There’s a lot of misinformation out there. We help you find the truth.
Financial help is everywhere. Whether it’s from a family member or a random person on an Internet forum, you can find endless advice on what you should do with your money.
Unfortunately, a lot of it is flat-out wrong.
Credit cards in particular attract a lot of home-baked advice, as they’re easily accessible. If you’ve received a few tips recently, do your research: The truth may be different than you expect.
Here are 10 myths that are especially prevalent in the industry — and why they’re simply not true.
Why trust us?
Finder.com launched in the US in the fall of 2015 with a mission to help consumers make better decisions. Whether finding a credit card, buying a home or getting life insurance, our goal is to help you navigate those complex decisions by bringing you an objective analysis and accuracy in the reviews and content we publish. Our commitment to producing independent, objective, fair, thoughtful, accurate and original content is what differentiates us from our competitors. Sponsors, advertisers and partners do not approve our content or editorial direction.
Myth #1: You must pay an annual fee to get a credit card.
One reason many people stay away from credit cards is because they’re worried about paying an annual fee. That’s too bad, because you can find many credit cards with no annual fees. Several of them offer great perks rivaling those of annual-fee cards.
Look at the Bank of America® Travel Rewards credit card, for example, which offers 1.5 points per dollar you spend on all purchases. It’s one of the best travel cards on the market, and it’ll cost you nothing.
If you’re looking for great cash back, check out the Citi Citi® Double Cash Card. It offers 1% cash back when you make purchases and 1% cash back when you pay off your card
. Like the Bank of America® Travel Rewards credit card, getting it will set you back exactly $0.
Even if your credit card does have an annual fee, your credit card company might waive it if you ask. Call your provider when you see the charge on your monthly credit card statement and ask them to remove the fee. Some providers want to make sure you’re happy and won’t switch to another card, so customer support could waive this fee if you ask or threaten to cancel. Not every company will do this, but it could be worth a shot.
Myth #2: It’s never a good idea to get a secured or store card.
Secured and store cards get a bad rap because they’re different from “standard” — or unsecured — credit cards.
To get a secured credit card, you must put down a security deposit. This serves as collateral in case you fall behind on your payments. And typically, a store card can only be used with the company that issues it. For example, you can only use the Target REDcard™ Credit Card for Target purchases.
So a secured card forces you to lock up a chunk of money right away. And a store card lets you shop only at a certain store. Why get either of them?
Here’s a big reason:
Because they can help you build credit. To get an unsecured card, you typically must have at least a good credit score. On the flipside, issuers of secured and store cards are more willing to take on customers with less-than-perfect credit.
Once you get a store or secured card, you can slowly build your credit by making payments on time. Once you’ve increased your credit score, apply for an unsecured card.
Compare secured credit cards
Myth #3: I got a credit card when I was 17, so my teen can too.
That’s not entirely inaccurate, but it’s not the whole truth. By current credit card laws, the minimum age to get a credit card without help is 18. Even then, those under 21 must prove their ability to pay their card bill independently.
It’s still possible for underage teens to get a credit card, but not on their own. The only way is for you to add them to your account as an authorized user.
For more help, check out our “under 21” guide to credit cards.
Myth #4: Forget about American Express — you can’t use it anywhere.
Back in the day, you might have seen plenty of signs that read, “Sorry, we don’t accept American Express.” There’s a long story for why that was the case, but it essentially boils down to American Express charging retailers high fees.
Though it’s true that fewer retailers accept American Express than Visa or Mastercard — the most widely accepted networks in the world — American Express has been gaining ground. Nowadays, if a retailer accepts Visa or Mastercard, they’ll probably accept American Express as well.
That said, Visa and Mastercard are still the most accepted networks by far. Keep one on hand just in case your American Express isn’t accepted.
Myth #5: You should carry a balance on your card and only pay the minimum.
Many people give this advice claiming it’ll help your credit. In reality, carrying a balance doesn’t help your credit score. Not paying your balance in full actually lowers your score because it increases your credit utilization ratio.
One argument for keeping a balance on your card is to show lenders you’re using your credit. You should certainly keep your credit card active, but that doesn’t mean you have to maintain a balance. Just use your credit card at least every one to three months.
If you keep a balance on your credit card, it’s usually a bad idea to make only the minimum payment each month. This puts you in danger of ballooning interest payments. Find out how credit card interest works here.
Overall, it’s best to keep your balances low relative to your total credit. Most experts recommend you keep your credit utilization ratio under 30%. And if you can pay your balance in full each month, even better.
