Top 10 Credit Card Myths & Misconceptions | Understanding What is True & False


Hi there, it’s Ernest from Trip Astute. In
this video, we’re going to discuss our top 10 credit card myths and
misconceptions, and explain why most of these ideas are not true. (light chiming music) Earning points
and miles is a great hobby, but I know a lot of folks still think that is some
sort of scam, or that it’s just too good to be true. While some of this is based
on misinformation, a lot of these doubts are based on false assumptions that
people have about credit cards. Even on our channel, we get questions all the
time that revolve around some of these ideas, especially on how credit cards can
affect your credit score. So today, we’re going to review our top 10 credit card
myths and misconceptions. Number 1: Credit cards lead to debt. This one can actually
be true. I’ve spoken a lot about how it’s important to be responsible with your
credit cards if you want to engage in this hobby. Like a lot of things in life,
the credit card is a tool but it can be easily abused and cause a person to go
into debt. If you’re using credit cards to earn points and miles, it’s important
to make sure that your financial house is in order. That means tracking your
budget and spending so you can pay your bill in full. If you’re carrying a
balance then you’re essentially negating the value that you would earn from
points. Number 2: Applying for a new credit card will hurt your credit score.
This one is also somewhat true, though it’s not as bad as a lot of people think.
When you apply for a credit card, you will often get a hard credit inquiry
which is different than when you use a service like Credit Karma or Credit
Sesame. The number of hard credit inquiries can have a negative impact on
your score, so you’ll often see a bit of a drop when you apply. However, your score
is also influenced by the amount of available credit that you have. So by
getting a new card, you’re increasing the amount of available credit and also
lowering your credit utilization, which is the amount of credit that you’re
actually using. Assuming that your spending level doesn’t change, this
should cause your credit score to increase over time.
Number 3: Having too many cards hurts your credit score. This is also a common
misconception. I think it’s rooted in the same idea as the previous tip about
applying for cards. However, like I mentioned earlier,
having more available credit and a lower credit utilization usually means
that your score will go up. Number 4: You should never pay an
annual fee. This is definitely false. We did an entire video on why it’s
sometimes worth paying an annual fee, especially if you’re able to get value
from the card. If you haven’t seen our video, definitely check it out. Number
5: You must carry a balance in order to build your credit history. I know a
lot of older folks have this misconception. I think there was a time
when this was actually true. However, this is no longer the case. You
can build your credit score by making sure you pay your bills on time and
using your credit responsibly. Number 6: Your minimum spend timeline starts the
moment you activate your card. Contrary to what a lot of people think, this is
not true. I actually didn’t even know about this until not too long ago. The
clock actually starts when you’re approved, so your window to complete your
minimum spend is often less than you may think.
For more information about meeting your minimum spend, check out our playlist on
the topic. Number 7: American Express cards have no spending limit. Several of
the traditional American Express cards like the Green, Gold, and Platinum cards
are considered charge cards and not credit cards. This has led a lot of folks
to believe that there is no credit limit since you have to pay the full balance
every month. This is actually false though. If you check the American Express
Platinum card’s fine print, you’ll see that no preset spending limit
doesn’t actually mean unlimited spending. The limit is based on your usage, your
payment history, along with your credit record and income. Number 8: If you
stay at a specific hotel brand or fly a specific airline, you should get their co-branded credit card. This can sometimes be true. However, with the rise of
flexible points programs, it can often be better to earn points that you can use
with different travel partners. For example, I can earn three Hyatt points per
dollar using my Hyatt credit card when staying at the Andaz hotel. However, I can
also earn three Chase Ultimate Rewards points using my Sapphire Reserve card,
which I can then transfer to Hyatt, or a bunch of other airlines and
hotels. In this case, I actually prefer to use my Sapphire Reserve as I like having
that extra flexibility with my points. Number 9: You should close a credit
card before getting a new one. This is also false, and I think it’s rooted in
the misconception that having too many credit cards is a bad thing. Much like
what I explained earlier about getting more credit and lowering your credit
utilization with your new card, the reverse is also true. When you cancel a
card, you will often lower the amount of available credit that you have which can
increase your credit utilization. It’s like shrinking the size of a pie so
it looks like you’re eating more, even if you’re actually eating the same amount.
There are tricks to get around this like converting cards to no annual fee
versions in order to keep the account open. So check out our “Top Credit Card
Mistakes” video for more information. And finally, number 10: It’s better to use
your debit card for daily purchases. This one is totally subjective. A lot of
people tell me all the time that they just prefer to use their debit card to
pay for things. While there’s nothing wrong with that, there are some
compelling reasons to use your credit card instead. It’s not just the points
that you’re not earning, but also the protections that you get when using your
credit card. When you use your debit card, you’re actually pulling money from your
bank account. If there’s a dispute or your information is stolen, you may not
have access to the affected money until the bank completes their investigation
and verifies information. I’ve heard a lot of horror stories with this situation,
so I personally prefer to use my credit card. Having a payment dispute or false
charge on a credit card seems much easier to resolve and is less likely to
involve me having my funds frozen until there’s a resolution. For those of you
who collect points, what do your friends and family think of your hobby? Do they
think you’re nuts? Do you get asked about these myths all the time? I’m curious
whether you all experience the same things that I do. If you’re interested in
applying for any of the cards mentioned in this video, check out the credit card
offers page on our website for the latest offers. We do get a percentage if
you use our link. It doesn’t cost you anything extra, but it does help us to
continue building content for this channel. If you enjoyed this video or found
it useful, please hit the “like” button and consider subscribing. Also, sign up for
our newsletter on our website for travel articles, updates, and
giveaways, like our 2,000 subscriber giveaway that’s happening right now.
Until next time, travel safe and travel smart.

