7 Popular Credit Card Myths Disproved

"False information is more dangerous than ignorance." This is a saying that most people agree with. Nowhere is it more applicable than in the world of credit cards. The small piece of plastic that you carry in your wallet has several myths associated with it. If believed and acted upon, these may cost you dearly (both financially and with respect to credit health). In this article, we dispel some of these misconceptions so that you don’t have to suffer from their adverse consequences.

Myth No 1: Applying for a card will not impact your score unless you use the card.

Fact: When you apply for a credit card, the lender pulls your credit report to gauge your creditworthiness. This is known as a hard inquiry and may bring down your score by a few points. Frequently applying for credit cards (even those that you are not approved for) may seriously damage your credit.

Myth No 2: It’s safe to pay less than the minimum amount due as it won’t be considered as a missed payment.

Fact: You must always pay at least the minimum amount due by the due date to prevent your issuer from reporting any missed payments on your account. In fact, you should try to pay off your entire balance every month to avoid incurring interest charges and prevent debt from accumulating.

Myth No 3: You can boost your score by paying more than you owe.

Fact: While this action may increase the amount of credit available to you, the situation is nevertheless considered by most scoring models to be a temporary one. Thus, even if you have a credit balance of $1,000, the model will still consider it as zero for scoring purposes – meaning that it may not really help your score in any way.

Myth 4: You can go over your credit limit and pay it back before the due date without any adverse consequences.

Fact: Usually, if you charge a purchase to your card that pushes the balance a little over your credit limit, your issuer may allow the transaction. Nevertheless, you can be charged an over-the-limit fee and be hit by the penalty rate – even if you pay off the entire balance by the due date.

Myth 5: To establish credit history, you need to carry a balance on your card.

Fact: To build credit history, all you need to do is use your card. There is no need to carry a balance from month to month. In fact, for best results, you should make purchases with your card and then pay off the balance in full each month. This will not only keep your credit utilization ratio (a vital component of your credit score) low; it will also save you from racking up interest charges.

Myth 6: Having more than one credit card benefits your score.

Fact: What credit scoring models want to see is that you can handle various types of debt efficiently – this means that you should have a good mix of both installment and revolving loans. So, if you own multiple credit cards, but no mortgage or car loan, your credit score could suffer.

Myth 7: A high credit card limit can be disadvantageous.

Fact: This is detrimental to your score only if you use the available limit recklessly. Some individuals carelessly rack up huge balances that they can’t afford to pay off. This ultimately has a negative impact on their credit score. However, if you use your credit card responsibly for small, essential purchases and then pay off the balance each month, your score will receive a boost due to the low credit utilization ratio.

Many people use the high credit limits on their cards to tide them over a temporary liquidity crunch. This is quite safe if you pay back the amount on time. In fact, at Fund&Grow, we utilize such high limit offers by credit card companies to help clients obtain as much as $250,000 of unsecured credit at 0% interest. Available for a period of 6, 12 or 18 months, this amount can be used for anything – from financing a small business to providing a down payment on a property. If you require such funds, we can probably help you too. All you need to do is call us at (800) 996-0270, and we will take care of the rest.