Credit card myths revealed!

Robert Powell hits the streets to reveal three credit card myths...
Robert Powell hits the streets to bust these credit card myths
It’s January – the month when many of us will be reluctantly opening our credit card bills and assessing the financial damage caused by Christmas.
But how much do we actually know about credit cards?
I’ve hit the streets to find out...
You get charged interest if you pay off your balance in full every month
Most of the people I spoke to were actually clued up about this myth. But a few did still think that they would get charged interest if they cleared their whole bill.
In fact, if you pay off your credit card bill in full every month you’ll never get charged a penny of interest on any purchases you make.
This is because most credit card companies will give you an interest free period on all purchases until your next bill is issued.
Some even give you more than 50 days' interest free from the day you make the purchase.
But the same is not true for cash advances which start accumulating interest from the moment you withdraw the money.
Paying off your bill in full every month improves your credit rating
A majority of the people I spoke to believed that clearing your full bill would improve your credit rating.
Paying your credit card bill in full may mean you don’t get charged any interest, but it won’t actually have any effect on your credit rating.
It doesn’t matter if you make the minimum payment each month or you clear the whole lot, so long as you don’t miss a payment, your credit rating won’t be affected.
The advertised interest rate of a credit card is the rate you’ll pay
Most people believed that they would get the advertised rate initially but that the credit card company would probably bump it up after a few months.
In fact, most advertised interest rates, or APRs - are actually ‘typical’ rates.
This means that currently, the lender only has to give this rate to 66% of the people who apply for the card – and when new laws come in on February 1st, this percentage will drop to 51%.
So if you have a poor credit history, you could find yourself with a higher rate of interest than was advertised.
Really, the two most important things to remember when taking out any credit card is to read the terms and conditions fully and always ensure that you can pay back what you spend.
And you can find full details of all the current market leading credit cards by heading over to lovemoney.com’s credit card comparison centre.
More: 20 top 0% balance transfer cards | A new 17 months interest-free credit card
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ced-ced, dormant credit cards definitely affect your pocket - if you have a dormant card, check its conditions carefully as many credit card providers have now introduced dormancy fees if a card is not used over a certain period, usually a year and many others are planning on doing so in the nearest future. As for the credit rating, yes, it might affect it, lenders as a rule do not appreciate you having access to too much credit, especially if it is unpropotional to your income. For more detail you might want to check http://www.loansyo.com/get-rid-of-your-dormant-credit-cards/
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Does a dormant credit card can affect your credit rating? Or is it better to get rid of it if you don't use it? Also I agree with glynton on mentioning the merchants fees if you use credit cards, especially airlines. It's very frustrating and seeing the different charges they each apply, it's only another way for them to make money.
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glynton, look at the airlines, they charge different rates for different cards, I have a visa electron card just to avoid fees with easyjet, Flybe are doing a no fee deal if you pay by PayPal. Where I work, they charge 3% on credit card payment and stopped taking Americ Express. This is because they charge a percentage of the transaction and take a while to credit the merchant. American Express were charging 5% and taking up to 3 months to pay. On small margins this can break small businessess. Lidle's and the others, whose margin was low never used to take any type of card, M&S used to only take their own for similar reasons.
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19 January 2011