Myths About Credit Cards

Almost everyone would have heard about several credit card myths and many do follow them, but if one lives by the myths it could cost a person lot of money as fees and further hurt their credit rating. In this article we look at six of the most common credit card myths :

1st Myth:  ‘See ID’ written in the signature line at back of the cards would help in stopping the credit card thief and absolve a person of any liability when it is used by any other unauthorized person.

Logic: “Ask for ID” or the “See ID” alerts the sales people to confirm whether name displayed on a credit card matches with the person who holds. The question arises that why should one have their signature in the little white space though it can be copied and further used on checks or some other documents? There have been reports regarding law enforcement personnel who have recommended this precaution

Reality: According to agreements of the card issuers and holders, a credit card which has not been signed is technically invalid. Practically most of the clerks don’t bother to check signatures at all which clearly means that they are least bothered to check the “See ID” on back a credit card even if there is one.

2nd Myth: One can buy as much he wants with their American Express card as it has no credit limits.

Logic: Powerful advertisements by American Express over the years has locked in the minds of the card holders that there is no limit for spending on your AmEx. This is the reason that whenever AmEx gets delivered one could activate it & buy any stuff they want which means anything. People believe this and feel there is no limit on the account of the card holder to spend.

Reality: Today AmEx has changed with time and charge cards are no longer issued to the customers. These cards allowed a person to pile up lots of debt, till the time they paid off their entire debt each month. AmEx issues credit cards that allow a customer to carry the balance. Credit cards ofBalance transfer are also provided today.

3rd Myth:  The most thought of is that one needs to have each of big cards in their wallets i.e.

American Express, Visa, Discover and Master Card. People believe that they might end up in a place which accepts only one of those.

Logic: At times people do believe that they can get into situations where any one of the 4 cards is accepted. For years rivals American Express & Visa has set this thinking in the minds of the customers. This could be well backed with the sort of advertisements shown by Visa through various media sources like the spots they display where Visa is accepted but those places do not accept American Express.

Reality: If a person holds any of the two big four they won’t face the above problem and on many of the people follow the simpler path and just get everything done by any one of them.

4th Myth: A person can boost up their credit card scores if they pay more than they owe.

Logic: It’s true that if one pays more than they owe, it bumps the amount of credit that is available to the customer. Another thing that holds true is that the use of smaller percentage of credit available in a customer’s account referred to as keeping the utilization ratio very low that affects simultaneously the credit score.

Reality: Even though one has a negative balance of his account the situation is assumed to be a temporary situation. So if one has  a card with a credit of $1,000 or $100 there will be a zero balance shown for the scoring purpose.

5th Myth: If one uses his card wisely it would help in improving their credit score.

Logic: Both Debit as well as credit card looks alike whether they have MasterCard, Visa or any other logo.  Retailers treat all the cards in the same manner so both would have the same impact on the credit scoring.

Reality: A person holding a debit card & maintaining their bank accounts properly represents that the customer is a responsible consumer but while taking into credit scores these points are not taken into consideration.

6th Myth: There can be a minimum limit retailers could charge on credit card when the customer buys something from them.

Logic: It is uncommon that a person would find a sign saying that $5 minimum amount  for any credit card purchases. But if this facility was not allowed by the companies then surely they would have surely cracked down on this.

Reality: If retailers set a minimum charge then they are breaking the agreements with the company, because retailers have to pay interchange fees that varies and averages around 2% of sale value and includes the transaction fees on every credit card purchase.

We can easily know what is the reason that the store owner does not accept small credit card sale, however if they do so that could result in loosing the ability for accepting cards.