Myth #6: Never use your credit card online.
You may think using your credit card online isn’t safe because your information could be stolen. The truth is, it can be very safe to shop online with a card as long as you follow a few precautions.
In fact, it’s better to use your credit card than your debit card for online shopping. If there are fraudulent purchases on your credit card, you can easily reverse them by contacting your card issuer. It’s more difficult to do so with a debit card.
When you shop online, look at your browser’s address bar and check for the “https://” at the beginning of the web address. This means the website encrypts your information — an important feature when you’re sending financial data.
Additionally, shop only on your personal computer on a private Internet connection. You have no idea who might access your information on a public computer, and hackers can intercept your data on a public Wi-Fi connection.
If you have a Visa card, its free program, Verified By Visa (VBV), adds another layer of protection when you shop online. It uses passwords to prove your identity every time you use your card online.
How credit card security works
Myth #7: Don’t sign the back of your credit card.
Some people will tell you to avoid signing the back of your credit card. They might tell you to write “See ID” in the place where your signature should be.
The idea is if a thief steals your card and uses it at a cash register, the merchant will ask for their ID. Seeing that the thief doesn’t have a matching ID, the merchant will refuse to process the transaction.
That sounds great in theory, but oftentimes merchants don’t look at the backs of cards. Furthermore, low-dollar transactions may not require a signature at all.
Your best bet is to sign your card. Signing the back of your card keeps a thief from signing their own name in a blank signature box. And technically, your signature is what seals your contract with your credit card company, giving you the right to use the card and qualifying you for certain consumer protections.
Myth #8: You can build a perfect credit score very quickly.
Getting a credit card isn’t a magic elixir for your credit score. It’s highly unlikely your score will shoot up 100 points just because you were approved for a card.
Yes, it’s true that a credit card can help you build credit. But this takes time — usually a long time. You build credit by making on-time payments consistently.
You might hear stories from people who get a great credit score in as little as a month. But their experience isn’t necessarily going to be yours, and there’s no hack or quick fix.
The perfect credit score is 850, and it’s not easy to achieve. You must have been working with credit for many years through credit cards, loans and other forms of credit, have no late payments and carry almost a zero balance on your cards.
What’s a good credit score?
The implication is clear: If you have an 850 score, you’ve been responsible with credit for a very long time.
Myth #9: You’ll always have the same APR from when you signed up for your card.
You may be excited to see your initial APR when you get your card. But be careful: It might not last forever.
Many people forget about the introductory APR, which is a special interest rate you get when you sign up for a card. If a card offers “0% APR on purchases for 12 months,” you won’t pay interest for a year. But if you still carry a balance after that time, you’ll start paying interest.
What is intro APR?
Beyond intro APRs, card issuers have other ways to change your interest rate. Here are the ways they can do so:
- You’re late on your payments. If you’re delinquent on your bill, your issuer may assess a penalty APR — typically around 30%. This interest rate could apply to your existing and new balances.
- Your APR is pegged to the prime rate. Your issuer will probably give you a variable interest rate that changes based on the prime rate. This is the interest rate banks give to their largest, most creditworthy clients. Unfortunately, this is pretty much out of your hands.
- The issuer deems you a higher-risk member. From time to time, your issuer assesses your risk profile. If it sees red flags — such as a big drop in your credit score — it may raise your APR. Before it does, however, it must notify you at least 45 days in advance.
- You’ve been a cardholder for at least 12 months and your issuer wants to raise your rates. As long as your issuer gives you at least 45 days’ notice, it can change your APR.
The Credit CARD Act of 2009 introduced many changes that protected consumers in the credit card industry. One of them is the requirement of a 45-day advance notice for most APR changes.
The Credit CARD Act of 2009
Myth #10: You can exceed your credit limit as long as you pay your balance before your due date.
Ditch this advice fast. Though your card issuer may not decline a purchase that puts you above your credit limit, that doesn’t mean you should make it.
Earlier, we talked about how your issuer can assess a penalty APR if you pay late. It can do the same thing if you exceed your credit limit. Furthermore, it may assess an overlimit fee, which will typically set you back $25 to $40.
Lastly, going over your credit limit could negatively impact your credit score. It’s never good when you exceed 100% credit utilization on one card.
Compare credit cards
Before following any credit advice, do your research and find out if it’s too good to be true.
Try to stay within your credit limit and watch out for fees, card theft, APR changes and other slowdowns on your way to excellent credit. You don’t want to pay for a costly credit mistake for years after following questionable advice.