Some people are so afraid of misusing credit cards that they refuse to use them altogether. Other people see their credit card as "free money" and make extravagant purchases with total abandon. Between the overcautious and the overzealous, however, there is a healthy middle ground. To use your credit card correctly (benefiting from its rewards and conveniences while also avoiding credit score damage), you will need to avoid the misinformation surrounding credit cards and credit scores. To get started, check out the common credit card myths below and learn the truths behind these misconceptions.
Common Credit Card Myths
MYTH: You should keep a balance on your credit card to build credit and improve your credit score.
FACT: You do not need to carry a balance to have a great credit score. Pay your entire balance each month to show lenders that you are responsible. In paying off your debt on time and in full, you will also avoid interest charges and financial stress. There is no benefit to carrying a balance.
MYTH: Paying with a debit card is safer than paying with a credit card.
FACT: Actually, credit cards are safer than debit cards. If someone gains access to your debit card information, they could drain your entire bank account. Credit cards, on the other hand, are more protected. Consumers are only liable for unauthorized charges of up to $50, and most credit card companies can quickly spot unusual behavior and alert threatened borrowers.
MYTH: You should always close unused credit cards that are paid off.
FACT: Canceling a credit card can hurt your credit score, especially if you've had the card a long time. Maintaining multiple credit cards generally leads to a high overall credit limit and a low utilization rate, which will improve your credit score. However, if your credit card comes with an annual fee or you have a history of abusing your credit cards, go ahead and close the account. Otherwise, simply cut up the card!
MYTH: I only need to pay the "minimum payment due" on my credit card bill each month.
FACT: Ideally, you should pay off your entire credit card balance every month. If you can't afford this, pay off as much as you can. Paying the minimum payment due will help you avoid a "missed payment," but you will still owe interest on the remaining balance, increasing your debt and lowering your credit score.
MYTH: Applying for a credit card will severely damage your credit score.
: Opening a credit card will make a tiny dent in your credit score
(about five points), but it shouldn't be a cause for concern. Having a credit card, on the other hand, can greatly improve your credit score because it shows that you can be trusted with credit. However, we don't recommend applying for dozens of credit cards at once. In addition, avoid applying for a credit card if you will soon be applying for a loan, as the dip in your credit score could increase your interest rate.
MYTH: Using a credit card is a recipe for disaster and debt.
FACT: People who believe this typically don't understand how credit cards work. Although credit cards do require responsibility, punctuality, and self-control, most adults are able to handle these requirements, and the rewards are worth it. Educate yourself before applying for a credit card, and discuss any questions or concerns you have with your credit union's financial advisors.
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If you hear one of these common credit card myths when you're out and about, don't be afraid to share your newfound wisdom! You would be surprised how many people have never learned the basics of proper credit card use.
Are you interested in applying for a credit card? You'll be pleased to hear that BluCurrent Credit Union
offers two great options: the VISA® Platinum and the VISA® Classic. The Platinum offers rewards on every purchase you make, and the Classic comes with no annual fee, no cash advance fee, and no balance fee! To learn more about our credit cards, please click here
, and to open an account, visit any of our branches
. You can also give us a call at 417-887-1983 or e-mail us at firstname.lastname@example.org for more information.