9 Spooky Myths About Owning a Credit Card

As we approach Halloween, you're likely preparing yourself to be spooked, scared and startled.

While those are acceptable responses to horror flicks and haunted houses, there's one thing that you shouldn't fear: Owning a credit card.

Avoiding credit cards like the plague may seem like a good way to stay out of financial trouble—but we're here to tell you that responsible credit card use can help you achieve your financial goals.

To help you learn the truth about credit cards, we'll review—and debunk—some questionable advice you may have heard.

1. Do you really need a credit card?

   A common question about maintaining good credit is whether or not you truly need a credit card. Debt and irresponsible spending habits are sometimes seen as the result of owning credit cards. However, owning one will help you establish credit that can help you get better loan rates on cars, homes and more.

    

   We can't dictate how you spend your hard-earned cash—and debt doesn't happen by merely owning a credit card. In fact, with a little planning and knowledge, owning a credit card can go a long way to increase your credit score.

    

2. Does having multiple credit cards hurt your credit score?

   It really comes down to personal preference. If you've had one for a while and feel comfortable with it, opening another one won't hurt your credit score. In fact, it could help your score by increasing your overall credit limit.

    

   The idea of responsible spending is still key, though. Experts recommend having one card that earns high rewards or points and one for emergencies that you use for a couple of purchases every month, just to keep it active. You should also consider diversifying your wallet with different credit companies because not all are accepted by every business vendor.

    

   Once you feel comfortable with those two, you may want to add a third—which brings us to our next question.

    

3. Are three credit cards too many?

   Short answer: No.

    

   One or two credit cards may be sufficient for some people. Others may find that their budget could use a third credit card—and that's totally fine! Maybe one is for gas, one is for travel and one is for emergencies. Credit is supposed to help you make the most of your money and time, and it should be used to its full advantage without pushing you deeper into debt.

    

   Regardless of how you use your credit cards, you need to keep track of your credit limits, payment due dates and ways to maximize rewards—keep a note by each card that reminds you which one is intended for groceries, flights or gas. Take it to the next level by adding calendar reminders on your smartphone—it’s a great way to help you stay on top of payments and keep your credit score high.

    

4. Does checking your credit score lower it?

   About that credit score … you should keep track of it. Checking your own credit score will not cause it to go down.

    

   Hard credit checks, or when a lender pulls your score to decide whether or not you're a trustworthy borrower, could lower your score slightly. But as long as you're not opening multiple credit cards or applying for numerous car loans, your credit score will not be significantly impacted.

    

   If you have a loan or checking account with Mountain America Credit Union, you can access your credit score for free in the mobile app. It’s a good idea to check your own credit score at least once a year or before you apply for a home loan. If you need help raising your score, start by paying off your credit card balance in full each month.

    

5. Does carrying a balance on your credit card help your score?

   Paying off your balance is one of the simplest ways—in theory—to increase your credit score. However, you may have heard that maintaining a small balance and making frequent payments will show lenders you can handle debt responsibly. The best way to show lenders you’re responsible is to avoid debt entirely.

    

   If you tend to carry a credit card balance, it’s important to have the lowest interest rate possible. Look for a card with low rates and other benefits to help you maximize your money, like a Low Rate Visa® card.

    

   Also, try to make some life adjustments to help you pay your balance off in a timely manner. Paying only the minimum will add years—not to mention plenty of interest fees—to your debt.

    

6. Should you accept a credit limit increase?

   If a credit card company offers you an increase on your credit line—accept it! Just don't feel like you have to use it.

    

   A large percentage of your credit score comes from your debt utilization ratio. If you have $3,000 on a credit card with a $5,000 limit and your limit gets raised to $7,000, your ratio goes from 60% down to 40%—and you didn't even have to make a payment!

    

7. Do I need to cancel a credit card if I'm not actively using it?

   Another portion of your credit score comes from the length of your credit history. One credit card myth is that canceling credit cards you're not actively using will benefit your credit score. However, doing so could have a negative effect on your credit length.

    

   Holding on to your first credit card can help with that. Keeping it could benefit you in the long run even if it's a low reward or high annual percentage rate card. Consider adding a small recurring charge to that card—like your cell phone or electric bill—and paying it off each month.

    

8. Are annual fees worth it?

   Not all credit cards are created equal. Some are intended to help you with emergency expenses. Some help you travel more. As you look for your perfect card, you'll find that some are free to use, while others cost money.

    

   You shouldn't always rule out credit cards with annual fees.

    

   While it might seem counterintuitive to pay for one, some credit cards offer rewards that easily outweigh the annual price. Take a good hard look at the fine print and find out how much you would need to pay to make that fee worth it, and then plan your purchases accordingly.

    

   That said, there are a number of credit cards that have no annual fee. Shop around before committing.

    

9. Is paying with a credit card safer?

   Finally, many people argue that paying for things with a credit card can be safer than paying with a debit card. This is usually true.

    

   In the case of a data breach, hackers and thieves can gain access to your accounts if your debit card number is on file. That means a lot of your spending money and savings may be at risk and you could fall behind on bills.

    

   If you're using a credit card, criminals only get access to that particular credit line. And, you’re probably going to get your money back faster from a fraudulent charge on a credit card. Why? Because most credit card companies reverse the charge as soon as you initiate a fraud claim. If, however, the fraudulent charge was on a debit card, you’ll likely have to wait until the investigation is completed to get your money back.

    

   If you're using a credit card, criminals only get access to that particular credit line. And, you’re probably going to get your money back faster from a fraudulent charge on a credit card. Why? Because most credit card companies reverse the charge as soon as you initiate a fraud claim. If, however, the fraudulent charge was on a debit card, you’ll likely have to wait until the investigation is completed to get your money back.

Now is the time to say goodbye to your fiscal fears and save your screams for your next scary movie night. Once you know the difference between credit card myths and facts, you can move forward and make informed decisions about your financial future.