score, which is a three-digit figure that indicates their trustworthiness. Since a person’s credit report contains details about their history of credit repayment, irregular credit card bill payments may lower a person’s credit score in addition to incurring late payment fees and exorbitant finance costs. A credit card user may find it more challenging to obtain new loans and credit cards as a result of all of this if their IIFL CIBIL score is low.
It is okay to pay the bare minimum bill amount every month
Many people who use credit cards erroneously believe that by only making the minimum payment, they will be safeguarded in the event that they are unable to make timely payments on their entire sum. That is untrue. The card user is nevertheless exposed to high financing expenses, which vary between 23 percent and 49 percent per year on any unpaid sums, even if quick payment of the minimum amount due by the due date exempts the card user from being charged late payment fees. Remember that missing even one payment will result in additional late penalties and a detrimental effect on one’s IIFL Credit score. If credit card obligations are not entirely paid off until all existing debts are cleared, the interest-free period on subsequent credit card transactions can also end.
In light of this, if you are having trouble making timely and full payments on your credit card debt, you may want to think about putting all or some of it on a monthly payment plan. Depending on one’s financial situation, converting all or part of a credit card debt might enable them to avoid finance charges on new purchases as well as enable them to make repayments at a substantially reduced interest rate and in smaller quantities. This is due to the fact that EMI conversion is available for lengths of up to five years and has an interest rate that is much lower than finance costs.
Your credit score drops if you have an excessive number of credit cards
In the credit card industry and among people who apply for credit cards online, the notion that having several credit cards will harm your Bajaj CIBIL score is pervasive. The cardholder’s credit score, however, is mostly determined by how they use and handle their credit card. The usage of behaviours including rapid and complete repayment of credit card debt, a credit utilisation ratio (CUR) under 30%, and a restriction on making a lot of credit inquiries, especially quickly, can help to build and maintain a strong credit score.
Furthermore, having multiple credit cards can be helpful in a number of ways, such as serving as a backup in case the primary card is lost or stolen, providing better rewards on spending across multiple cards based on their reward point structures, and allocating expenses in accordance with each card’s interest-free period.