Five credit card myths debunked

Stay in the loop and have confidence in your credit knowledge.

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With numerous myths surrounding credit cards, it can be difficult to decide what to do and, most importantly, what not to do each month. Here are a few debunked credit myths, so you can feel more empowered to use credit properly.

Myth 1: Opening a new credit card will hurt your overall credit score.

This is not entirely true. Yes, when a lender conducts a hard inquiry on your credit history, your credit score is likely to drop a few points. However, a credit card balance paid in full and on time each month could help build your credit over the years. The hard inquiry by the credit card issuer typically disappears from your record after a period of about two years, according to Credit Karma.

Myth 2: You must carry a balance to improve your credit score.

It’s quite the opposite. Paying your credit card in full and on time each month can boost your credit score. Carrying a balance above 30% of your credit line and late payments often translate to lenders as “high risk.” You should not rack up a high credit card bill with no intention of paying it in full when the bill is due. Plus, accruing unnecessary interest charges can be financially detrimental to you in the long run.

Myth 3: There is no penalty for just paying the minimum.

While there may be no late payment fee imposed, paying just the minimum means you are electing to go into debt, and to pay interest on your outstanding balance. Before paying the minimum, look at the fine print for your interest rate — the average annual percentage rate (APR) is 15.59%, and that is often for people with established lines of credit. New borrowers’ APR could be upward of 20%. Even with a 0% APR, check the fine print to find any time limits or other fees that may apply.

Myth 4: Having more than one credit card will hurt your score.

It may be beneficial to have a second credit card, as a back-up for your regular credit card, but it is important to remember to pay off the balance for both cards each month. Your credit may be affected temporarily due to the credit inquiry, so be mindful of when you open any new cards. If you decide to obtain another credit card, keep the old account open. Proof that you are a long-time credit card holder can boost your score and make it easier to open accounts in the future.

Myth 5: Checking my credit score will hurt my overall score.

Using sites like AnnualCreditReport.com to check your score is considered a “soft inquiry” and will not affect your credit score. Knowing your score is beneficial, especially if you have a big purchase on your post-grad horizon like a car. The only time your score may be affected is when a bank or lender conducts a “hard inquiry” on your credit history.