Five Myths about Credit Cards

November 26, 2020

A good credit score can help you do more than be approved for a credit card, auto loan, or mortgage. Credit scores demonstrate your bill and debt paying history to those who provide services or loan you money. Learn more about credit scores and five myths about credit cards.
A credit score is a three-digit number lenders use to determine the likelihood of you paying back borrowed funds. It can be requested by landlords, lenders, utility providers, and even employers. Anytime you need apply for financing or set up services, your credit may be checked.
One way consumers begin to establish credit is with credit cards. While responsibly using credit cards is a great way to build credit, there is a lot of misinformation about them. Here are a few credit card myths we want to debunk. 
Myth #1: You don’t need credit cards
Using a debit card may seem easier to manage than a credit card, but someday you may want to purchase larger items that you will need credit for, like a house. Using credit cards responsibly is a good way to start and build credit. Also, unlike most debit cards, credit cards have fraud protection, so you are not responsible for charges you did not make. If your credit card is lost or stolen, you are protected by zero dollar fraud liability. 
Myth #2: You need to carry a balance to build credit
You do not have to carry a balance on your credit card to build credit. If you make your payments on time, and keep your loans up-to-date, you can build credit without carrying a balance. 
Myth #3: Reward-based credit cards are not worth it
If you pay off your balance each month, you can use reward credit cards to your advantage by earning cash back on everyday items. Be aware that many cards charge an annual fee, so make sure you can benefit enough from the rewards. 
Myth #4: If you aren’t using a credit card, close it
Even if you have paid off a credit card and you are no longer using it, keep it open, along as it does not have an annual fee. Because part of your credit score is based on how much credit you currently have and the length of your credit history, keeping even unused cards open can help your score.
Myth #5: You can’t have too many credit cards 
Each time you apply for a credit card, you receive a “hard inquiry” on your credit report. Every hard inquiry can impact your credit score negatively, but you can recover these points by paying your bills on time each month. It’s a good idea to only apply for cards you will use or that will benefit you, have a low or no annual fees, and low interest rates.
Good credit helps make your financial life easier. And it will help you save money when you qualify for more favorable loan rates. Keep up responsible credit card management and paying your bills on time, and you will be able to build and maintain a good credit score.

Tags: Credit Cards, Learn About Credit, Money Management