Credit Card Myths Debunked

Credit cards have become incredibly popular in India over the last few years. As of February 2024, banks have issued over 100 million credit cards in India, according to the data presented by the Reserve Bank of India (RBI). However, people still have many misconceptions and incorrect assumptions about credit card usage, which can be financially detrimental. By understanding how credit cards work and debunking credit card myths, you can learn to use credit responsibly in a way that benefits you.

Credit card misconceptions debunked

Let us look at some of the most prevalent credit card myths and misconceptions to understand the truth behind them.

Applying for a new credit card tanks your credit score

One of the most common misconceptions people believe is that applying for a new credit card drops your credit score significantly. Although an enquiry is indeed made on your CIBIL/credit score when you apply for a new credit card, the drop in your credit score as a result is minimal. Also, this minor drop in your credit score is temporary.

As long as you keep paying your credit card dues on time and keep your credit utilisation optimal, your credit score will recover in just a few months. In fact, responsible credit card usage may end up boosting your credit score.

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• 5 reward points for every ₹150 spent
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• Reward points that can be redeemed for air miles or cash credit
• 100% digital application andinstant approval with a video KYC process

Click on the credit card apply button today to get started with IndusInd Bank and enjoy a range of credit card benefits!

Cancelling unused credit cards will improve credit score

Another popular misconception is that cancelling old and unused credit cards can improve credit scores. However, the opposite is more likely to happen. As you close or cancel a credit card, your overall credit limit goes down, increasing your utilisation ratio. A substantial increase in your credit utilisation can lead to your CIBIL/credit score going down.

Also, if you have been using a certain credit card for many years, it becomes a part of your credit history. Cancelling an old card with a long history may also bring your credit score down, as essentially a major chunk of your credit history gets erased.

Checking your credit score can lower it

Many credit card holders believe that checking their credit score can cause it to drop. However, checking your own credit score is considered a ‘soft inquiry’ and does not have any negative impact on your credit score.

In fact, if you use your credit card regularly, it may be a good idea to keep periodic tabs on your credit score in case there are any erroneous or falsely marked missed payments, and resolve them with your bank as soon as possible. 

Key takeaways

By debunking the myths surrounding credit cards, you can learn to use credit cards responsibly. When used optimally, credit cards can help you build a good credit score in the long run, and help you earn a variety of discounts and cashback on your purchases and spends. However, make sure you pay your credit card bills on time and keep credit utilisation on the lower end for a better financial future.