Credit cards have been around for nearly a century, since oil companies and department stores began issuing them to good customers in the 1920s. Diners Club, the first universal credit card, came in to existence in 1950, when legend has it that founder Frank McNamara was caught short of cash for a restaurant bill.


Myths About Owning A Credit Card

Despite this long and venerable history, there is still a surprising amount of misinformation surrounding credit cards. How do you separate fact from fiction? Here are four of the more widespread myths about credit cards along with the underlying truths.


1. Carrying a monthly balance improves your credit score.

Rumor has it that keeping a monthly balance on your credit card, no matter how big or small, gives your credit score a boost by demonstrating responsible use. This fiction most likely originated as a marketing tactic of business owners as a way to encourage spending. The truth is that carrying a balance improves nothing but the chances of you incurring finance charges.


2. Never sign up for a credit card that charges an annual fee.

On the surface this is good advice, but not all annual credit card fees are created equal. For instance, American Express Blue Cash Preferred charges a $75 annual fee, but between the 90-day sign-up bonus and the generous cash-back programs, you can earn that amount back many times over.


3. Applying for credit cards negatively impacts your credit score.

While a new credit card application can cause a small dip in your score, the effect is temporary and results in no long-lasting damage. You’re much more likely to increase your credit score thanks to a better debt-to-credit ratio and a more robust history, assuming you maintain the account in good standing.

The only way applications can hurt you is if a flurry of them show up within a short period of time, which is one of the reasons you should monitor your credit reports for fraudulent activity.


4. Cancelling unused accounts lifts your credit score.

This myth is the flip side of #3. Closing accounts sharply increases your debt-to-credit ratio, which can cost you valuable rating points. If you want to curtail your spending, cut the cards up and throw them away, but keep the accounts open.

Don’t believe everything you hear. Educated consumers make the best consumers, and consulting a knowledgeable professional is the most effective way to raise your financial IQ.


Daniel R. Gamez, an attorney focusing exclusively in debt relief, is licensed to practice in all state and federal courts in California and Texas. Mr. Gamez owns and operates the Gamez Law Firm in San Diego, CA. For more information, please contact Daniel Gamez at 858-217-5051, or use our online contact form. Stay updated with the latest debt relief tips by following on Facebook and Twitter!