
After reading the Ultimate Guide to Understanding Your Credit Score, some of you decided to open a new credit card to build your credit! I have been getting a ton of questions about it. Turns out that there are still some credit card myths out there that need to be ANNIHILATED. Here are the top 5 credit card myths:
Myth #1: You have to carry a balance.
Incredibly FALSE! You DO NOT have to carry a balance on your credit card to keep it open or to build your credit. In fact, you should NEVER carry a balance on your credit. You should always pay off your full balance with EACH paycheck. Credit cards have the WORST interest rates. You do not want to rack up that interest.
Myth #2: You have to use your credit card every month.
FALSE! You only have to use your credit card ONCE A YEAR to keep it open. You could use it more often if your card offers rewards like cash back or miles, but only if you have the cash available in your budget to pay it off immediately.
Myth #3: You have to have credit to get a credit card.
Having credit and good credit is helpful when you want to open a credit card, but it is not 100% necessary. You have options, but a conventional credit card may not be one of the options available to you. Some other options are a student credit card (This was my first credit card!), a store credit card, a secured credit card, or a credit union credit card. Check the credit cards area of Credit Karma to see your approval odds.
If you have decent chances of being approved for a low credit line conventional credit card, consider applying for a Discover card using this link to receive a $50 statement credit if you are approved and make a purchase within three months! (Disclaimer: I will also receive a $50 statement credit for referring you).
Myth #4: Credit cards are the devil and ruin your credit.
YOU are in charge! Do not let your credit card control you. Your goal is to make your credit card work FOR you, not work to pay off your credit card. Credit cards can actually help you build your credit if you use them correctly. You should only use your credit card when it benefits you, like collecting reward points, cash back, or travel miles. You should only use the credit card when you already have the cash in your bank account to buy that item.
For example, if my credit card is offering 5% cash back for gas station charges, I will charge all of my gas on my credit card that month. This doesn’t mean that I will drive more than usual that month. I purchase the amount of gas that is available in my budget, immediately pay off the balance, and collect the 5% cash back as either a statement credit or an Amazon gift card to treat myself later (for FREE)!
Myth #5: Credit cards are impossible to pay off. You should cut up all of your cards.
DO NOT CUT UP YOUR CREDIT CARDS. You want to keep them open and active to help build your credit. If you have credit card debt that you are struggling to pay off, that is 100% okay. I know it seems scary and daunting, but it is manageable and it is possible to pay them off. Your first goal is to stop charging items on your card, if at all possible. Start by deleting your credit card information from Google Chrome and all of your online shopping accounts. Your second goal is to pay more than the minimum payments. Review your budgets to see if there is anywhere that you can cut back on to pay extra on your credit card. Make a payment on your credit card with EACH paycheck, no matter how small each payment is. You WILL accomplish your goal. YOU CAN DO IT!