Closing a Credit Card Helps Your Credit
When people intend to pay off their credit cards they often close out the old cards so they aren’t tempted to rack them up again. However, doing can be counterproductive to your credit score. You do want to pay your credit cards on time to keep good credit, but keeping them open will actually help build your credit. Instead of shutting them down just use them in very small amounts and then pay them off each month. If you don’t trust yourself to carry them around, then don’t. Use them as the default cards for your automatic bill pays and then cut up the physical card.
Having Many Credit Cards is Bad for Your Credit
This is not necessarily true. Your credit score does take a slight dip when you apply for a new card, but it’s possible to have ten cards and still have a great FICO score. For the average person, however, two is a great number to go with. Credit card owners are highly rewarded for having cards for long periods of time. In fact, 15 percent of your entire credit score is determined by the length of its history.
An Annual Fee Card Should Be Avoided
Credit cards that require an annual fee also offer perks, which is probably why you would choose to sign up for one in the first place. Maybe the card provides airline miles or points that you can use at the grocery store. It’s not necessarily a bad move to get a card with an annual fee, just as long as you’re actually using the perks. The perks should outweigh the annual fee, plain and simple.
Having a Balance is a Good Thing
Carrying a balance from month to month on a credit card does not help to increase your credit score. It only leads to a buildup of interest and requires more money from you in the future. Your credit score is not going to suffer if you pay off your balance each month, it will only suffer if you stop using the card completely or close it out in entirety. It’s up to you whether you carry a balance or not, but do know that it won’t necessarily help you.
It’s Okay to Go Over Your Limit
Many credit cards will, in fact, allow you to charge over your limit. But they will also charge you a fee when you do. Being penalized with a $30 or $40 fee for spending a few bucks over probably isn’t worth the move. Instead, work on paying down your cards and not relying on credit so that you’re not faced with that situation at all.
Interest Starts Accruing Immediately
Do you know when the interest on your purchases actually starts accruing? Many people don’t. The credit card company only adds interest to your purchases the following day after your monthly payment is due. That means that if you pay off your entire monthly statement on time each month, you won’t owe any interest at all.