Credit card myths are way too common for my liking, so I thought it was about time to straighten folks out on a few.
Credit card myths aren’t just annoying and misleading; some can be costly, especially if you carry a lot of plastic. Even if you don’t, it’s always a good idea to expand your knowledge on the subject, so you can more readily pick out the real from the artfully untrue.
Wheat from Chaff
Some of these myths evolved from misunderstandings, although many derive from misleading practices of the card issuers themselves. Once again, let me remind you: the issuers are not your buddies. They want to make money off you, and will do so any way they can, as long as it remains legal.
With that in mind, let’s debunk six big myths still bedeviling the industry. Some may seem obvious, some less so, but people still fall for all of them.
Myth #1: The issuers set your card limits at what they think you can afford.
It would be so nice to believe that, but let’s get real: your issuer probably has no idea what you can afford and could care less. Even if they checked out your credit report, all they did was make sure you had a good record of paying your bills when they were due.
That’s all a credit report really does, you see. It doesn’t reveal what your personal or family income is, or how much you have in savings. And they may not have actually pulled your report, if your credit score was high enough. So no matter how surprisingly large your limit is, don’t assume they know something you don’t!
Myth #2: My interest rate is fixed as long as I pay my bill on time.
This hasn’t been true for most cards since the Credit Card Act of 2009, which closed most of the loopholes issuers could use to pump up your bill, including how they could use fixed rates. As a result, many issuers switched to variable rates, which rise and fall like the tide according to how other interest rates vary.
Of course, they’re going to pull a rate hike on you if a payment is even a minute late…in fact, your rate may suddenly rise to as high as 30% and stay there. If you use the card to withdraw cash, expect to pay an APR of 20% or more.
Just Getting Started
Now, aren’t you wishing you’d read all that fine print? And that’s only for two myths so far. So you’d best get out that microscope and start reading…and expect to be a little shocked.
Okay, maybe a lot shocked.
And don’t forget to check Part II of this article, where I’ll outline four other credit card myths you’d do well to rid yourself of immediately.