5 Credit Card Myths You Need to Stop Believing

credit card myths

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There are a lot of credit card myths that hurt my ears when I hear them. As someone who loves credit cards, I find it frustrating when people ruin their credit because of false assumptions. That’s why I’ll be sharing with you 5 credit card myths you need to stop believing if you want to improve your credit.

Many Americans think they have a good grasp on credit cards, but I’m sure you’ve fallen into the trap of at least one of these myths. Read each one carefully and discover the truth behind every lie you’ve been told.

1. Having a lot of credit cards is bad

If a person has 10 or more credit cards, most people would assume it’s because they’re bad with money, but this is usually not the case. Having a lot of credit cards is only bad for people who can’t manage their money properly. I’m not saying you need 10+ credit cards, but people with that many cards have them for rewards and they’re usually very organized with their money to ensure they profit off of their churning system.

Another misconception about having a lot of credit cards is that it’s bad for your credit. This is also not true. In fact, having more credit cards with more money available to you while keeping the same spending will allow you to keep your credit utilization lower and raise your credit score as a result. As long as you don’t get too many hard inquiries, your score won’t suffer because of the large number of cards.

2. You need to carry a balance to build credit

I don’t know why this myth exists, but it’s completely false. Even people that are good with money fall victim to this credit card myth. Carrying a balance will increase your credit utilization and lower your score. Paying off your credit card balance in full is the best thing you can do for your credit score and the best way to use your cards.

More debt is never good for your credit so do not intentionally take on debt to raise your credit score. It’s not going to help you and it’s definitely not worth the interest payments.

3. You can afford the minimums, so you can afford the purchase

A good credit card rule to follow is to always pay your balance off in full. This is because if you are managing your money properly, you should have the funds to pay off all of the purchases you made that month.

When it comes to credit cards, a lot of people fall into the trap of overspending because it’s not their money. My advice is to treat your credit card like a debit card. If you don’t have the money in your checking account at the moment of purchasing, then don’t buy it because you don’t have it. Wait until your next payday to make the purchase just like you would if it were a debit card.

There is no excuse for carrying a balance other than poor money management skills. Christmas, anniversaries, and birthdays happen at the same time every year. You need to save money for those gifts and celebrations throughout the year to avoid unnecessary debt. The only time you pay the minimum is when there’s a big emergency such as a job loss, divorce, or a medical emergency.

Not only is it important to pay your bill every month in full, but you also need to pay it earlier than the due date. This is to avoid being charged interest after paying the full statement balance.

This is called residual interest and it happens when you’re charged for the balance you carried between the due date and the date your payment was received. That’s why you need to pay off your credit card balance 2 days before the bill is due. You can call your bank and move the due date for your bill if you need to. Make sure to set up automatic payments as well.

4. You should cancel cards you don’t use

A lot of people cancel cards they don’t use because they think it makes sense. Why keep a card if it’s no longer useful? However, canceling cards lowers your score because it shortens your average age of credit.

To avoid this common credit card mistake, make sure the cards you get make sense to keep for life. If they have no annual fee, then you don’t have a reason to get rid of them. Just put your Netflix bill on it or use it to buy yourself a 20 cent banana once a month to keep it active.

If there is an annual fee on the card, then make sure there is no annual fee downgrade path before you get it. This is just in case you decide you don’t like the card or if you only wanted it for the signup bonus.

Canceling credit cards is the worst thing you can do for your score besides missing a payment. Never get a new credit card just for the signup bonus or a discount. You’ll be crushed when you see the fees on a lot of the store credit cards and bad bank cards.

5. High credit limit is bad

Many people believe the credit card myth that a high credit limit is bad because that’s more debt. However, a higher credit limit does not mean more debt, it just means you have access to more debt. A higher credit limit is better for your credit score because, if you keep your spending habits the same, it’ll lower your credit utilization. 

These are some of the most popular credit card myths people believe and as a result, hurt their credit. If you want to be good with money, stop following what other people say and learn for yourself. Here’s a list of 10 things that lower your credit score to help you get started. Do the research so you won’t fall victim to any more myths or false assumptions.

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credit card myths

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