Everywhere you turn, there’s a new credit card offer or a new reward. Credit card companies have their ways of making everything sound so tempting! But sometimes what they’re selling us isn’t the full story. Here are ten common myths that credit card companies want you to believe—and how they might actually cost you a lot more.
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Carrying a Balance Improves Your Credit Score
You’ve probably heard that keeping a balance on your credit card is good for your credit score. But it’s not. What really matters is paying your bills on time & not maxing out your cards. Carrying a balance just means you’re handing over extra cash to the credit card company through interest. Pay the balance!
More Cards, More Credit
Many people think you need a wallet bursting with credit cards to build a strong credit history. However, managing one card well can do the same thing. It all comes down to how responsibly you use the credit available to you instead of how many cards you have. With multiple cards, you need to keep track of different payment dates, annual fees & interest rates. It’s a lot more hassle than it might be worth.
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Minimum Payments Are Your Friend
Credit card statements highlight the minimum payment because it seems like you don’t have to pay much each month. But only paying the minimum means stretching out the debt—and piling on the interest. Eventually, a small purchase becomes a years-long financial burden. You should pay more than the minimum, even just a bit, whenever you can. It’ll reduce your debt much faster.
Rewards Cards Are Always the Way to Go
Rewards cards seem rather great with all their points and cashback offers. Yet they often come with higher interest rates—and annual fees that’ll negate the rewards you’re earning. Don’t get blinded by the appeal of free flights or hotel stays. Do the math first. As long as you pay off your balance each month with minimal to no interest, then sure, rewards cards are a good deal.
You Can’t Change Your Card’s Terms
Many people think the terms of their credit card are set in stone. Not true! If you have a good track record, you may be able to negotiate a better interest rate or a higher credit limit. It never hurts to ask! After all, credit card companies don’t want to lose you to a competitor. Go ahead and pick up the phone—see what they can offer.
Online Shopping? You Need a Credit Card
Credit card companies will tell you that you should use their cards for online shopping. And while that’s true, you should remember that credit isn’t the only way. Debit cards, prepaid cards & other payment services work just fine—and without the risk of racking up debt. Using alternatives will help you stay within your budget since you can only spend what you have.
Fraud Protection Means You’re Totally Covered
Similarly, credit card companies love to tout their fraud protection yet it’s not invincible. You’re still responsible for keeping an eye on your account & reporting any suspicious transactions ASAP or you’ll be responsible for charges you didn’t make. The fine print often says you have a limited time to report unauthorized use to be fully covered. Don’t let it lull you into a false sense of security!
Closing Old Cards Is Good for Your Score
If you have an old credit card you’re thinking of closing, be careful. Closing a card may damage your credit score because it affects your credit history length & your total available credit. You might want to keep it open and use it for small purchases instead. This way, the card stays active. It might even help your credit score by showing a long history of responsible use.
Every Card Comes With Annual Fees
It’s a common belief that the best credit cards come with annual fees, even though plenty of great cards have no annual fee at all. It comes down to finding the right card for your needs—and making sure the benefits outweigh any costs. Some cards with annual fees offer valuable perks that easily justify the cost. But many fantastic no-fee options might fit your lifestyle better.
Interest Rates Are All That Matter
While it’s smart to look for a card with a low interest rate, it’s not the only thing to think about. Fees, rewards & credit limits are all important. Plus, if you pay off your balance each month, the interest rate won’t even matter—what’s more important is finding a card that works with your spending habits & financial goals. For example, you might want a high reward rate on groceries or no foreign transaction fees. Either way, keep your priorities in mind.
Disclaimer: This list is solely the author’s opinion based on research and publicly available information.
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