Inaccurate knowledge of a subject is rather harmful and it is regardlessly true in terms of credit cards. More than 50% of Americans are unaware of the common misconceptions about credit cards. They might feel they have it all under control and one little mistake and they are left with regretful financial decisions. Proper understanding is must in order to avoid any unwanted circumstances such as debts or no rewards. There are many terms that are misleading to the customers and in order to receive potential health benefits, you need to understand all the facts first.
Certain common misconceptions about credit cards are:
1. One should only have one credit card at a time
There is nothing wrong with having more than one credit card at a time if you know how to manage your expenses and debts efficiently. Having only one credit card is only recommendable when you are dealing with it for the first time. After you get a hold of how to manage the bills and stay at the top of your payments, multiple cards can actually be benefitting in terms of different rewards and other benefits.
2. More credit score for discarding old credit cards
This is a serious misconception everyone needs to take off their list. People are usually under the impression that their credit score will improve by discarding the old credit cards through the opposite of the fact is rather true. Closing the old credit cards before the expiration generally harms your score as the average length of your credit is an important FICO score decider and if you were managing the cards well then closing the old ones usually means low credit limit for you which can be disastrous in terms of temptations.
3. A new credit card harms your credit score
This is one of the most common misconceptions about credit cards that should be addressed by plenty. After you request for a new credit card, the bank usually pulls your credit history or credit score and some of the way pills do not harm it anyhow. Buty if there are multiple credits pulls from time to time, the credit score will actually defer as the bank will know that you are facing financial problems but if you are in no debt whatsoever, getting a new credit card won’t affect the score and will otherwise improve it as you will have lower utilization ratio.
4. Exceeding the credit limit is not harmful
This is one of the biggest mistakes you any credit card holder can easily ignore. You are under the impression that if the banks have forgiven you for exceeding the limit once, they will continue to do so. While this is not the case. It is one of the easiest ways for a bank to make business and exceed your credit limit which will further increase your interest rate.
5. Debt is good for increasing credit score
This misconception is responsible for causing you more money and debts which are not so easy to ignore. Carrying a debt will neither improve your credit score and nor will it pay for itself. You have to pay the necessary amount every month if you wish to ignore extra charges and debts. This is one of the most Common Misconceptions about Credit Cards that are actually getting you into a loss instead of offering benefits.
Do check out our blog post on Best Places in America to Deposit Your Cash.