When dealing with credit cards, you need to know the facts. Credit cards are assets in your quest for a better credit score. Understanding how to utilize them correctly can get you farther on that mission, far faster than you could do so without them. Sorting between myths and facts can be overwhelming. But today, we will be busting three credit card myths to help you on your financial journey.
Myth 1: Avoid credit cards at all costs
Some personal finance advocates believe in using only cash to pay for everyday expenses. However, when it comes to improving your credit, using credit cards is the best way to increase your credit score. Although debit cards and cash can benefit you in budgeting your short-term financial goals, credit cards can expand your ability to finance large purchases like a mortgage or auto loans. Credit cards offer many benefits such as cashback rewards, travel points, and even discounts. By using your credit card wisely each month, you can build your financial credibility with companies who want to offer you competitive interest rates and provide you with great services.
Myth 2: Transfer your balance to a new credit card with 0% APR
Some credit companies might entice you with an exciting offer to transfer your balance to a lower or zero percent interest rate. When trying to determine if you need to transfer your credit card balance to a new card, you need to read the fine print of the terms and conditions. Although it might sound like a great opportunity, sometimes the agreement might reveal hidden fees that make you pay more over time. Instead, try to contact the credit company you currently use and ask for a lower rate. If you have a good track record of making on time payments, use this to your advantage. Discuss other competitive interest rate credit cards that you have considered with credit card company representatives. Credit card companies are more likely to reward reliable customers than lose out to their competition.
Myth 3: Increase your credit score by disputing credit card purchases
This faulty tactic used by some credit repair companies can actually harm your credit in the long run. Many lenders have fail-safes against using such strategies and can request that any disputes be removed from your credit report before approving your application. In instances of credit fraud or incorrect reporting, disputes are a valid way to remove these errors. However, using disputes to eliminate valid credit card transactions are frowned upon not only by creditors but also by the credit reporting agencies. The three main agencies thorough investigations when you initiate a dispute, so if a credit card company has valid paperwork to tie you to these transactions, the chances of your dispute being approved are slim. Instead of using disputes as a way to boost your score, call your credit company to negotiate better terms. When used effectively, using credit cards wisely can provide your family with more opportunities in the long run.