Credit Card Myths

Credit cards are everyday objects that most people use on a regular basis, and are familiar with their nature. Still, not all the information you hear about them is accurate or sensible. There are quite a few urban legends surrounding them and you may receive advice form various acquaintances that turns out to be mere fiction rather than solid fact.

Believing some of these myths can put you at a disadvantage by making you lose money or hurting your credit card rating. Fortunately, there is plenty of accessible and accurate information around that will help you stay out of trouble. Here are some of the common myths regarding credit cards and the reality behind them.

There are quite a few people who believe that you need an excellent credit score in order to obtain a card, and that those with bad or no history will automatically be turned down by the issuers. Although having a good score does represent an advantage, because it allows you to get a more favorable interest rate, even those with average or bad history can obtain one.

There are a number of solutions available even if you have just come out of a financial disaster like bankruptcy. You will probably have to pay a higher interest rate and the initial credit line may be lower, but there are products created for such cases, and all you have to do is to look for the right one. Students or young adults also have a wide range of choice at their disposal.

One of the frequent sources of worries among owners is the belief that should their card be stolen by a criminal, they will be responsible for paying all the charges. The fact is that in case of theft or fraud the rightful owner only has a limited liability, having to pay about $50, regardless of the amount of the unauthorized transactions. You should always be aware of your responsibilities in case of theft, since the companies usually require you to report the problem immediately. Many of them will not hold you liable for any of the charges provided that you take all the necessary steps.

Another myth related to thieves is the one that says you should write “Ask for ID” on the back of your card instead of signing it. Allegedly, this will prevent a thief from using it because it will remind the sales personnel to ask for identification. However, merchants are not supposed to ask for a driver’s license or ID in the first place, and they rarely check what is written on the back of the card anyway. On the other hand, a card without a signature is technically invalid, so by following this “prevention method” you may actually get yourself in trouble.

Many people are happy if they can obtain a higher credit limit, and you may think that the more you can borrow the better. In reality, a high limit may be a source of problems in some cases. Having much unused credit can be regarded as a risk factor by certain lenders, because there is always the possibility that you will use up that credit at some point and be left with a large amount of debt suddenly. It isn’t difficult to get a higher limit in case you should need it, and sometimes your company may even raise it without letting you know, but the essential is to use only about 30-50% of what is available to you at all times. Otherwise, you will be considered a repayment risk.

Some people are of the opinion that they need to get a card from all the major providers – Visa, MasterCard, Discover and American Express – just to be sure that they can buy at any merchant. This is not necessary at all, since these companies are present all over the globe, and their products are accepted almost everywhere. There is no reason why you should get a card unless you actually plan to use it on a regular basis. Having too many of them will only make it harder for you to keep track of your finances, and you can always ask whether the one you own is accepted before you make a purchase.

When it comes to closing an account, certain users will simply cut up their card and think that they can forget about it. However, the fact that you can no longer use it doesn’t mean that your account is closed. It will continue to exist until you get in touch with the issuer and tell them you want to close it. It takes a minimal amount of time and effort to get this done, because the number of the customer service department is usually printed on the back of the card, and you can get the whole thing done with one simple phone call.

Even if you have closed one of your accounts, this doesn’t mean that there won’t be any trace of it left in your life. Although some tend think the opposite, it will still show up on your credit report with the mention that it has been closed by the customer. Many of these myths surrounding credit cards will probably continue to be around for a long time since they are well rooted in the public conscience. As mentioned before, acting based on them can sometimes have negative consequences, so as a customer you should always try to stay informed and check the source of any information you hear. When you are in doubt, you can always contact your issuer or a financial advisor. They are professionals who can tell you all there is to know about the particular product you are using, and how to make the best of it.