Common credit card myths

Myth 1 - Credit cards lead to a lot of debt

When you own a credit card, you’re responsible for how you manage it. If you pay off the full balance each month, you’ll avoid interest on your purchases. It’s also important to be aware of additional credit card fees. Steering clear of late payments or spending over your credit card limit can help you avoid debt.

Myth 2 - Having more than one credit card is bad

Having multiple credit cards is only an issue if you can’t manage your monthly repayments. In many cases, managing multiple credit cards can lead to an increased credit score.

Setting up a Direct Debit is the easiest way to manage multiple cards and avoid missing a payment. If you have an M&S Bank Credit Card and you want to set up a Direct Debit, our ways to pay page provides more information.

Myth 3 - All you need to do is make the minimum repayment

You should always try to pay off your outstanding credit card balance in full whenever possible.

While you can meet the terms of your credit card agreement by making only the minimum monthly payment, by doing this it will take longer to clear your credit card debt and you can end up paying more interest.

Myth 4 - A low APR is the most important feature of a credit card

The most important feature of a credit card depends on what you need it for.

A low APR is important if you can’t pay off the full balance each month since you’ll want to pay less interest. But if you can pay off the outstanding balance in full, you may prefer a credit card with benefits like air miles or shopping rewards instead of a low APR.

Myth 5 - Missing a payment won’t impact your credit rating

Missing a single payment can negatively affect your credit score.

With a credit card you will need to make minimum monthly payments – the smallest amount of money you must repay towards your outstanding credit card balance. Missing this payment can show financial instability, causing your credit score to drop.

Learn more about how credit cards work.

Myth 6 - Credit card interest rates can’t change

As long as your credit card provider gives you appropriate notice, your credit card interest rate or APR can change.

Many credit card interest rates depend on the Base Rate – the Bank of England’s official interest rate. So if the Base Rate increases, your APR will also likely increase.

Myth 7 - Being on government benefits lowers your credit score

Claiming government benefits won’t lower your credit score. There are many things that won’t appear on your credit report or lower your score:

  • government benefits
  • criminal convictions
  • student loans
  • medical history
  • savings accounts and investments

Claiming government benefits won’t affect your credit score, but it might affect your chances of being accepted for a credit card. If you claim government benefits because you have a low income, you might not meet the minimum income requirement for certain credit cards.

Myth 8 - You should cancel credit cards you’re not using

Before cancelling a credit card, you’ll need to consider its impact on your credit utilisation ratio. This ratio is how much available credit you use in a month.

Suppose you have a credit card with a credit limit of £500. If you spent £250 on the card, you’d have a credit utilisation ratio of 50%.

With multiple credit cards, your credit utilisation ratio is based on the credit you use across all the cards.

If you have two credit cards, one with a credit limit of £1,000 and one with a limit of £500. This means the total credit available to you is £1,500. If you regularly spent £250 across both cards, you’d have a credit utilisation ratio of about 17%.

If you cancel the card with the £500 credit limit and continued to spend £250 a month, your credit utilisation ratio would now be 25%. A high credit utilisation ratio can lower your credit score, so keeping the other card might be a better option.

However, credit cards that are hardly ever used or checked can increase the risk of fraud, so it may be sensible to cancel unused credit cards to help reduce the chances of you being scammed.

If you are looking to cancel your M&S Bank Credit Card, visit our card support page for more guidance.

Myth 9 - Having a high credit limit is bad

If you get a credit card for large purchases, you might need a high credit card limit to avoid using all your available credit.

High credit card limits only become an issue if you regularly use all of your available credit, which indicates financial instability. Asking your credit card company to lower your limit can reduce these spending temptations.

If you’re interested in applying for a credit card, learn more about the credit cards M&S Bank offer.

Published August 2023