There is a lot of false information out there about money, credit, and credit cards. Misinformation leads to bad luck, so make sure you know The Truth before you take on the credit card demons.
Myth 1: "I'm in this credit card mess because of me!"
The truth is that it might not even be your fault. Credit card companies really do want to take advantage of us. You likely just fell into the trap.
Myth #2: "I got into debt because of credit cards."
The truth is that you got into debt because you spent money. Credit cards only made things easier.
Myth #3: "My credit score is ruined for good, and I can't do anything about it."
If you have a job and are willing to work at it, you can fix your credit and get your credit score back. You must pay your bills on time, look for better options, and learn about money and credit in order to rebuild your credit.
Myth #4: "It's okay to give my credit card number for identification as long as I don't authorise a charge."
The truth is that you should NEVER give your credit card number to prove who you are. In fact, you should be as fierce about protecting all of your personal information as a tiger.
Do not give out your name, address, phone number, social security number, credit card number, or driver's licence number to anyone who calls you without your permission. All of this information can be used to steal your identity or do worse.
Myth #5: "If I pay off a debt or cut up a credit card, this information will be taken off my credit report."
When you pay off a debt that is past due, the time that it can be on your credit report starts all over again. Cutting up a credit card doesn't mean that the account is closed. To close a credit card account, you must always call the credit card bank.
The urban credit legend is another one.
Urban legends are a normal part of life in the computer age. There are old ones that have been around for years, and every day there are new ones. It's like gossiping over the back yard fence in the 21st century, and most of the rumours are false but harmless. When it comes to credit, urban legends are true, but they are harmful.
"A credit card can open a lock" may be true, but it's not a good idea because you could damage the card. Use a butter knife or a piece of a milk bottle to do this. But why did you try to pick a lock in the first place?
These are some dangerous urban legends.
The account is closed when the credit card is cut up.
Wrong! To close the account, you need to call the number on the back of the card. So, put the card back together, find the phone number, call, and close the account.
When you close an account, it disappears from your record.
Wrong! The people who work at credit reporting agencies are not very forgiving, and they remember things like elephants. Even if you have closed an account, it will stay on your credit report for seven years.
Even good things on your credit report fall off after seven years.
Wrong! Credit reporting agencies, unlike people, remember the good things forever (even if the accounts are closed), but they forget the bad things after seven years. Unless you think this, of course.
Legend: Your credit score goes up when you pay off a past due account.
Wrong! When you pay off an old debt that was past due, the seven-year clock starts over.
Before letting you take a test drive, car dealers have to check your credit.
Wrong! This is a trick that those people who sell "60-day wonders" do. Don't take a word of it seriously. You haven't asked to buy anything yet, so there's no reason to check your credit until you do.
Credit card companies are really after you.
Their goal is to make as much money as they can legally off of you. You're not making it up, and you're not being cynical. They are out to get you, and it's getting worse every day.
In 1978, there were fifty companies that gave out credit cards. Together, they made up half of the credit card market. Only four companies control 65 percent of the same market right now. These four are American Express, Bank of America, Citigroup, and JP Morgan Chase. The fifth one was MBNA, but Bank of America just bought it. Consumers never benefit from less competition. Already, these big companies offer you a credit card with an introductory rate of 0%. After that, the rate goes up quickly and sharply. In that tiny print that you didn't read, it says that the credit card company can do that with just a 15-day notice. No longer is it 30 days between when you buy something and when your interest starts.
It's getting smaller at a scary rate. Fees for being late on a bill payment or going over your credit limit have gone through the roof. The average rate of penalties is about 24%, but some are as high as 35%. Yes, the fact that credit card companies don't really compete with each other hurts all of us.
What should a customer do? Our country is hooked on spending with credit cards. When we buy something, we always pull out a credit card to pay for it. We use them to buy groceries, pick up our laundry, and get a hamburger. We need to stop doing this bad thing, get over our addiction to it, and start using our credit cards wisely.
Cash a check at the bank and pay cash for things you buy every day, is one suggestion. Don't use your credit cards unless you have to, and don't pay high interest rates or fees.
