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Top false beliefs about credit cards

Posted Sep 08 2008, 06:14 PM by Karen Datko
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No matter how much personal-finance bloggers write about credit cards, myths about them persist. Kristin at Twenties Money Magazine sets the record straight with "TMM top 20 dumb credit card rumors."

Here's No. 18, which we think gets a lot of traction, even though it's absolutely untrue: "Cash advance is the same as using an ATM." In fact, credit card cash advances come with a hefty price tag.

Kristin says, "Actually, any cash advances that you take will probably account for the highest interest rate that you will pay on your credit card."

Another whopper: "It's OK to charge your credit card up to its maximum balance." This is untrue for several reasons, including if you care about your credit score -- which you should. Kristin says that "you should avoid spending more than 30% of your available credit line."

To read all of the posts in the Twenties Money series about credit card myths, click here, here, here, here and here.

Possibly the most widely accepted -- and most insidious -- credit card myth is the one about how it's fine to make just the minimum payment each month. Sure, that's fine, if you don't mind making interest payments for years with nothing to show for it. The best credit card advice is to pay off your balance each month.

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Comments

 

Donna,

I have misplaced your email and had something to send your way. Can you send me your email address? Thank you so much!!

Amy Clark (Posted 09.09.08 9:57 AM ) Report Abuse

Thanks for the great information. I think another bit of advice would be to leave business cards alone. J. C. Penny gives 10% off purchases for a reason. Many other stores will discount 20% just to get you in a card. I won't shop at any of these stores because why should i get charged more just for being thrifty..

wayne smith (Posted 09.09.08 10:26 AM ) Report Abuse

No interest advances can actually cost you more than the initial fee.  If you already have a balance when you take the 'deal' any payments will be towards the interest free amount.  The FULL amount that was on the card when you took the 'deal' will continue to accrue interest which will be added to those balances.  So you end up paying interest on interest.  If you are going to get the full advantage of interest free transactions, make sure you have a zero balance.

Bob (Posted 09.09.08 11:02 AM ) Report Abuse

I used to never have debt and then I started working at a financial institution that toted how great loans and credit cards are.  I went from debt free and over time it is  now $47,500 and we are digging out from under it each month.  I of course transferred the debt onto low to 0% rate credit cards and then life happened: unemployment, unexpected expenses.   Bottom line, avoid debt at all cost it is almost never worth it.   Plus it's a pain making payments and not having any fun money.

Steph (Posted 09.09.08 11:03 AM ) Report Abuse

The best thing I ever did - CUT THEM UP AND HAVE BEEN FREE OF THIS ADDICTION FOR GOING ON 10 YEARS - and the credit card companies still are dangling the carrot - its not going to happen you sleazebags! There is ABSOLUTELY NO REASON for which I want to be in debt and this is the fastest way to do so!

atllaw191 (Posted 09.09.08 11:04 AM ) Report Abuse

The biggest myth about credit cards is that you need them in the first place! Somehow our grandparents' generation got along without them just fine. Best money management principal out there is don't buy it unless you have cash for it, duh!

Recent research indicates that when you pay with credit certain areas of your brain register the transaction very differently than when you pay with cash. Cash hurts to spend, credit doesn't . . . until later.

The other obvious myth for credit cards is that they benefit the consumer! Hah, that's a laugh, they are there only to benefit the CC company/lender. And don't give my this thing about "building credit" and "conveinence". The CC companies have us duped as a society. They are scumbags that practice illegal collection schemes and abuse their power. None in my wallet, none in my wife's none in my kid's even when they go to college (no they don't need one for an emergency). Okay, "credit" where due . . . check out Dave Ramsey at his website or watch him on Fox Business Network. He'll change the way you think about money and credit cards if you give him a watch or listen.

Jerry (Posted 09.09.08 11:15 AM ) Report Abuse

I had two accounts with Citi, 750 anf 2500. I made my payments, but did carry a balance. "As soon as i paid them off, in full, (early by the way), they lowered my credit limit to 500 on each card: I'm closing both accounts!"

steve (Posted 09.09.08 11:16 AM ) Report Abuse

Hot Diggity! That thar Sarah Palin is some hot tomato.  Yessireebob, she is a gal after my own heart.  N' she's a looker too.  She is gonna put the final touches on this here Nazification of America.  

Fuzzygabby Hayesknight (Posted 09.09.08 11:18 AM ) Report Abuse

CAR DEALERSHIPS DO NOT ACCEPT CREDIT CARDS AS PAYMENT FOR AN AUTOMOBILE PURCHASE.  A CARD CAN BE USED FOR THE DEPOSIT BUT THE BALANCE IS EITHER PAID WITH CASH OR CHECK OR FINANCED. REMEMBER, A CUSTOMER USING A CREDIT CARD COSTS THE DEALERSHIP MONEY, WHEREAS FINANCING IS A MONEYMAKER.

BOB (Posted 09.09.08 11:22 AM ) Report Abuse

is there any suew way to keep my interest rates from going up?

marilyn arnold (Posted 09.09.08 11:24 AM ) Report Abuse

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