The top five credit card myths dispelled

Credit card myths are typically half-truths spread through word of mouth and if believed, can be detrimental to your personal finances. So that you put your mind at ease with your credit card and stay on top of your account, it's crucial that your knowledge is up to scratch.

To help you out, we've compiled a list of the most widely believed credit card myths and the facts to set them straight.

1. I'll always get the advertised rate

A common misconception among credit card holders is that when they apply for a credit card they'll be guaranteed the APR that's advertised by their provider, when actually there are a number of factors that could affect it.

Your rate could depend on your income and overall financial position, as well as your credit history. Each of these will vary from person to person, and your APR will be worked out by your provider accordingly. So, if you and a friend decide to take out a new credit card on the same day, you could be quoted different rates.

2. I can improve my credit score by paying off more than I owe

Many people mistakenly believe that they can boost their credit rating by paying their credit card provider more than they owe, but this isn't the case. While paying above the owed amount does temporarily increase the credit you have available to spend on your card, this action will not impact your rating.

It is important to bear in mind that even if the balance on your account is below zero, it will still show up as a zero balance for scoring purposes on your credit report.

3. If I go over my credit limit and pay it back before the due date, I'll be OK

It's never a good idea to go over your credit card limit, whatever the situation, as this could incur a financial penalty. What's more, it won't go unnoticed in your credit report, meaning your credit rating will also suffer.

If you think you’ll exceed your limit, get in contact with your lender as soon as possible. Even if you go over your limit for a short period of time, a penalty could bump up your interest rate.

4. Leaving a small balance each month will help my credit score

Many credit card holders believe that by paying off their balance in full each month, they will successfully reduce the profits their lenders make on interest. They also think that maintaining a small running balance on their card will earn them a higher credit limit and improve their credit rating.

However, when it comes to your credit rating, unless you're permanently close to the top end of your credit limit, it won't have any effect on your score. Your credit score mostly depends on whether or not you've missed payments in the past, and, if you have, then it could take up to six years for these to clear.

5. Paying off my credit card in full every month improves my credit rating

There are certainly benefits to paying off your credit card in full each month - it'll help you to stay abreast of your finances and you won't have to pay any interest on your purchases. However, doing so will not have any impact on your credit rating.

As we've mentioned before, the main thing that affects your credit rating is missing a payment. So if you missed a payment three years ago, it's likely this will still be on your credit report, no matter how good you've been with your money recently.

Before you take out any credit card, make sure you read your provider’s terms and conditions and check the small print thoroughly.