Credit cards can be a blessing or a curse. They can help you get the things you need, even when you don’t have enough income to cover your expenses. But if you’re not careful, that little piece of plastic can lead to enormous amounts of debt, filling your life with stress.
Even though nearly every American owns at least one credit card, many people do not know the truth about credit cards and credit card debt. Various myths swirl around and mislead innocent credit card users. Here are some of the most common myths.
Myth 1: Credit Cards Always Lead to Debt.
Some believe that the act of owning a credit card itself leads to debt. In truth, debt comes not from credit cards themselves, but the way we use them.
It is indeed possible to own a credit card and never get into debt. You simply need to pay off your credit card in full and on time each month. If you can’t pay it off in full, pay as much as you can. The more you pay each month, the less you will pay in interest.
It’s important to have a credit card because it helps you establish a credit history. Without a credit history, you can’t get approved for a loan. This affects your ability to buy a house or a car or to pay for a college education.
Myth 2: Having More Than One Credit Card Damages Your Credit Score.
Some people stick to just one credit card because they’re afraid applying for a new card will lower their credit score. Applying for a new credit card causes a slight dip in your credit score initially. But if you avoid credit card debt, your new credit card should improve your score over time.
This doesn’t mean you should apply for as many credit cards as possible. You’ll damage your score if you have a poor credit history and apply for lots of new accounts at once.
Myth 3: Credit Debt Always Comes From Shopping Addictions.
Not every person with credit card debt is a shopaholic who constantly charges credit cards for expensive clothing.
Most people in debt use credit cards to meet basic needs. These people are often single parents trying to make ends meet, hard workers who experience an unexpected job loss, or families dealing with unexpected medical bills. Life situations render them unable to make full payments.
Myth 4: You Should Avoid Store Credit Cards Like the Plague.
There’s some truth to this myth. Store credit cards usually come with high interest rates. And some people end up spending more than they need to simply because they have a credit card.
However, store credit cards are not harmful as long as you pay them off in full. They are great at helping you build credit if you have a low credit score. Plus, if you shop at a particular store often, a store credit card may offer deals to help you save money.
You should exercise caution when applying for a store credit card, but that doesn’t mean you have to avoid them entirely.
Myth 5: If You Make Your Minimum Payments, You Won’t Have Credit Card Debt.
Some believe that as long as they pay the minimum payment each month, they can avoid credit card debt.
But your balance increases every month that you continue to make purchases without paying off your card in full. The higher balance makes it harder for you to pay off future bills, and you’re more likely to end up further in debt.
Over time, making only minimum payments hurts your credit score as well. Lenders don’t like it when you carry a high credit balance from month to month.
Thus, you should always pay your credit card bill in full if possible.
Myth 6: Credit Card Debt Is Punishable by Jail Time.
There was a time when getting into debt would land you into debtor’s prison. Fortunately, that doesn’t happen today.
But credit card debt isn’t free from consequences. A creditor can sue you and take some of your property.
Myth 7: You Have to Get Out of Debt Alone.
If your debt is bringing you attention from creditors, you likely feel overwhelmed and helpless. Fortunately, you don’t have to solve all your problems alone.
Meet with a bankruptcy attorney. He or she can help you create a customized debt elimination plan. This may include:
- Paying off one card at a time.
- Requesting a lower interest rate from creditors.
- Taking out a loan.
- Working with creditors to consolidate your debt.
Some people eliminate credit card debt on their own, but it’s often better to turn to an attorney. Advantages of working with a lawyer include:
- Receiving experienced advice and more predictable outcomes.
- Avoiding the grunt work of negotiating with creditors.
- Ensuring your creditors follow laws on debt collection.
If you’re overwhelmed with credit card debt, talk to a bankruptcy attorney.