Lifestyle
7 common credit card myths debunked
A lot of us could probably use a refresher on healthy financial habits. After all, preserving your credit score should be a priority. Here are some common misconceptions when it comes to credit cards.
Myth #1: You need to pay off your whole balance to have a good credit score
Verdict: False
Your payment history is the most important factor, followed by the amount you owe. You do, however, need to pay your credit card bill on time each month, and maintain a reasonable level of utilization.
Myth #2: You should close old accounts you're not using
Verdict: False
Older accounts can increase the average length of your credit history whether you’re using them or not. Closing an account will lower the amount of credit you have available, which in turn affects your credit utilization ratio.
Myth #3: If you have too much credit available, it shows you're too risky
Verdict: False
If you have a history of overspending or mismanaging money, having access to multiple credit cards could be a slippery slope. But if you’re responsible, having a high line of credit typically means you’re keeping your credit utilization low.
Myth #4: You have to use your credit card every month
Verdict: False
It’s not mandatory but if you make small purchases on your card each month and pay your bill in full, over time these movements will help beef up your credit history and improve your score.
Myth #5: You don't rack up interest if you have a 0% APR card
Verdict: False
The 0% usually only lasts for a limited time, and if you do carry a balance beyond that period, the remaining amount will be subject to the variable APR your issuer charges, often a hefty interest rate.
Myth #6: You need to be 18 years old to have a credit card
Verdict: False
Some credit card issuers don’t impose age restrictions when it comes to adding anauthorized userto your account. But if you want to be approved for a credit card of your own, you do have to be at least 18 years old.
Myth #7: Medical debt will immediately impact your credit score
Verdict: False
Medical debt will not necessarily impact your credit score provided you have negotiated a payment plan with the medical provider and you’re making all the required payments. It can hurt you if you stop making payments and your account is sent to collections.
Bottom Line
Be an informed consumer. Make sure you read any credit card offer's fine print before you sign up so that you clearly understand the implications of the new account.