Knowing the fact and fiction concerning most things in your life is important, because not knowing can end up causing a lot of problems. In the case of credit cards, being unaware of the truths versus the myths can cost you money in both the short- and long-term. More importantly, knowing the facts and disregarding the fiction can save you a great deal of money.

Separating fact from fiction can save you money

For example, knowing that you can often get an interest rate reduction or get some of the many credit card fees waived can potentially save you hundreds of dollars annually.

Another example: Even if you have excellent credit, applying for nine or ten credit cards over a few days could potentially lower your credit score whether or not you're approved or accept any offers. Being aware of this fact can both save you money and help to keep your credit report solid.

When considering credit card options, gather the facts by searching for the rates, terms, and fees associated with each offer. Create a side-by-side comparison and note the differences, similarities, and potential money saving features of each.

Taking the time to put together a thorough and honest comparison of different credit cards will allow you to complete a fair analysis of the terms offered by many different card issuers.

Credit card facts

Consider some credit card facts that might help you avoid problems and/or save you some money.

Fact: I can increase my credit score by using my credit card accounts properly.

Somem financial "experts" often advise that credit cards can only hurt your credit report, regardless of how you use them. This is bad advice. Of course, if you secure available credit above what you can realistically afford, use your credit to the maximum, and then make late monthly payments, your credit score may indeed be hurt.

But, having a few credit cards, using your credit limits wisely and conservatively, and making your payments on or before their due date, will, if nothing else, help you to build a solid credit history.

Fact: Business credit cards can deliver important benefits to many businesses.

Many people believe that business credit cards are expensive and add to the cost of running a business. In most cases, the opposite is true. Business credit cards can often save a business money in a variety of ways. For example, a company won't need a large, complex petty cash fund, constantly dispensing amounts of money for small cash expenses.

Also, the accounting department need not spend valuable time writing out monthly checks to reimburse employees for business expenses. Instead, the detailed reports that accompany corporate credit card statements provide a complete snapshot of all charges, the employee who made them, and the expense categories into which they belong.

Credit card fiction

Here are a couple of popular myths that can cause you problems and/or cost you money.

Myth: Having small business credit cards eliminates any personal liability for charges and balances.

If your business is a sole proprietorship, general partnership, or Subchapter-S corporation, you are usually asked to provide "personal guarantees" for all business credit card use. Personal guarantees mean that you have promised to be personally liable for all charges to your business credit card.

Should your business not have the funds to pay charges as agreed, you have the responsibility to use your personal bank account to make monthly payments. If you build up credit in your company name in the future, you may eventually qualify for business credit cards that do not require your personal guarantee.

Myth: Always make just the minimum required payment, even when you are able to pay more.

This myth can cost you hundreds of dollars in finance charges over time. Combine your interest rate with any applicable fees and you'll quickly be disappointed that you chose this action plan.

Since a credit card tends to be a "fluid" credit source, making only the minimum required amount each month will end up costing you much more in finance charges than is necessary. To save money, make the largest payment that you can afford each month so your finance charges remain reasonable.

Recommended resource: Credit card minimum payment calculator

These are only a few issues that can save or cost you money. Separating the fact from the fiction regarding credit cards can give you multiple money-saving benefits.

Credit card fact or fiction series:: Part I | Part II | Part III