More than merely an annoyance, credit card myths can create actual problems in the future if you mistakenly believe they are fact. By taking action based on a credit card fiction, you may end up selecting the wrong credit card for you or not selecting what may be the best card for your situation.
In the end, the inability to separate fact from fiction can lead to bad decisions regarding your credit and possible larger amounts of debt.
Why it is important to separate fact from fiction about credit cards
For example, if you have less-than-perfect credit you might believe that you are ineligible for any type of credit card. You decide to not even see if any choices are available.
By taking this action based on the myth that you are ineligible for any type of card - as there are some credit card choices for those with bad credit - you could miss valuable opportunities. You could miss opportunity to bolster your credit score by establishing a healthy account and you could also lose the ability to have access to some credit when you need it most.
Therefore, try to be sure you make credit card decisions based on fact and reality, not merely on some things you have read or heard in the past. The odds are that some of the information you have seen and/or heard is based on myth, not fact.
Credit card facts
Consider some credit card facts that might help you make better decisions and have a more rewarding experience with your available credit.
Fact: If you'd like to have a lower annual percentage rate (APR), ask for it.
Unlike a home mortgage loan that specifies a fixed or adjustable rate with a variety of carved-in-stone conditions, credit card APRs are based on your lender's decision alone. That said, credit card APRs may be modified if both parties agree.
It is important to remember that both you and your credit card company must agree to modify any terms in your credit card agreement. But lowering your APR is not as difficult as you might think. If you have a good payment history, just e-mail or call your card company and ask for a reduced APR. They will simply either agree to or deny your request.
Fact: If you have bad credit, it will be more difficult to receive a high credit limit.
While this is a fact, there is some good news: If you understand this reality and request a modest initial credit limit ($500 or less), you may be able to work your way up to higher limits in the future.
For example, after you receive a low-limit credit card, charge some items and make your payments on or before their due date. After about six months of making all payments as agreed, ask your credit card company to increase your limit – no, not right to $20,000 – to a few hundred dollars higher. If they agree, follow the same process in the future.
Credit card fiction
The fiction will typically hurt you more than the fact. You should always learn about the myths and ignore them. There is often a corresponding fact that you can use to your advantage. Consider these items.
Myth: It's a good idea to apply for many credit cards at the same time.
Applying for ten or eleven credit cards at once, regardless of the strength of your credit score, is a terrible idea. Every time you apply for credit, the prospective lender will access your credit report. This generates a "credit inquiry" that is recorded in your file. More than a few inquiries in a relatively short period can potentially affect your credit score in a negative fashion.
It doesn't matter whether or not you are approved for the credit you've requested, prospective lenders can quickly become concerned about your account. Be conservative and only apply for the credit card that you really want.
Myth: It is impossible to avoid the many fees charged by credit cards.
You will often read some credit card agreements and become overwhelmed by the number and size of potential fees the card company may charge. Moreover, should you do nothing, you may be subject to some or all of these fees. However, these charges, often called "junk fees", can be negotiated or waived if you incur them in the future.
Some charges, like the infamous "annual fee," need never be agreed to. Look for credit cards that offer no annual fee and eliminate those with this charge. In addition, other charges and fees, like late fees, can often be waived if you call and ask.
Credit card fact or fiction series: Part I | Part II | Part III | Part IV