10 comments on “Top 10 Credit Card Myths & Misconceptions | Understanding What is True & False”

  1. JC Williams says:

    Great video! I used to be anti-credit card. Until I realized that I am a responsible user and bill payer! Lots of great details here!

  2. eljuancho2 says:

    If I use more then 30% of my limit and pay in full, does this effect my credit score?

  3. Jorge Acevedo says:

    It's funny at first the guys at work thought I was nuts. The other day my boss came over and asked my advice on his credit cards. At a surprise dinner party for my girl friend last Saturday my boss and friends watched me pay with the CSR. Some of them came over and said you are hitting minimum spend in one night! I saved for several months dinner for 23 is no joke. Then i gave all the credit to your channel. Thank you Ernest!

  4. Falco Peregrinus says:

    #6 hurts my heart. I read a horror story somewhere on the web of someone missing a very lucrative sign up bonus by $21. Can you imagine? Fuck that. NO WAY would I EVER miss out on a sign up bonus. I remember getting the CSP was intimidating to me cause I didn't know how I would spend $4000 in 3 months but then I discovered Plastiq lol! I try to hit minimum spend in two months by planning big purchases.

  5. TikiTrvlr says:

    Thanks for that info. Quick question. As far as Chase I know their 5/24 rule is for opening any 5 cards in 24 months. But what other rules do they have? Like a certain number of Chase only cards in a certain number of months?

  6. GOSTO says:

    Great video. Bravo

  7. Jose Perez says:

    Thank you Ernest for breaking it down, love the topic ! So useful you amazing … 

    Jose P.

  8. Todd Davis says:

    Great content, keep the videos coming. Quick question, will having a lot of credit cards open affect my ability to get a car loan or mortgage?

  9. David Kierszman says:

    Thanks for your videos and the valuable informational content. I accidentally fell into the hobby about two and a half years ago when I applied for about 4 credit cards in a one month and got approved for all of them. Then I started watching the videos about a year-and-a-half ago and got a little bit better Direction in this Hobby. You're right I have some people telling me that I'm crazy!… My son tells me I need intervention… but he's joking of course. At the same time now I'm having people asking me how can they start building there credit so it wakes up a lot of people when they see me pull up my cards. I do get a lot of compliments on my credit card from the cashiers. You hit it dead-on! I'm constantly hearing all those myths and some people just need a little Direction. Again thanks for your videos. They're great! They definitely have helped immensely!

  10. Trenton Pottruff says:

    Using a credit card as a daily spending card is one of the smartest things you can do, especially if you use it as a debit card and pay off the credit immediately or soon after.

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