There’s no question that credit cards can be a powerful financial tool. But as with any tool, it’s essential to know how to use them correctly. In this article, we’re going to bust some common myths about credit cards so you can ensure your money is working for you and not against you.
Opening a credit card will hurt your credit score
Many people wonder, does opening a credit card hurt your credit? But the truth is, opening a credit card is just one way to build your credit score. If you’re new to the world of credit cards, it can be helpful to know that there are plenty of ways to boost your score without opening one. You can also check with the three major credit bureaus to see if they have any information about you in their databases before applying for a card.
It’s important to note that getting approved for a loan or renting an apartment should not be affected by having multiple lines of available credits.
“The reason that hard inquiries can lower your credit score is that a new application can represent more risk for the card issuer. The uncertainty that applying for new credit ads can be compounded if you have just a few accounts or not much in the way of credit history,” says SoFi experts.
Using your credit card to pay your bills will help build your score
Paying your bills with a credit card can indeed help build your credit score. The logic behind this is that if you use a debit card or cash to make a payment, it may not appear on your credit report. But you can use alternatives if you’re worried about paying bills and your card getting maxed out your limit. Of course, you still have to pay off those bills anyway; there’s no reason why making that happen sooner will harm your score.
You shouldn’t carry a balance from month to month
You may have heard that you shouldn’t carry a balance from month to month, but there are many benefits to doing so. The first thing to consider is how much you can afford to spend each month and then determine how much you can afford to pay back each month.
The main reason why this myth is so harmful is that it forces people into using their credit cards more than they should be and thus increases their debt.
Secured cards aren’t as good as regular cards
Secured credit cards are a great option for beginners or those with limited credit histories. You can use them to build your credit by paying off your balance on time each month and keeping your utilization low, which will help you get better terms and more options in the future. For students who want to build their credit but don’t want to deal with the hassle of getting approved for an unsecured card yet, secured cards are another excellent choice. They require little information beyond an initial deposit as collateral and typically offer easier qualification requirements than other types of credit cards.
In our modern age of credit cards, there are a lot of myths surrounding them. The key is knowing how your credit card works to use it wisely, rather than being tricked into using it in ways that are not good for your finances.