You can find lots of misinformation about money and credit and especially credit cards. Misinformation is misfortune, so arm yourself with The truth before you tackle the credit card demons!
Myth #1: “It’s all my fault I got into this credit card mess!”
The truth: It may not be your fault at all. Credit card companies really are out to get us. You probably just got caught in the trap.
Myth #2: “Credit Cards are what got me into debt.”
The truth: Spending is what got you into debt. The credit cards just made it easier.
Myth #3: “My credit rating is destroyed forever and there is nothing I can do about it.”
The truth: If you have a job and are willing to work at it, you can get your credit under control and your credit rating restored. Rebuilding your credit requires that you do three things; pay your bills on time, look for better options and learn about money and credit.
Myth #4: “It’s fine to give my credit card number for identification as long as I don’t authorize a charge.”
The truth: NEVER give your credit card number for identification purposes. For that matter, you need to guard all of your personal information like a ferocious tiger.
Unless you initiate the phone call, do not give your name, address, phone number, social security number, credit card number or driver’s license number to anybody. All of this information can cause your identity to be stolen or worse.
Myth #5: “If I pay off a debt or cut up a credit card, this information is removed from my credit report.”
The truth: When you pay off a past due debt it actually restarts the time period that it can be reported in your credit history. Cutting up a credit card does not close the account. You must call the credit card bank to close an account under all circumstances.
Then There’s the Urban Credit Legend
Urban legends are just a fact of computer life. There are the old ones that have been around for years and new ones that pop up everyday. It’s the modern version of gossiping over the back yard fence and most of them are false but harmless. When it comes to the urban legends about credit they really, however, they are harmful.
“You can pick a lock with a credit card” may be true but it’s a bad idea…you could mess up the card. Use a butter knife or a piece from a plastic milk bottle. But what were you trying to pick a lock for anyway?
These are a few urban legends that can hurt you.
Legend: Cutting up a credit card closes the account.
Wrong! You must call the lenders phone number on the back of the card to cancel the account…so piece that card back together and get the phone number, make the call and cancel the account.
Legend: Closing an account removes it from your record.
Wrong! Credit reporting agencies are a rather unforgiving lot and they have memories like proverbial elephants. Accounts remain on your credit report for seven years even the ones you have closed.
Legend: Even good credit information drops off your report after seven years.
Wrong! Unlike humans, credit reporting agencies remember the good stuff forever (even if the accounts are closed) and forget the bad stuff after seven years. Unless, of course, you believe this
Legend: Paying off an old delinquent account improves your credit.
Wrong! Paying off an old delinquent debt actually starts that seven year clock ticking again.
Legend: Car dealers need to run your credit before you take a test drive.
Wrong! This is a fast one pulled by those super duper 60-day wonder salesmen. Don’t believe a word of it. You have not yet applied to buy anything and there is no reason for to check your credit until or IF that time comes.
Credit Card Banks Really are Out to Get You
Their objective is to make as much money off you as they possibly can legally. It isn’t your imagination and you aren’t being cynical. They are out to get you and it’s getting worse by the day.
In 1978 there were fifty credit card issuing companies that accounted for 50% of the credit card market. Today there are only four companies that control 65% of the same market. Those four are American Express, Bank of America, Citigroup, and JP Morgan Chase. MBNA was the fifth but it has just been gobbled up by Bank of America. Less competition is never good news for consumers. Already these giants sign you up for card with a 0% introductory offer and then that rate goes up quickly and steeply. In that itty-bitty fine print you didn’t read it says that the credit card company can do that with only a 15day notice. The period between a purchase and the time your interest starts is no longer 30 days either.
It’s been shrinking at an alarming rate. The fees you are charged for paying the bill late or going over your credit limit have exploded. The average penalty rate is around 24% but some are as high as 35%. Yes, the lack of any serious competition between credit card companies is hurting all of us.
What is a consumer to do? We are a nation addicted to plastic spending. When we make a purchase we just automatically reach for a credit card to pay for it. We use them to buy groceries, pick up our laundry and buy a hamburger. We need to break this bad habit, over-come this addiction and start using our credit cards wisely.
Suggestion: cash a check at the bank and pay cash for everyday purchases. Use your credit cards only when necessary and avoid paying high interest and fees.