When it comes to credit cards, the last thing you want to do is mistake a myth for a fact. Doing so can hinder your ability to responsibly use a credit card.
Here are five common credit card myths that you should be aware of:
Myth #1: You need to carry a balance on your credit card to build credit
Many people believe that they need to carry a balance on their credit card to build credit. However, this is simply not true. Carrying a balance on your credit card could actually hurt your credit score in the long run.
The best way to build credit is to use your credit card responsibly by making your payments on time and keeping your balances low. This shows lenders that you are a responsible borrower and can be trusted with credit.
Myth #2: You should always close old credit card accounts
Another common myth is that you should always close old credit card accounts. While it may seem like a good idea to get rid of cards that you no longer use, closing old accounts can actually hurt your credit score. This is because part of your credit score is based on the length of your credit history.
When you close an old credit card account, you are shortening your credit history and potentially lowering your score.
Myth #3: Applying for credit cards will always hurt your credit score
Many people believe that applying for credit cards will always hurt their credit score. While it is true that applying for credit can have an impact on your score, it is not always negative.
If you are approved for a new credit card, it can actually help your score by increasing your available credit and lowering your credit utilization ratio. Just be sure to only apply for credit when you need it and to shop around for the best rates and terms.
Myth #4: Credit card rewards are not worth the effort
Some people believe that credit card rewards are not worth the effort, but this is simply not true. Credit card rewards can be a great way to earn cash back, points, or miles for purchases that you would be making anyway. Many credit cards offer sign-up bonuses, spending bonuses, and other perks that can make them well worth the effort. Just be sure to read the fine print and choose a card that fits your spending habits and lifestyle.
Myth #5: Credit cards are only for people with good credit
Finally, many people believe that credit cards are only for people with good credit. While it is true that some credit cards require a good credit score to qualify, there are also many credit cards available for people with less-than-perfect credit.
These cards may have higher interest rates or lower credit limits, but they can still be a valuable tool for building credit and managing your finances.
There are many credit card myths and misconceptions that can hold you back from making the most of your credit cards. By understanding these myths and learning the truth behind them, you can use your credit cards to your advantage and build a strong financial future.
So, be sure to use your credit cards responsibly, shop around for the best rates and terms, and enjoy the benefits of credit card rewards.
Have any of these myths thrown you a curve? How did you manage to exchange fiction for fact?