4 Common Credit Card Myths
You’ve heard them. You’ve probably even believed them. That stops today. Check out these 4 common credit card myths. Get a handle on how they can cost you in fees and potentially damage your credit score.
Don’t Fall for These 4 Credit Card Myths
The following list will help you steer clear of some pretty persuasive credit card myths out there. These lies and bad advice can actually hold you back. They can cause stress, frustration, and even depression at times. We hope you find this information helpful and encouraging.
1. “You should always carry a balance on your credit card.”
Many people incorrectly believe that this is how you improve your credit score. They think you absolutely must carry a balance and pay interest fees. Wrong. In fact, interest fees are sometimes upwards of 20%. That’ll get expensive. In a hurry.
It’s not true that credit card companies automatically cancel your card and erase your account history if there’s no balance. Paying your card balance in full before interest charges are made each month is a great idea. Do it if you can.
Tip: It can even be beneficial to your credit score if you leave your unused credit card accounts open. There’s no balance, right? But this can lengthen your credit history and help you in reporting low utilization. Do this unless annual fees aren’t worth it. And do it as long as the risk of going into debt isn’t an issue.
2. “You’ll always pay interest if you use a credit card.”
If you’ve been clinging to this myth, it’s high time you didn’t anymore. Understand how credit cards work. Surprisingly, many people think that you will pay interest even if you pay your balance in full each billing cycle.
See our article “Credit Card Grace Periods – How Do They Work?” and clear up any misunderstanding. It’s possible to have a credit card and to never pay one cent in interest or late charges. How? Always pay your balance in full before it’s due. Knowing this about credit cards could come in handy down the road.
3. “Make the minimum credit card payment each month, and you’ll be fine.”
Not the case. This is probably the most common of the common myths listed here. And it can spiral out of control rather quickly. Get to know the facts.
Some people can’t pay more than the minimum each month. Their funds won’t allow it. But some consumers think minimum payments are how the system works. If you’re paying the minimum payment because you believe that’s what’s required to avoid interest charges, you’re mistaken. You are not avoiding interest. Not in the least.
Minimum monthly payments lead to paying more in the long term. Interest continues to stack up. Interest on top of more interest! Minimum payments can keep you in good standing, but your credit score can suffer as your debt increases.
Tip: Always do your best to pay credit card balances in full. If you can’t, do your best to pay more than the minimum payment.
4. “Paying off your credit card debts will erase them.”
You’ve heard that things are too good to be true, yes? Case in point, eliminating credit card debt does not clear your credit slate. Your credit score and profile are reflections of your credit history. Creditors want to understand your financial character.
So, if you pay off your credit card debt, you’re no longer tied to payments. But the evidence of that debt can hang around on your report for years. In fact, most negative credit information will remain on your report for up to 7 years.
The silver lining? If you’ve made on-time payments and finally paid your debts in full, you’ll actually want that paid-off account reported on your credit. It shows that you’ve been responsible in paying back what you borrowed.
Don’t Let These Myths Limit You!
Myths like these can stand in your way. Understand how your credit cards work. And always pay as much as you can, even if you can’t pay debts in full.
We aim to educate you on credit management, credit laws, and more. This is not information you should have to pay for. Companies should never mislead you. You deserve the truth, and you have rights as a consumer. Don’t allow bad financial advice and outright lies to take your buying power from you.