Credit cards can be complicated financial tools – tools that many people admittedly don't completely understand. This is partially because we don't take the time to learn and also because there is a lot of bad information floating around online.
Here are five common credit card myths that can be avoided completely.
Applying for a New Credit Card Will Hurt My Credit
One of the biggest misconceptions people have about credit cards is that they will hurt your credit score. The exact opposite is actually true. When you first apply for a new card, there will be a hard inquiry on your account, just to make sure the credit card issuer feels like you are a good candidate for their card. This ends up dropping your score a few points, but the decrease is actually short lived. With the new card you will eventually increase your average length of credit, and you will also increase your total available debt. This helps to decrease your debt-to-income ratio, which can help boost your credit score significantly.
Writing "See ID" Will Stop Credit Card Theft and Release You from Liability
While a lot of people might think that it's actually safer to write "See ID" on their credit card, it's actually not. In reality, not signing your credit card before you use it actually makes it invalid. On top of that, how many cashiers actually look at the signature, much less ask to see your ID? Not many, most likely.
Credit Cards Only Lead People into Debt
In a way, this could be thought of as being true. Many people do end up in debt because of their credit card usage. However, if cards are used responsibly, then they are actually more of a benefit than a liability. Credit cards can help you build credit, which will help you receive other loans for things like a new car and even a mortgage.
My Income Isn't High Enough for a Credit Card
This is a statement that is talked about way too much. Having a limited income will almost never restrict anyone from being approved for a credit card. You might not receive a very high credit line, but you will almost always be approved as long as your credit score justifies it.
Going Over Your Credit Limit Is Acceptable if You Pay it Back Right Away
We all have unplanned expenses that pop up occasionally. It could be an emergency trip to the animal hospital or it could be a new roof on the house. If you don't have a large enough emergency fund set up, then you are most likely going to need to rely on credit.
If your purchase happens to put your over your credit limit slightly, there is a good chance your credit card company will still approve the charge. What you need to watch out for is that they then have the right to increase the interest rate on your card to a penalty rate. Even if you pay off your purchase right away, you might still have an issue.
Always make sure you stay within your credit limit and you will avoid any potential problems.
The Bottom Line
Everywhere you turn, someone is going to have an opinion about credit card usage. While some things might be true, others are far fetched. These were five of the most common credit card myths that you should be aware of.