Sure, credit cards used to get a bad reputation when we were kids, before they became the norm of making purchases, because back then it was assumed that you didn’t have the money to make the purchase so you put it on a credit card. While sure that may still be true for some, that doesn’t mean that credit cards are bad, in fact, it can actually be quite financially responsible to use one, so you can ignore some of the myths out there.
It’s Not Necessary to Have One
While sure you can get on with your life using cash or your debit card, but what if one day you want to fill out an application for a mortgage or personal loan, you can probably expect to get the highest rates on the market with no credit, or no approval at all. Since the slightest percent can increase your monthly payment substantially, you’ll want to strive for the lowest rates out there, which come with having excellent credit, so you might want to start building that up, starting with a credit card.
Carrying a Balance Helps Your Credit Score
While charging on your card will help your history with the account, and probably grant you continuous credit line increases along the way, I’m sorry to say that carrying a balance will not help your score, in fact it could actually lower it, depending on your available credit. Since carrying a balance increases your credit utilization, as you get closer to your credit limit your score will decrease, so it’s important not only to avoid carrying a balance over to the next month to not pay interest, but to keep the balance at zero for your credit score.
You Should Close Your Account at Zero Balance
Paying off debt is quite the accomplishment, probably even taking years to get your card balance to zero, probably with the help of passive income ideas to generate extra money to pay it off, but the first instinct you have would be to close the account so that you don’t get into credit trouble again, but that actually could hurt you. In fact, by closing the account you would be taking away that available credit, so if you have a balance on another card your total credit utilization would be based off that, and no longer the amount you closed. It might actually work out better to keep the account open, but to cut up the card.
Opening a New Credit Card Will Hurt Your Score
While true your score may go down a few points by opening a new credit application, it could actually help you in the long run for the short-term drop. For instance, if your new card has great rewards such as miles, points, or dollars, the amount you’ll get back from making purchases could far away a slight decrease of your score for now, and by the time you are rolling in the rewards, your score will have already gone back up.