3 Myths About Credit Cards

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3 Myths About Credit Cards And Their Rewards

I sincerely hate credit cards!

I use one, but still, I despise using it. Credit cards are convenient, I get it. However, if you and your spouse aren’t on the same page when it comes to a budget; say no to credit cards.

You: “But Armond, I got a free trip to Hawaii?”

I get it, but do you have running debt on that credit card? You know credit card companies aren’t running a soup kitchen, right? They aren’t giving out those free vacations and rewards for nothing.

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Companies around the world study human habits. If they can predict, understand, or change your habits to benefit them, they will do that. There is nothing better than getting you in the practice of pulling out the shiny plastic rather than pulling out that disgusting cash that has been touched by other humans—who knows where their hands have been.

No… Please don’t touch that bacteria carrying money; instead, you should pull out your equally dirty credit card—at least you get cashback. Plus, if you keep using your credit card, you and your spouse will never be on the same page with your spending habits; you will spend more money and pay us even more.

Sincerely,

Your Credit Card Company

Even if you pay the credit cards off every month, you still usually spend more money. If you don’t spend more, it’s because you are tracking what you spend. There are websites and apps out there to assist you with tracking your spending. This is a better way to use your credit card and have the ability to track your spending and stay within budget.

I’m not trying to tell you never to use your credit card; they definitely have their benefits. I ask that you create good habits first before introducing credit cards to your family. If you are already in credit card debt, stop using them until you get a handle on your spending habits.

The credit card companies want you to owe them forever. They just want you to make the least amount of payment per month so that you will pay them more interest. They are hoping that something happens in your life to cause you to have to spend more interest over time. With that said, let’s debunk a couple of myths about credit cards:

I need it to build credit.

I remember when I was in college, I got my very first credit card. People told me I needed a credit card to start building my credit. This couldn’t be further from the truth. Companies are tricky. They will lend money to people WHO ALREADY HAVE MONEY! It is very much like the Field of Dreams.  If you have a job, the lenders will come. I have witnessed people who are in the process of short selling a home to obtain credit and loans. The point is, you do not need a credit card to build credit; if you have good spending habits, you only need a credit card to make big-ticket purchases. A great rule of thumb is to pay the item off as soon as you buy it. Another way you can build your credit score—pay your bills on time. That’s it. You don’t have to use a credit card.

Lowering the credit limit hurts my credit.

To keep your family’s budget under wraps, you can call the credit card company to lower your credit limit. If you just want to get the points and earn great rewards, then lower your credit limit to $5,000. That way you can’t spend over that amount. By the way, what do you need that costs more than $5,000? If you have control over your spending, $5,000 is plenty. Taking a loan out and biting off more than you can chew can ding your credit, but not lowering your credit limit.

If you’re ever in a bind and need to raise your credit limit again, the company would probably be more than happy to do this because they want you to pay more interest.

You do need to know that if you lower your credit limit and your card appears maxed-out, it can hurt your chances of buying a home. While we’re on the subject, you should not buy a home unless you are debt-free.

Closing a credit card hurts my credit.

Please don’t keep a card open that you are not using. Especially if it is a card, you are not paying attention to. Closing an old credit card will not keep you from buying a home. However, someone stealing your credit card information and running up your card will. Also, if you have issues with staying out of debt, you should stick to just one to two cards. It is hard enough to manage your life without having to try to maintain the Target card, the Walmart card, the American Express, and the Victoria Secret’s card. Close them. You don’t need them.

In closing, credit cards are evil but useful. If you have bad spending habits, you should stop using them all together until you create new patterns. If you believe that somehow lowering your credit limit or closing your credit card is going to severely hurt your chances of purchasing a car or buying a home, please don’t believe the hype. Yes, this will affect your credit score overall, but if you are managing your money the correct way, it shouldn’t make or break you.

Always be leary of anyone offering anything free, especially credit card companies. If they are offering something free, then they are trying to bring you into the fold so that they can make money off you. Don’t let those free vacations get you in severe financial trouble.

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