Credit cards are surrounded by myths and misunderstandings. Some of these myths can lead people to waste money, miss rewards, or even damage their credit score.
In this article, we’ll bust the most common credit card myths so you can use your card confidently and smartly.
Myth 1: Carrying a Balance Improves Your Credit Score
- The Truth: Carrying a balance does not help your score — it only costs you interest.
- Better Approach: Pay off your full balance every month to avoid paying extra.
Myth 2: You Need to Use All Your Credit Limit
- The Reality: High use of your limit (utilization rate) can damage your rating.
- Smarter Strategy: Use less than 30 percent of your limit, preferably under 10%.
Myth 3: Closing Old Cards Always Helps
- The Facts: Closing your oldest account is a way to lower your average account age, which will harm your score.
- Smart Tip: Do not close old accounts that do not charge an annual fee.
Myth 4: All Credit Cards Have High Fees
- The Truth: Most of the cards do not charge an annual fee as well as hidden fees when you pay.
- Wiser Way: Select cards that have no fee or with benefits that exceed charges.
Myth 5: Applying for Multiple Cards Always Hurts Your Score
- The Real Deal: Every application will ding you with a minor temporary hit; however, the longer-term effect of having more available credit can actually boost your number as long as you take care of it.
- Better Solution: Apply today, only to the ones you will use and leave a gap between applications.
Myth 6: Rewards Aren’t Worth It
- The Truth: Rewards may be very useful when you select the appropriate card in line with your spending pattern.
- A more sensible idea: Select your card based on your lifestyle, travel, groceries, or cash back.
Myth 7: Debit Cards Offer the Same Protections
- The Reality: Charge cards usually have better travel benefits and protections against fraud and against purchases.
- Alternative Method: To make purchases online or large purchases with a credit card to have more security.
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How to Avoid Falling for Credit Card Myths
1. Become self-educated: Read reputable finance blogs (such as this one).
2. Research at an Official Source: Visit the website of your bank or credit bureau's information pages.
3. Monitor Your Outgoings: It is a myth that a book is not opened until it is closed -monitor your spending to show the truth.
4. Ask Questions: Do not assume you can trust what you hear on social media or being told by your friends.
🔰🔰 Conclusion
Knowing the myths about credit cards can save you money and be bad for your financial well-being.
It is only through knowing the truth and making educated choices that you will be able to utilize all the advantages of credit cards- without getting into the expensive traps.
Remember: "Knowledge is your best financial tool".