Credit cards are a financial product. When used well credit cards can help your overall financial health. Benefits like rewards programs, price protection, and rental car deductible coverage make it worth having a credit card or two.

On the other hand, misuse of credit cards can get consumers into financial trouble. Credit cards may be a source of anxiety for you, especially if you have debt problems or have in the past.

As with many financial tools, there myths about credit cards that are commonly believed. Let’s delve into the top 3 Credit Card Myths.

Credit Card Myth #1: Carrying a balance on your credit card improves your credit score.

No. Carrying a balance forward means you will incur interest charges and it will do nothing to help your score.

The two most important components of your credit score are: on-time payments and utilization. Utilization is your statement balance as a percentage of your total available credit limit. The myth often suggests carrying a balance equal to roughly 30% of your credit line. The sound financial advice is that if you have to carry a balance forward, keep the balance below 30% of your credit line. Carrying a high balance forward can harm your score.

Credit Card Best Practice: Pay your credit card bill on-time and in-full every month.

Credit Card Myth #2: It is best to avoid credit cards and use a debit card instead.

Certainly if you are prone to over-charging using a debit card that only allows you to spend up to the amount in your bank account can be helpful. Though, this tactic is not doing anything to improve your credit score or develop credit history or payment history.

Your credit score is a reflection of your behavior when you borrowed money previously. Lenders look at your credit score as a measure of your likelihood to repay the money you borrow. Since debit cards do not involve a bank lending you money, debit cards are not considered in the calculation of your credit score.

Since credit cards involve a bank lending you money, and when used wisely credit cards can help you establish a good credit history.

Credit Card Best Practice: Use your credit card as an opportunity to build good credit history by paying your bill on-time and in-full every month.

Credit Card Myth #3: Opening a credit card will harm my credit score.

It is true that anytime you apply for a line of credit or credit card your score will decrease by a few points (roughly 5 to 10). If you have a high credit score in the 700s this slight dip is generally not an issue. The only time to be cautious of even a slight dip is if you plan to apply for a mortgage or other large loan, because the higher your score, the lower the interest rate.

If your credit score is hovering in the 600 range or lower, then it is important that you focus on improving your score so that you will be eligible for credit cards that come with the best perks.

Credit Card Best Practice: Use your new credit card responsibly to ensure the slight decrease in your credit score will recover quickly.

We hope dispelling these 3 credit card myths helps you better protect your money and your credit score!

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All of us at the Law Office of Barbara B. Braziel are here to help you end your financial struggle and gain financial freedom. We help people get out of debt by filing for bankruptcy protection. Contact us at (912) 351-9000 today to set up a free consultation.

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