10 Credit Card Myths Indians Still Believe (And the Truth Behind Them)
Credit cards have been around in India for decades, but misinformation about them is still everywhere — from well-meaning parents to YouTube finance influencers. Believing the wrong things can cost you money, hurt your credit score, or keep you away from a useful financial tool. Let’s set the record straight on 10 of the most common myths.
Myth 1: “Having a credit card means you’re in debt”
The truth: Having a credit card does not mean you are in debt any more than having a car means you are in an accident. A credit card is just a tool. If you pay your bill in full every month, you pay zero interest and build your credit score at the same time. Debt happens only when you fail to pay back what you borrow.
Myth 2: “Paying only the minimum amount due is fine”
The truth: This is the most expensive myth on this list. The minimum due keeps your account from being marked delinquent, but the unpaid portion accrues interest at 3-4% per month (36-48% per year). Worse, once you carry a balance, new purchases lose their interest-free period and start accruing interest from day one too. ₹50,000 unpaid at 40% annually for a year becomes ₹70,000+. Always pay in full.
Myth 3: “Closing a credit card helps your CIBIL score”
The truth: It usually hurts. Closing a card shortens your average credit history length and increases your overall credit utilization ratio (since your total available credit drops). Both of these lower your score. If a card has no annual fee and you do not use it, keep it open with a small recurring charge that you auto-pay. If it has an annual fee you don’t want to pay, ask the bank to downgrade it to a free variant instead of closing it.
Myth 4: “More credit cards means more debt risk”
The truth: More credit cards do not automatically mean more debt. In fact, having multiple cards with low utilization on each can actually improve your credit score. What matters is how much you spend relative to your total limit, not how many cards you have. Three cards each used at 10% of their limits look healthier than one card used at 70%. The risk comes from spending more than you can pay, not from owning more cards.
Myth 5: “Cash withdrawal on a credit card is just like an ATM withdrawal”
The truth: It is one of the most expensive things you can do. Unlike purchases, cash withdrawals via credit card have no interest-free period. You are charged interest from the moment you withdraw, at 36-48% per annum, plus a one-time withdrawal fee of 2.5-3% (minimum ₹300-500). Even a ₹10,000 withdrawal can cost you ₹500-800 in the first month alone. Use this only in genuine emergencies.
Myth 6: “Credit cards are only for rich people”
The truth: Entry-level cards in India are available to anyone earning ₹15,000-25,000 per month. Secured cards against a fixed deposit are available to anyone with some savings, regardless of income. The “premium-only” image comes from the flashy marketing of super-premium cards — those are indeed for the wealthy. But 80% of cards issued in India are mid-range or entry-level, not premium.
Myth 7: “Checking my own credit score lowers it”
The truth: Checking your own score is a “soft inquiry” and has zero impact on your CIBIL score. You can check it every month without worry. What does affect your score is a “hard inquiry”, which happens when a bank pulls your report because you applied for credit. Free tools from CIBIL, Paisabazaar, BankBazaar, and others let you check your score safely. Do it regularly to spot errors and track your progress.
Myth 8: “Cashback is just marketing — it doesn’t actually save you money”
The truth: It absolutely does, if you use the right card for your spending pattern and pay in full every month. A 2% cashback on ₹30,000 monthly spending is ₹7,200 a year. If your card has no annual fee or has fees smaller than that, it is real savings. The catch is that cashback becomes meaningless if you carry a balance and pay interest — one month of interest can wipe out an entire year of cashback. The math works only if you pay on time.
Myth 9: “Rewards points are worthless, they expire before you use them”
The truth: Depends entirely on the card. Some programs have lifetime points (HDFC, Amex in some cases), others expire in 2-3 years. The myth persists because people forget to check and redeem. Set a calendar reminder every 6 months to log in and redeem points for things you would buy anyway — Amazon vouchers, flight bookings, or statement credit. The value per point varies hugely, from 10 paise to 50 paise. Check the redemption catalog before assuming points are worthless.
Myth 10: “EMI conversion on your credit card is always a good deal”
The truth: Not always. Banks advertise “no-cost EMI” aggressively, but read the fine print. Many so-called no-cost EMIs actually charge interest, then give a discount on the product upfront to offset it — which works out to the same thing but with a processing fee on top. Standard EMI conversions charge 13-16% annual interest plus a processing fee of 1-2% of the transaction value. That’s better than rolling over a balance at 36-48%, but worse than a personal loan at 10-12% for large amounts. Do the math for every conversion, not just the headline offer.
Bonus: One thing people rarely warn you about
Here is something that doesn’t make the myth list but catches many people off guard: Rent payment via credit card is almost never worth it. Third-party apps charge 1-2.5% as a convenience fee. Even with 1-2% cashback on the card, you usually break even at best, and more often lose money. Banks also often exclude rent payments from reward points. Unless you are chasing a minimum spend for a milestone benefit, paying rent by UPI is far better than via credit card.
Final thoughts
Credit cards have a bad reputation in India partly because they are misused and partly because myths keep getting passed around. The reality is much more balanced — they are a powerful financial tool if you understand the rules. Ignore the hearsay, read the fine print, and make decisions based on math rather than myth. Your wallet will thank you.
