8 Shocking Myths About Credit Cards & Credit Card Rewards – Debunked!
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Credit cards have become a ubiquitous financial tool for consumers across the world. With the rise of credit card rewards, credit cards are no longer just for making purchases but also help with building credit and earning perks and cashback. However, many myths and misconceptions continue to surround credit cards and their rewards programs, which can prevent individuals from using them to their full potential. In this blog, we debunk eight of the most common myths about credit cards and credit card rewards to help you make informed decisions about your financial strategy. Click to get FREE credit report.
1. Myth: Credit card rewards are not worth the effort of earning them.
A common misconception is that the rewards from credit cards are meager and not worth the effort of earning them. However, credit card rewards can add up quickly if you use your credit card strategically and maximize earning opportunities. By using your credit card for everyday purchases, travel, and large expenses, you can earn substantial rewards, such as cashback, points, miles, and other benefits.
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2. Myth: Applying for a credit card will hurt my credit score.
Another myth about credit cards is that applying for one will hurt your credit score. While applying for a credit card can cause a temporary dip in your score, it’s typically minimal and recovers quickly. Moreover, if you use your credit card responsibly, including paying your balance on time and never missing a payment, you can improve and maintain your credit score over time.
3. Myth: Rewards credit cards are only for high spenders.
Many people assume that rewards credit cards are only beneficial for high spenders. However, there are options for all budgets, including rewards credit cards that offer cashback on everyday purchases, such as groceries and gas. By strategically using your credit card for daily purchases, you can earn rewards and benefit from the perks, regardless of your spending level.
4. Myth: Credit card rewards are too complicated to understand.
Some people avoid using credit cards and credit card rewards due to the perceived complexity of the rewards programs. However, most credit card companies provide detailed information about their rewards programs, including how to earn rewards, the value of rewards, and redemption options. Additionally, credit card companies often offer customer support and resources to help you understand and optimize your rewards program.
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5. Myth: Credit card rewards are subject to taxes.
Many people believe that credit card rewards are taxable. However, according to the IRS, credit card rewards are considered discounts, not income, and, therefore, not taxable. However, if you receive cashback rewards, it may be subject to taxes if it’s considered a referral or signup bonus.
6. Myth: Credit cards with annual fees are never worth it.
Some credit cards require an annual fee, which can deter people from applying for them. However, high-fee credit cards often offer substantial rewards and exclusive perks that can justify the annual fee’s cost. Before deciding on a credit card, analyze your spending habits and determine if the benefits outweigh the annual fee’s costs.
7. Myth: Having multiple credit cards will hurt my credit score.
Contrary to popular belief, having multiple credit cards may not hurt your credit score. A significant factor in determining your credit score is your credit utilization rate, which is a ratio of how much credit you use compared to your credit limit. By spreading your purchases and credit utilization over multiple credit cards, you can maintain a lower credit utilization rate and potentially increase your credit score.
8. Myth: Using a credit card will lead to debt and financial ruin.
Finally, some people avoid credit cards altogether, assuming they will inevitably lead to debt and financial ruin. However, responsible credit card use, including maintaining a low balance and consistently paying your bills on time, can help you build your credit and improve your financial standing. By using your credit card strategically, you can enjoy the benefits of rewards programs without falling into debt.
In Conclusion, credit cards and credit card rewards are a prevalent part of modern-day financial management. By debunking these common myths, we hope you can make informed decisions about credit card use and identify the credit card that best suits your financial needs. Remember to read the fine print, understand the terms and conditions, and utilize resources to maximize your credit card rewards.
Stay informed, stay responsible, and enjoy the benefits of credit card rewards!
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