Credit cards are a quick way to a good credit score or a hole that you can not climb out of on your own. Either way it goes, you can only blame yourself. Your best chances of building a solid credit score with credit cards is to arm yourself with knowledge. To help, here are three costly credit cards myths debunked.
- Paying the minimum each month is fine. Yes, it is acceptable and your credit report will show a positive transaction, but…just paying the minimum will cause you to pay interest. Each month after your first minimum payment, you will be paying interest on the interest from the previous month. Doesn’t make much sense does it?
- The interest rate on your card will stay the same. This is rarely the case. Today, most credit cards offer variable rates in order to maximize profits.
- Interest is the only fee I will see on my credit card statement. That may be true if you never make a single mistake. Make your payment late, boom a $35 fee. Need a cash advance, boom a fee of 5% of the advance plus a higher interest rate on the cash.
So, what is the solution to maximizing your credit score with a credit card? Only charge what you can afford to pay off just before the grace period and never exceed 25% of your credit limit at any time. Otherwise, you could find yourself in need of TX credit counseling before you know it.