The Top Common Credit Cards Myths – And How They Can Be Hurting You

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Credit cards can be confusing; just one look at the pages of fine print on your monthly credit card statement will attest to that. But what you don't know about your credit card - or what you think you may know - can actually be harmful to your finances and credit score in the long run.

There are many myths regarding credit cards, their affect on your credit, and how to manage them. A few of the most common ones include:

Myth 1: Applying for multiple credit cards has no affect on my credit.

Each time you apply for any type of credit, it is recorded on your credit report. Multiple credit card inquiries are viewed negatively because seeking new lines of credit is equated with higher risk. The good news is that in most cases, it won't affect your score much - typically, around 5 points for each inquiry. However, if you are trying to rebuild your credit, even this small amount can be damaging.

That said, checking your own credit does not affect your score. It is actually recommended, as doing so can help you spot any fraudulent activity. Visit to get a copy of your free credit report.

Myth 2: Paying my balance off each month harms my credit score.

Many people think they need to carry a balance on their credit card to improve or maintain their credit scores. This is not the case. Paying off your balance each month is actually advisable when possible because it allows you to save on interest payments and keeps your debt to income ratio low.

An inactive credit card, on the other hand, will not improve or hurt your score.

Myth 3: Bringing an account balance current erases the negative mark on my credit.

When you are more than 30 days late on a credit card payment, you are reported to the credit reporting agencies. The more this happens, the more it affects your score. Your payment history makes up 35% of your overall credit score, so late payments have a significant effect. Bringing the account current does not wipe the negative report off of your report; it will stay on for up to seven years. The good news is that once you start making your payments on time, you will start to see your credit score go up.

Myth 4: My credit card interest rate is fixed at the time I get my card.

Not necessarily. Before the Credit CARD Act of 2009, credit card companies could increase interest rates to as high as legally allowed - up to 30% - after just one late payment. Today, they can still be increased, but only after a payment is 60 days late and after the cardholder has been notified at least 45 days in advance that their interest rate is scheduled to go up unless payment is made.

If you pay your credit card payments on time, you can decrease the chances of having your interest rate skyrocket due to missed payments.

Myth 5: I only need to pay the minimum payment.

Technically, this is true. However, paying just the minimum payment will increase the amount of time it takes to pay off your card by years. Paying just an extra $20 a month over your monthly minimum will reduce your interest payments substantially and ensure your card is paid off sooner.

You can debunk these myths by carefully reading and understanding the fine print on your credit card statements and familiarizing yourself with the Credit CARD Act of 2009. Separating credit card fact from fiction can improve your finances and help ensure your debt remains under control.

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Please note your financial situation is unique and our tips & advice presented here may not be appropriate for your situation. recommends that you seek different advice & opinions from your own accountant or financial adviser who understands your individual circumstances before making any important decisions or implementing any financial strategy.