Money myths: fact or fiction
You'll automatically get a top credit card if you're a high earner, right? Explore the truth behind this and other common money misconceptions.
When it comes to our finances, we're constantly bombarded with half-truths and pecuniary old wives’ tales. How do you separate the truth from the myth?
MYTH ONE: High earners get the best credit cards
FACT OR FICTION? Even earning a six-figure salary doesn’t guarantee being accepted for a credit card. However, a person’s earnings may be a factor in helping a potential lender determine creditworthiness.
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Most credit card applications ask for your salary details. In fact, a number of the most competitive cards require that borrowers have a minimum household income in order to qualify.
However, lenders also look at a potential borrower's credit report. Whatever that person’s salary, any serious blemishes such as bankruptcy within the past six years could seriously hinder the chances of getting credit.
MYTH TWO: You can’t move banks if you’re overdrawn
FACT OR FICTION? Many banks or building societies willingly accept new business from customers in the red.
Those who are currently paying an expensive interest rate on their overdraft may be able to pay off their debt more quickly by moving to another bank. For instance, Santander offers a 12-month interest-free arranged overdraft on its Preferred Current Account.
Banks may run a credit check on new applicants who are applying for an overdraft. Those with a less than impeccable score may not qualify for the most competitive accounts – or receive a small overdraft.
MYTH THREE: You can't beat a credit card company
FACT OR FICTION? This may be true for borrowers who find themselves paying expensive interest on a debt they can’t afford to pay off. However, savvy customers may be able to make a profit or earn rewards by capitalising on credit card perks.
With the Capital One World MasterCard, for instance, borrowers receive 5% cashback in the first three months – up to £100. The representative APR on this card is 19.9%.
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MYTH FOUR: You're jointly liable for your spouse's debt
FACT OR FICTION? Despite popular misconceptions, walking down the aisle doesn't instantly tie a couple financially.
Unless two people have a joint credit agreement such as a credit card or loan, there isn't a financial association between them.
However, if you do have a financial connection with a spouse and the relationship ends, it would be prudent to inform the major credit referencing agencies (Equifax Callcredit and Experian).
MYTH FIVE: Making minimum repayments on a credit card damages your credit score
FACT OR FICTION? As long as a borrower pays at least the minimum amount required by the bill due date, there should be no ill effects for their credit report.
That's not to say that making the minimum repayments is a good idea. Borrowers who can afford to (and many of us can't in the current climate) would normally be wise to pay off as much of their credit card balance as possible each month.
Otherwise, they may accumulate a credit card debt that they could spend years (or even decades) struggling to repay.
Already aced our first credit card quiz? If you enjoyed that, it’s time to pit your wits against our latest set of mind-bending questions.
MYTH SIX: You don't need to worry about a pension until you hit middle age
FACT OR FICTION? Of course, a person's pension plan depends heavily on his or her personal circumstances.
However, it's normally wise to start saving for retirement as early as possible. The longer a person postpones pension planning, the more he or she may need to set aside each month when they do begin saving.
Likewise, young people may also believe they don't need to consider life insurance if they don't have any dependents and are in good health. Ironically, however, this may be the optimum time to purchase a policy as premiums tend to become more expensive as we age and develop medical problems.
**Articles featured on BeatThatQuote.com are for information purposes only and reflect the views of individual writers. Articles are not, and should not be considered as, financial advice. BeatThatQuote.com strongly encourages our readers not to rely solely on information contained within this article/our website, but to conduct their own research and seek independent advice about the financial products they purchase.**
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