Sunday, 17 May 2020

6 Credit Card Myths You Need To Stop Believing


In today's article, we're going to talk about five credit card myths that you need to stop believing. I do agree that credit cards can be a complex subject there are two sides to this, there are people who look at credit cards as a form of debt, credit cards are like a something awful for you. And then there is another group of people, people that use credit cards to travel the world for free, that use the credit card rewards, the bonuses, the statuses, the benefits, and use that to their advantage.



Myth 1: You Need To Carry A Balance To Build Credit

A lot of people tend to believe that you need to carry some type of balance to have a good credit score, we're going to start out with this myth in particular just because it's the exact opposite of what you should be doing with credit cards. First of all, you don't need to carry a balance on your credit cards all you have to do is pay it off in full and the exact opposite will happen, your credit score will go up and you will benefit from having credit cards. One thing to note, you do want to make sure you use your credit cards actively if you have 20 credit cards and you don't use those 20 credit cards at all within a couple years chances are they will shut down those credit cards and it can negatively impact your credit scores. so yes, use your credit card, just don't carry a balance you don't need a balance to build your credit score.

You want to build credit all you have to simply do is put a charge on that credit card, set up automatic payments, you're good. Just make sure there's some money in the bank to pay that amount. 


Myth 2: You Should Cancel Your Credit Card If You Are Not Using It

This is actually happening to a lot of people I know in real life and I'm not sure exactly why this myth started, I think people assume that if you're not using a credit card you should close it. I guess it does make sense though because if I'm not using my Netflix account I'm going to cancel that, if I'm not using Hulu I'm going to cancel that, if I'm not using some type of service or an app on my phone then I'm probably going to cancel that, the one thing you should not cancel though is credit cards especially if it has no annual fee. 

Holding a credit card isn't doing anything bad for you, it's actually doing the opposite of that it's helping you. If you have a credit card say at the age of 18, you're at Victoria's Secret for whatever reason and you open a credit card there, say you're 26 now and you decide to cancel that first credit card that you open, you may see a significant impact on your score that tanks your credit score because if you cancel that credit card what ends up happening is you lose that history with that credit card. It's better to keep a credit card open because it's going to have that account history that's going to improve your credit score.


Myth 3. Having Multiple Credit Cards Is Bad For Your Credit Score

You do not have a lot of debt if you have a lot of credit cards. In reality, having a lot of credit cards can actually help your score because if you have a lot of credit cards it means you have a higher credit limit if you have a $1,000 credit limit and then you have like ten of those cards you will have a higher credit limit so if you end up carrying a balance for whatever reason that utilization on your credit card isn't going to be that significant because you have so many credit cards with so many different lines of credit. There is an argument that having multiple credit cards can also be bad for you because you get a lot of hard inquiries or hard pulls on your account,

Whenever you log in to Credit Karma or you go into any other credit score checking app it's going to say oh, hard inquiries are so bad for you this is why your score is in the 720 and it's bad for you. That's not why it's bad, hard inquiries reduce your score yes temporarily, but listen, in the long term run these hard polls aren't going to do anything bad for you. Having hard polls is not the reason why your credit score is the way it is, all you have to do is pay off your card on time and you're going to see your score slowly increase. 


Myth 4. Hard Inquiries/Pulls Are Bad For You And Will Ruin Your Credit Score

Don't worry about it it's nothing significant, yes, you're going to get an email that says, Oh, a TransUnion pulled your score and we saw a slight decrease in your score or oh, your score went down by a couple points. A couple points aren't going to kill you, the only time when I say that's going to be significant is maybe when you're applying for a mortgage or you're about to buy a new house where every little interest rate or every little percentage is going to make a difference to you and if that credit score goes down your interest rate goes up maybe that's when it's going to affect you quite a bit and that's when I don't recommend a lot of people to apply for credit cards.

But if you're someone that's just getting into the credit card game, go ahead and apply for it but also keep in mind, there are other rules like the 5:24 rule or there are other credit card rules out there, but the thing you should not be worrying about is hard pull that decreases your score temporarily. 


Myth 5. Missing A Payment Will Affect Your Credit Score Immediately And You Will Forever Be Sad

If you miss a payment on your credit card your credit score isn't going to get affected right away or it might not ever even get affected and here's how it works. Your credit card issuers report to the credit card bureaus about every 29 to 30 days. The codes for past due accounts usually start after that 30-day late period mark, if you're someone who hasn't had a late payment for more than 30 days, chances are it's not going to report to your credit score and there have been multiple times for me where I forgot to set up automatic payments and I got dinged with a fee, those fees you can get waived if it's your first offense. I usually just chat them up and they're more than willing to actually get that reimburse for me.


Myth 6. Credit Card Terms & Conditions Are Non-negotiable

People think credit card terms are non-negotiable and this is actually far from the truth if you someone who has an interest if you're someone who has debt and you want to work out some type of deal and say hey, could you reduce my interest rate just a little bit or hey, this annual fee on my American Express gold card is $250 and it's a lot. You can negotiate all of that they can reduce that. Nothing is set in stone with these credit card issuers I know you can get a piece of paper and it'll state all these things but you can work out these type of deals nothing is set in stone, so the worst-case scenario, if you ask for something if you try to work out a deal, is if they say no and that's the worst-case scenario there's nothing to that, if you have been rejected anytime before in the streets, then you will know that is easy, that's something you can probably take.





Conclusion

Don't believe everything you hear from the outside world don't believe that credit cards are evil don't believe that there are all these myths that aren't true, do the research for yourself I thought a lot of these things were true just because growing up for me I realized how evil credit cards were supposed to be but after doing just a little bit of research you realize like, some of these things are ridiculous and how these actual false myths and things came about it blows my mind. So make sure you do your research and just have an opinion for yourself

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