Deciding to take out a credit card means facing all sorts of questions and myths that revolve around them.
Sometimes, many of them become a brake on the final decision of who intends to process it.
In the following article we will clear up many of the speculations that revolve around credit cards and tell you what is true and what is not.
The credit card is given away
Many people think that banks give you credit cards, because it is a procedure that suits them to acquire greater profits.
However, the reality is different, because for you to acquire this plastic the bank has to corroborate that you have a stable job that will allow you to cover the expenses you acquire with the credit card.
You have to keep in mind that when you start making payments with the card, you also take responsibility for the monthly payments, that if you do not carry out the bank will charge you with high interest rates that will be more expensive than your initial debt.
They are synonymous with free and unlimited money
You have to understand the difference between a credit and a gift, and cards are not gifts, but loans.
The intention of a credit card is not to give you the money you need and do not have at that time, but financial institutions make you a loan through that plastic, which you have to pay off in a given period.
We must also consider that when we process a credit is for a certain amount, so the amount we can dispose of is not unlimited.
You must have a balance on the card to establish a credit history
Credit cards are a very useful tool for generating credit history; however, it is not necessary to have an outstanding balance to establish one.
The ideal strategy for cards is to use them and pay the debts acquired month by month without failing, because in this way you keep up to date the proportionality of your debt.
Having many credit cards is good
Having many credit cards is not necessarily synonymous with something good, because the more you drive, the more debts you acquire with the bank.
However, if you decide to have multiple plastics but are not disciplined by any of them, your finances could be severely affected.
Ten percent of your credit score is determined by the type of credit you have, whether it’s credit cards, mortgage loans, or some other, meaning that if you only have plastics, it probably won’t help you as much in your score as having a good credit mix.
High Credit Card Limit Is Bad
Many believe that having a high limit on credit cards is bad, but the reality is that well used can be an advantage.
The key to plastics is to use them sensibly; 30% of a credit card’s score is based on the debt-to-credit ratio, that is, the amount you owe as a proportion of your total credit limit.
If your credit limit is high and your balances are low, it benefits your credit score.
In Mexico, credit card interest rates are usually high, at approximately 35%, while in countries such as the United States they are between 10 and 15%.
One of the myths about credit cards is low interest payments, but the reality is that each credit institution has different interest rates; however, the general recommendation is to become a totalero.
Totalers are the users who pay off their debts so as not to generate interest month by month or apply the magic purchases of interest-free months.
Taking out a credit card is very late
Each financial institution has different processes, so the process of acquiring a credit card varies depending on each one.
Usually the average delivery time is 15 minutes to 8 days, companies that take eight days conduct a detailed investigation to determine whether you approve or deny the application.
However, in other institutions the process is too agile, because with the requirements requested by the company you can have your plastic in 15 minutes or less.
Now that you know the myths and realities surrounding credit cards, you will be able to direct your decision to what is best for you.