Credit cards are still often considered to be a bad form of credit by many people, mainly because of a lack of proper information. Practices of misinformation continue to plague the financial industry and as a result, there are numerous credit card myths that still confuse consumers.
Here are 7 credit card myths debunked:
Using prepaid credit and debit cards can boost your credit score.
When using these cards, there is no reporting to the credit bureaus. So it doesn’t affect your credit score. If you use a secured credit card you may be able to boost your credit.
Not having credit cards means having a good credit score.
This may possibly be one of the most important of the 7 credit card myths debunked. Not having any credit cards doesn’t guarantee that you’ll have a high credit score. If you have a credit card and you manage it properly, this can help improve your credit score. Creditors and lenders want to see that you can manage credit cards efficiently before they may be willing to offer you credit.
A fixed interest rate can never change.
This interest rate may change as a result of a number of reasons, such as changes to your credit score or late payments.
Closing credit cards will improve your score
Having more credit available to you and not using it enhances your credit score.
Credit cards are dangerous and should be avoided
If used correctly, credit cards can be ideal for financial emergencies or for buying big ticket items. Rewards programs can also be helpful and you can build your credit score.
There is no penalty for maxing out your credit card.
By maxing out your credit card- using 100% of your available credit- you are considered a lending risk. This is likely to raise red flags with credit providers.
You lose your rewards when you cancel your credit card.
Anytime that credit card rewards are offered, they are yours to keep, even if you cancel your credit card.