Misconceptions About The Credit Card

Written by imoney

Credit card misconceptions abound so it’s important to get your credit card facts straight. Knowing (and side-stepping) these misconceptions should help you better navigate credit card usage. Knowledge is power!

As long as you pay any amount before the due date, you’re in the clear

Not in all cases. You will need to at least pay the minimum payment stated in your outstanding credit card bill for you to be considered up-to-date with payments. Paying less than the minimum would mean you technically “missed” your payment. The outcome: a negative effect on your credit score, higher interest charges, and penalties.

You must carry a balance in your card to build your credit history

There’s truth to this but let us clarify this further. The first thing to do to start building your credit history is to begin using your card. Yet, it doesn’t end there since you will need to pay on time, better if in full, in order to maintain a sound credit record. Your ultimate objective is to keep your outstanding debt at the end of every month low and to settle your bills before they are due.

Having a high credit card limit is bad for your credit score

There’s really nothing wrong with having a high credit limit. As long as you are fully aware of your spending and are able to pay your bills on time before they the due date you are well on your way to maintaining a sound credit standing. Holding a high credit limit, and a low outstanding balance can help build a good credit score

Having many credit cards = Better!

This is categorically false, as banks generally get nervous about consumers who hold too many credit cards. While you have more available credit, the tendency is also to spend more when you hold many credit cards simultaneously.

Like this article? Perhaps you might like this article about improving your credit rating.