10 Things Most Americans Don’t Know About Credit Cards
10 Things Most Americans Don’t Know About Credit Cards
John Csiszar Fri, May 12, 2023
Credit cards are so convenient that they are part of daily life for many Americans. Given that fact, it's perhaps surprising that there are so many common misconceptions about credit cards floating around.
Seeing as your credit score and how you manage your credit can affect so many areas of your life, from applying for a car loan or a home mortgage to qualifying for an apartment, it's important to know the facts about credit cards. Here's a look at 10 common misconceptions about credit cards and the truths behind each myth.
Your Credit Report Shows as Debt-Free If You Pay Your Balance in Full Every Month
Paying your entire credit card statement in full every month is a sound financial strategy. However, if you want to appear debt-free to lenders, you'll have to alter the timing of your payments.
Every month when you get a credit card statement, your creditor reports that balance to the credit reporting agencies. Even if you pay the balance in full after getting your statement, according to your credit report, you're still carrying that balance. To appear debt-free to your creditors, you'll need to pay off that balance in full before your statement closing date.
Applying For a Store-Branded Credit Card Won't Hurt Your Score
There's a common misconception that opening store-branded credit cards is not the same as opening a general credit card from an issuer like Chase Bank. Since these types of cards can typically only be used at the store where they're issued, many consumers mistakenly believe that they are "private issue" credit cards or somehow don't end up in the traditional credit reporting universe. The truth is that store credit cards are issued by banks as well, and they are reported to the credit agencies just like any other type of credit card.
Closing Unused Accounts Raises My Credit Score
From a financial planning standpoint, it's true that you shouldn't have more credit cards than you need. However, if you go about canceling your unused credit cards, you might end up paying a price when it comes to your credit score, in two ways. First, a big part of your credit score comes from your credit utilization or the percentage that you're using of your entire amount of available credit.
If you carry a balance on some cards and cancel your other ones, your credit utilization percentage will jump, thereby lowering your credit score. Second, the average age of your credit accounts is another factor affecting your credit score, although not as significantly as your credit utilization. If you close long-standing accounts and lower the average age of your credit lines, your credit score will take another hit.
You Must Carry a Balance To Improve Your Credit Score
To continue reading, please go to the original article here:
https://finance.yahoo.com/news/common-misconceptions-credit-cards-230738822.html