Over the years, I’ve heard a ton of bad information about credit. I’ll never know why this is, but I’ve spent a considerable amount of time on credit card myth-busting.
I should first thank my mom for giving me a dynamic credit card lesson when I was 19 years old. She laid out the credit card “game” in minutes. And because of that, I’ve always felt compelled to share my mom’s lesson with the world.
There’s one credit card myth that continues to bother me to the core. Here it goes.
The Myth: When you consider getting a credit card, you should first consider the interest rate.
Many people will have you believe the interest rate is the most important thing you should consider before getting a credit card. Unfortunately, it isn’t. My mom first explained this to me during that credit lesson. She said verbatim: “If you use your credit card each month and pay off the balance in full when you get the bill, the interest rate will never apply to you.” Simple right?
So, whether the interest rate is 19%, 28%, or some other variable rate, it’s irrelevant if you consistently pay off your balance in full. I’ve had many people challenge me on this, but again, I was trained by someone who has always had excellent credit. If someone is getting a credit card and is concerned about the interest rate, they’re already telling themselves (mentally) that they will overspend and maybe not pay off the balance in full.
Someone reading this may still want to challenge me. Interest rates do matter when it comes to debt. Just not credit cards. Interest rates should be scrutinized when considering a car or home loan. That’s a debt that you might have for a while. Credit card debt is something someone should only plan on having for a short time.
So, what is the first thing someone should consider when getting a credit card? (All of these would be acceptable answers.)
- Does the card offer rewards?
- Is there an annual fee?
- Are you in a position to make the on-time payments each month?
Okay, before I finish up, another myth bothers me, and it also needs to get busted.
Myth: It isn’t good to max out your credit card during the month Nope. It’s only bad if you don’t pay off the balance (hopefully in full) when you get the bill.
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