Don't get duped by these credit myths.
You probably know that your credit score can affect your life in all sorts of ways — from the interest rate on your auto loan to the type of apartment you can rent.
But among the facts about your credit, there are also a few myths lurking about. Check out our helpful guide below to see how we’ve debunked these common credit card myths and how they can impact your credit score.
Myth: Using a credit card will put you in debt.
Answer: Not if you use your credit card responsibly! To do so, you should try to pay your balance in full every month, which will help you avoid paying interest fees. Think of using your credit card like you'd use your debit card. Only spend what you can afford each month and don't spend beyond your credit limit. Doing this can help you establish and build your credit score.
If you do end up maxing out your card, we won’t charge you a penalty. However, doing this will greatly affect your utilization rate, which in turn negatively impacts your score. It’s commonly advised to keep utilization under 30% of your card’s available limit. Credit utilization is a large factor that contributes to the breakdown of your credit score and using a large portion of your available limit, may indicate to lenders that you’re overextending your spending.
Myth: You have to carry a balance to build credit
Answer: You should actually do the opposite. Your goal should be to pay off your balance in full each month. By carrying a balance, not only are you losing money to interest payments, but you’re also impacting your credit utilization.
Need some help managing your money each month? Our free budgeting tool, Money Management, can help you visualize your overall financial picture by giving you the ability to connect, share, and control all your accounts and loans in one place.
Myth: You should close a card before opening a new one
Answer: Not necessarily. Cancelling a credit card also lowers your average age of accounts, which can negatively impact your credit score.
Similarly, having multiple cards isn’t necessarily bad for your credit. It’s not so much the number of credit cards you have, but rather how you manage them. Payment history, your average age of accounts, and your credit utilization are what you should be focusing on instead.
Myth: Credit cards are for purchasing items you don’t have the money for otherwise
Answer: This isn’t the case! You shouldn’t think of your card as an extension of your budget. Emergencies happen, but as we mentioned before, you should be aiming to pay your balance in full each month. To help with unexpected expenses, creating an emergency fund can help you cover unexpected costs instead of using your card.
Myth: All credit cards have annual fees and/or foreign transaction fees
Answer: This isn’t the case for our Clearview cards! Our Platinum Mastercard® doesn’t have an annual fee. What’s even more exciting is that our Premium World® Mastercard® has no annual or foreign transaction fees! When shopping for a new card, be sure to look at the fine details to find out if there are any additional fees you need to be aware of.
Myth: You should always choose the credit card with the best rewards
Answer: Rewards are great but they aren’t everything. There are many factors to consider when determining the best card for you. Interest rates, rewards, and convenience should all be considered. Making this decision can be hard and overwhelming but we’re here to help you find the perfect credit card.
And there you have it — common credit myths debunked! Discover more articles such as how to read your credit report and much more on our blog, The Clear View.