Credit Card Confusion: A Recent Survey Unveils Ten Myths That Could Be Leaving You Out of Pocket

Jun 5th 2019

TotallyMoney's annual Financial Awareness Survey asked a nationally representative sample of 2,000 UK adults a range of questions putting their personal finance knowledge to the test.

  • Nearly one in two (49%) think that APR (annual percentage rate) is the most important feature of a new card
  • Just under half (46%) don’t know that you’ll still pay interest even if you make the minimum payment
  • Barely one in four (23%) rightly believe that you shouldn’t spend more than 25% of your credit limit
  • Only just over a third of people (39%) understand how a balance transfer can save them money

What’s the cheapest way to borrow? What do lenders think about me? How many cards should I have? Just some of the questions that people have when thinking about credit cards. And, as recent findings suggest, questions that not many people know the correct answer to.

A 2019 OnePoll survey of 2,000 people, commissioned by credit experts TotallyMoney, reveals that alarmingly over half of people didn’t think a higher credit score meant better credit deals.

Just one shocking statistic uncovered by TotallyMoney’s poll — but it doesn’t stop there. Only 49% knew having a credit card would affect your credit rating, and less than one fifth understood the company you bank with isn’t more likely to accept your credit card application.

Over time, such financial fables have been compounded, instead of alleviated — causing confusion for consumers nationwide.  

Alastair Douglas, CEO of TotallyMoney said: “Among credit card veterans and novices alike, there still exists many misconceptions which could be holding them back.

“Rumours and stories have spread over the years — and stuck. At TotallyMoney, we break down what is good and what is bad about each card, so our customers know exactly what they’re getting.

“Understanding what’s best for your needs is the first step to building a better financial future. As a TotallyMoney customer, you’ll get alerts and updates about the latest credit products and offers tailored to your credit rating — so you’re always in the know.

“But, there’s still some confusion out there. So, we’ve debunked some of the most common credit card fictions to help set the record straight.”  

Fact is Stronger Than Fiction

Myth 1. I’m more likely to be accepted for a credit card from the bank I’m with

Why people believe it: If your bank already knows you, they trust you enough to give you a credit card. The facts: This isn’t considered when the bank processes your application. Sometimes, your current bank will limit the perks available to you, as you’re already a customer. Another provider may offer you a greater range of perks to encourage you to become their customer. The findings: Less than one in five people (19%) of people know that your current bank isn’t more likely to give you a credit card.

Myth 2. If I have a card, I should spend something on it each month.

Why people believe it: If you don’t use your card, there’s surely no point having it, so the lender will take it away. The facts: If you’ve got a card, it’s absolutely fine to use it as sparingly as you’d like — but be sure not to use over 25% of your available credit, as this can lower your credit score. The findings: Over a third (37%) of those surveyed knew that you don’t have to spend something on each of your credit cards every month.

Myth 3. If I don’t use a credit card, I should cancel it.

Why people believe it: Why keep a card that you don’t use? Fact: Closing a credit account reduces the amount of credit available to you. So, depending on how much you’ve used across your other cards, could increase your overall credit utilisation. Using over 25% of your available credit is not looked upon favourably by lenders, so your credit score will decrease if you do. The findings: Less than one in five people (16%) knew that you shouldn’t necessarily cancel the credit cards you no longer use.

Myth 4. Getting a credit card won’t harm my credit rating.

Why people believe it: There’s no harm in simply having a credit card. It’s how you use it that matters. The facts: If you’re accepted for a card, your credit score will drop temporarily. Use your credit sensibly, and you’ll start to see your credit score increase. However, being rejected for credit may harm your chances of acceptance in the future, and if you keep applying and keep being rejected, the situation will only get worse. The findings: Less than half of people (49%) know that getting a credit card will harm your credit rating.

Myth 5. When looking for a new card, the most important thing to consider is the APR.

Why people believe it: High APRs mean you’ll pay more interest, which you want to avoid. The facts: There are a lot more important things to look at when considering a card. For example, a purchase offer gives you a period of interest-free spending, and there may also be fees attached to a card. And, if you make sure to pay your balance off at the end of the month, you won’t pay any interest at all. The findings: Nearly one in two (49%) think that APR is the most important thing when they apply for a credit card.

Myth 6. I won’t build any interest if I make my minimum payments.

Why people believe it: If you’re still paying the bank back something, that’s enough to avoid interest. The facts: Unless there’s an interest-free period, the only way to avoid paying interest is to pay off your balance every month — in full. The findings: Almost half of those surveyed (46%) didn’t know that making the minimum payment each month still incurs interest.

Myth 7. A balance transfer won’t help me save.

Why people believe it: It’s all about paying your balance off and not building any debts — not moving your money. The facts: Balance transfers could help you save money. They allow you to move a balance from one card, with a higher APR, to another card that usually has an interest-free period. This means you can pay off a balance over a longer period of time. The findings: Only just over one third of people (39%) of people are aware that a balance transfer card could be an easy way to save money.

Myth 8. I only want one credit card. Having too many will damage my credit score.

Why people believe it: Lenders only want you to have one card — their card. If you’ve got multiple cards, lenders will think you can’t be trusted to make your repayments across all of them. The facts: Lenders are more concerned about whether you make your repayments. If you make your repayments every month across all your cards, there shouldn’t be any negative effect to your credit score. The findings: Only a third of respondents (31%) know that having two or more cards isn’t necessarily bad for your credit score.

Myth 9. My credit score doesn’t affect the credit deals and offers I can get.

Why people believe it: Your credit score doesn’t mean much. Banks don’t really look at it. The facts: Your credit score is a representation of how favourably lenders view you. The higher the score, the greater the trust. The more they trust you, the better the rates you’re likely to get. The findings: Staggeringly, more than one in two people (54%) don’t think that a higher credit score will impact the deals and offers you can get.

Myth 10. Maxing out my credit card is fine. They gave me a credit limit, so why not use it?

Why people believe it: The bank has given you a certain amount of credit. There’s no problem in using it all, otherwise they wouldn’t have set me this credit limit. The facts: Going over 25% of your credit limit across all your cards can lower your credit score. If you spend too much, lenders could think you’re at risk of maxing out. This suggests to lenders that you’re struggling and having to resort to credit for day-to-day living, and risk building up a balance you can’t pay off. The findings Only around one in three (23%) knew that keeping your balance below 25% of your credit limit is good for your credit score


For more information, please contact James McCaffrey

About TotallyMoney

TotallyMoney is on a mission to improve the UK's credit score, with their free credit report at the heart of this goal. Today, TotallyMoney is the highest rated free credit report provider on Trustpilot, and has over two million customers (and growing!). They've also won Best Free Credit Report Provider at Moneynet's Personal Finance Awards every year since their launch in 2017.