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Saintel Daily Debunks the Top 6 Credit Card Myths

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If you’re not financially savvy, there is a good chance that you aren’t really sure what’s happening with your credit score and your credit card.  I mean, the world of finance can be extremely confusing, and if you’re not prepared, you could be paying a lot of money in fees.  This may end up hurting your credit score, so please make sure you know and understand what’s what.   In this post, I am going to dispel some of the myths associated with your credit card and spending.

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Myth #1: Writing “See ID” on the signature line on the back of your credit card will keep it safe from someone using it.

Why do this in the first place?  The idea behind this is that it will remind a salesperson to confirm that the name on the credit card matches that to the person using the card.  But the reality is, an unsigned card is technically invalid.  This is according to the agreements that card issuers have with retails.  If you do give a clerk an unsigned card or one with “See ID” written on it, the clerk is supposed to have you sign the back of the card and check the signature against your driver’s license or passport. This may trip someone up, but in the end, it doesn’t absolve you of the liability for card fraud in the end.

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Myth #2: You need one of each of the big cards — Visa, Mastercard, American Express and Discover — in your wallet because you may be stuck someplace that accepts one and not the others.

Advertising suggests that there are certain cards you can’t use with certain vendors.  Certain vendors sometimes have exclusive deals with a credit card company.  Visa and Costco used to have this kind of arrangement.  But, if you’ve got two of the big four, you’re probably in good shape.  There are millions of people who just use one card, so you might not even need two.

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Myth #3: You can give your credit score a boost by paying more than you owe.

Paying more than you owe does temporarily bump up the amount of available credit on your card.  It’s also true that using a smaller percentage of the credit available in your accounts helps your credit score.  But, regardless, if you pay $100 or $1000, it still shows a zero balance for scoring purposes. Of course, you should pay as much as you possibly can, but it’s not going to make a difference on your credit score.

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Myth #4: Using your debit card wisely can help your credit score.

I mean, the cards look alike, but they’re not credit cards.  Which is why you need a credit card in order to build your credit. Sorry – this one is pretty black and white.

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Myth #5: Keeping your balance under 30% of your total credit limit is good for your credit score.

Again, this isn’t really going to help you.  This is a good strategy, but not from a credit perspective.  Keeping a low credit utilization is good practice, but applying this 30% rule across the board to everyone doesn’t make sense.  Keeping a low balance is often better than a $0 balance, because it shows lenders that you are actively using your credit, and therefore they’re more likely to give you more.

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Myth #6: If you go over your credit limit and pay it back before the due date, you’ll be fine.

Not true at all.  A lot of people go over their credit limits, and it’s unlikely that a credit card company will decline your purchase because they don’t want to lose you as a customer.  But this isn’t a good strategy.  Every time you surpass that credit limit, even for a short period of time, you could give the card issuer a reason to boost your interest rate to penalty rate levels.  In some cases, these can be more than 30%.

In general, you want to be smart with your credit cards.  I know we have all made mistakes in our day, so it’s not the end of the world if you run into some issues here or there.  The key is to not let yourself get so far in debt that you’re unable to pay it back.  Hopefully, this will help you out in some small way.  Get in touch with a financial advisor if you’re really struggling as they may be able to help you come up with some relief strategies.

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