Credit card myths revealed!

Robert Powell hits the streets to reveal three 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