Common myths surrounding credit card use lead many into bigger debt

Financial recovery and getting out of poverty with the word debt as a sinking hole in the ground and a red ladder as a helpful solution and answer to the finance and business problems on a white background.

(WRIC) — Over 160 million Americans use credit cards, yet many are unfamiliar with how credit cards truly work and what laws surround them.

Despite the fact that credit card companies do provide users with all of the information regarding card use, few actually read these facts. Instead, many choose to believe common myths that are often presented as facts.

However, doing so can quickly lead card users into greater debt than they expect.

Credit cards can help users build up their credit history or repair damaged credit if they are used responsibly. However, many users quickly get into debt without realizing it, leaving them to pay large amounts of interest every month.

Some people never pay interest by paying off debt every month. Many believe this will not help build up their credit, but the truth is that carrying a balance will not improve a cardholder’s score, either. That is only affected by the number of payments made on time.

Closing a credit card also does not improve a cardholder’s credit. In fact, it may do the opposite. When a credit card is closed, borrowers lose that available credit, but retain any debt owed to the card until it’s paid off. This will raise their debt-to-credit ratio, a key factor lenders use when determining if an applicant can pay back a loan. Closing credit card accounts may prevent the cardholder from increasing their debt, but it won’t make their credit score any better.

If you want more credit, check out MoneyTips’ list of credit card offers.

 You can find additional Money Tips here or visit their website.

Find 8News on Twitter, Facebook, and Instagram; send your news tips to iReport8@wric.com.

Comments are closed.