Credit cards continue to be a part of everyday financial life in India, although myths surrounding how they work can lead to poor decisions and long-term damage to your credit score. In 2025, with tighter credit terms and more products competing for your money, it is more important than ever to understand the facts about credit cards. From myths surrounding minimum payments to lies about closing unused cards, these myths can end up costing cardholders in the form of surprise fees, low credit scores, and even debt traps. Here are the most common credit card myths you have to break—and the truth is really.
Myth 1: Having a balance improves your credit score
A popular myth is that paying a balance every month is a good thing to help your credit score. Really, it may damage it. Lenders such as CIBIL and Experian reward people who pay their bills in full with better ratings. Paying a balance translates to paying interest—usually 30–42% per year—without any credit benefit. Really, paying on time in full has much more impact on improving your credit history.
Myth 2: Pulling your own credit score will decrease it
This is a very persistent myth. Hard checks (by banks) do impact your score to some extent, but soft checks (like when you check yourself) won't. Running regular checks on your report is actually a good idea, as this will enable you to track errors or misuse of your identity. Institutions like CIBIL and CRIF now offer one free credit report annually to consumers.
Myth 3: Credit cards are only used in emergencies
By 2025, this line of thinking is antiquated. Ongoing use of a credit card—and prudent use—is one of the best methods for establishing a credit history. Cards also provide rewards, cashback, discounts, and fraud protection. Not using them at all means potentially sacrificing financial benefits, such as being able to tap into higher credit lines or lower-interest loans in the future.
Myth 4: Having too many cards always damages your score
While too many cards opening themselves in a short time can damage your score with several hard inquiries, having multiple cards is not a bad thing. Having multiple cards spread out reduces your credit utilisation ratio—a significant credit score factor. It's just keeping them under control: on-time payments, low utilisation, and not closing old ones unnecessarily (as it shortens your credit history).
Myth 5: Payment of minimum due amount is enough to stay safe
Most cardholders think that paying the "minimum due" avoids interest or penalty. This is not true. It avoids late charges, but it does charge interest on the outstanding amount. This can balloon into huge debt over a period of time. The best thing to do is to always pay the amount due and not the minimum.
Myth 6: Zero annual fee means no cost at all
Some cards are marketed as "lifetime free" or "zero annual fee," but there are still fees that are incurred, such as late fees, forex markup, or cash withdrawal fees. You need to carefully read the terms and conditions before you can conclude a card is free.
Financial literacy still in catch-up mode
In 2024, a report by TransUnion CIBIL stated that 47% of Indian credit card holders did not have a proper idea about how the credit score is calculated. It is suggested by financial planners to read RBI's consumer awareness notices or EPFO and SEBI's investor education portals to clear myths and keep themselves updated.
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