Credit Card Myths | Understanding Credit Cards

From unavoidable interest and debt, to the impact a missed payment has on your credit score – there are a few misconceptions about credit cards.

If you’re looking at taking out a credit card, you want to be sure of what you’re getting.

Credit cards can help you manage your money, build your credit rating and even earn rewards points. But if you don’t use them correctly, you can also get into debt and harm your credit rating.

Knowing what’s true, and what’s not so true, is a great place to start when thinking about how to best use a credit card.

Here are some common credit card myths.

Myth 1: You'll get into large debt if you get a credit card

You’re in control of how much you spend and how you manage your repayments. If you pay off the full amount you owe every month, you won’t get into debt or pay interest charges.

If you’re worried that the temptation to spend may be too much, it’s worth considering whether a credit card is right for you. Why do you want the credit card and what will you use it for?

If you decide to take out a credit card, setting yourself clear rules can help you avoid spending more than you’re comfortable with.

You can also look at setting your credit limit at a smaller amount to start, so you can reduce the chance of getting into any trouble.

Explore: Tips for using your credit card

Myth 2: A low APR is one of the most important things to look for

If you can’t afford to pay off the credit card balance in full each month – the annual percentage rate (APR) is important, as you'll be paying interest on the debt.

But if you do plan to pay off the full amount each month – the APR may not be as important. You want to weigh up the cost of a higher APR against other benefits, such as air miles or rewards.

Explore: Types of credit cards

Myth 3: All you have to do is make the minimum repayment

While this is technically true, it’s really important to pay your balance in full whenever possible. Only making the minimum repayment on your credit card can mean it takes you longer to clear a credit card debt, and you could pay a significant amount in interest.

You should always try to pay your balance in full or, if that’s not possible, as much as you can.

Remember: if you have an HSBC credit card, any refunds you receive on your account won’t count towards your minimum payment. You still need to pay the full minimum payment, unless the refund reduces your balance to an amount lower than your minimum payment. In that case, you’ll only have to pay the remaining balance.

Explore: Tips for paying off your credit card

Myth 4: Missing a payment won’t impact your credit rating

While your credit rating looks at your borrowing history and financial activity over a period of time, even missing one credit card payment can negatively impact your credit rating.

It’s important to stay on top of things, otherwise you may find you’re limited in what you can borrow in the future. Setting up a Direct Debit automates your payments, so there’s one less thing to have to remember.

Explore: 5 reasons to care about your credit score

Myth 5: Having multiple credit cards is better for your credit score

This isn't necessarily true. Your credit rating is based on the different types of credit you have (which could include a student loan, a mortgage and credit cards), as well as other factors, such as: