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How the average person can save money quickly and easily

Why We Debunked 7 Credit Card Myths

 

There are tons of credit card myths floating around, we deal with 7 of the worst offenders.  Credit cards are like many other financial instruments in today’s world—what you don’t know about them will hurt you. To make matters worse, a lot

credit card myths

credit card myths

of the things you probably believe about the plastic in your wallet are dead wrong.

To help you get a handle on your debt and use your cards properly, we will try to debunk some of the most popular myths out there. Understanding why these popular ideas are myths can give you more control over your finances.

 

The Big Credit Card Myths and Why They Are Myths

  1. Credit card rewards are always a good deal. Reward points that you will not or cannot use, such as airline rewards for a person who rarely flies, are a waste of time. Cards that force you to go out of your way to accrue points can actually cost you money. Nor is cash back always a good deal; if the amount of cash back is below your interest payment, you’re losing money. Many rewards points and programs are not a good deal making this one of the big credit card myths.
  1. Canceling your credit cards can help your credit score. Running up less debt, paying on time, and paying off your balance can help your credit score. Canceling the account might have no effect or, worse, reduce the amount of credit available. Some credit card providers use something called the credit utilization ratio (the amount of credit you use) to decide what to offer you. Those with a low utilization ratio often get fewer offers.
  1. You can damage your credit score by applying for new cards. Not true; new card applications create a hard application, which causes a temporary drop in your score. That drop usually disappears after a few months. Applying for too many cards at once can cause your score to drop significantly in a short period time. Something to remember is to not apply for new cards if you’re thinking of taking on a big debt such as a car loan or a mortgage.
  1. Having too many credit cards hurts my credit score. Having more credit cards might actually help your credit score by raising your credit utilization rate. A new account can generate more credit history, which can help your score if it is positive.
  1. You will lose your rewards when you transfer a balance. Some credit card companies will transfer rewards if you ask. Others, like American Express, allow you to keep the rewards as long as you have another card with that company, so this is one of the credit card myths, really worth remembering.
  1. It is always better to pay with cash, check, or debit card than credit card. There are many times when paying with a credit card makes sense. This includes online transactions, overseas transactions, and those at retail stores. If there is a high risk of fraud (such as online), use a credit card because you can challenge any suspicious transaction and get it removed. Using credit cards can also help you build up your credit history and rating and accumulate rewards points. If you pay off the balance, you won’t accumulate a lot of debt.

    credit card myths

    credit card myths

  1. Balance transfers can save me money. This is not necessarily true, because many credit card companies will match other companies’ offers to keep your business. Before you transfer the balance, call your current company and ask if they can match the offer. You might be able to get the same deal without taking on a new card.

 

These are just a few of the credit myths out there. Unfortunately, there are many more, and they are widely believed. What you think can hurt you when it is wrong.

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