Credit cards: are one of the most popular financial tools in the world, and for good reason. They offer convenience, security, and flexibility when it comes to managing your finances. However, there are still a lot of misconceptions about credit cards that can lead people astray when it comes to using them effectively. Here are 5 myths about credit cards you need to stop believing:
1. Carrying a balance will improve your credit score
This is one of the biggest misconceptions about credit cards out there. Many people believe that carrying a balance from month to month will help improve their credit score by showing lenders they’re responsible borrowers who can handle debt.
In reality, carrying a balance only leads to more interest charges and higher overall debt levels – which can actually hurt your credit score over time.
2. Closing old accounts will boost your score
If you’ve paid off an old card or simply don’t use it anymore, you might be tempted to close the account thinking it will help boost your overall credit rating.
The opposite is often true – closing an older account can actually shorten the average length of your active accounts and reduce the amount of available credit at your disposal (which impacts another key component of calculating scores).
3. Rewards points aren’t worth pursuing
Rewards programs have become increasingly common with many card issuers offering incentives such as cashback bonuses and travel rewards for spending on their products.
Some people believe these programs aren’t worth pursuing because they require too much effort or attention but if used properly they could result in significant savings or perks such as free flights etc.
4.You need perfect scores to get approved
Many people believe that a perfect score is required to be approved for a credit card – but that’s simply not true. Credit cards are available for people with all kinds of credit backgrounds, even those who have had financial struggles in the past.
5. Paying bills on time is enough to keep your score high
Paying your bills on time is crucial when it comes to maintaining good credit, but it’s not the only factor at play.
Your credit utilization ratio – or the amount of available credit you’re using at any given time – also plays a significant role in determining your overall rating. Keeping balances low and utilization rates under 30% can actually help boost your score over time.
In Conclusion
Credit cards are powerful financial tools that can help you build and maintain good credit over time, but they do require careful management and attention if you want to use them effectively.
By understanding these common myths about using them such as carrying a balance will improve my scores or closing old accounts will boost my scores etc, You’ll be better equipped than ever before when it comes to making smart decisions around how best utilize this essential tool!
