Common Credit Card Myths
There are many things that people think are true about credit cards that are not true at all. This type of misinformation can cause people to make bad financial decisions and to accumulate unmanageable debt, which can lead to financial devastation and bankruptcy. Here are some of the most common myths about credit cards today.
Myth 1 – Just Pay The Minimum
Many people make only the required minimum payment on their credit cards each month, reasoning that they will just pay whatever the credit card issuer says to pay as the minimum and they will eventually pay off the debt. Most of these individuals do not understand that the minimum payment amount will only cover the monthly fees charged to the account and one-percent of the actual balance, as required by federal law. This means that if you stopped charging purchases to the credit card today and made only the minimum payments each month, it would take you at least 100 months – 8.3 years – to pay off your balance.
Myth 2 – Go For The Rewards
Most of the people who hold a credit card with a rewards program specifically targeted that credit card because they desired the rewards associated with the program. What many of these people do not understand is that the rewards are still costing them plenty – through program fees, account fees, finance charges, and interest charges associated with the credit card. With some of the more popular rewards programs, you would have to spend a minimum of $5,000 with the credit card each year to earn a reward equal in cost to the annual rewards program membership fee.
Myth 3 – Paying With Cash And Paying With Credit Costs The Same
Many people make no distinction between paying for an item with cash and paying for that same item with a credit card because the total on the register is the same in both cases. The truth is that this is only correct if the person pays off the balance of their credit card each month. If a balance is carried on the credit card, then the cost of that purchase will increase quickly due to finance charges, interest charges, and fees related to carrying a balance on the credit card, adding 20% or more to the original cost of the item purchased.
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