Seven Myths About 0 APR Credit Card Offers That May Damage Your Credit… Or Worse
Are you considering 0 APR credit card offers? Read our myths first. In the following list we debunk seven myths about credit cards:
Myth #1:
You don’t need credit. Some people will try to tell you that you don’t need credit, that you should only buy what you can afford at that time. But think about it – how long would it take you to save up $20,000 to buy a new car? $120,000 to buy a house? The truth is that for most of us living in the realm of Middle America, credit is a necessary part of life if we want to live the American dream. It’s true. Should you save money to buy a couch or put it on credit? Probably save it up. But if you want to make a big purchase you will need to build your credit first.
Myth #2:
Applying for cards is terrible for your credit. Some people will tell you that applying for a credit card damages your credit. But you get 0 APR credit card offers – should you apply for them? The fact is that there can be some truth to this statement that applying is bad if you apply for too many credit cards. Fair Isaac developed the FICO score, and they hold the exact formula pretty close to their chest. But we do know that when you apply for a credit card you get an “inquiry” on your credit record. Too many inquiries can negatively impact your credit score. So can too much revolving credit, both debt and available credit. However, as long as you are not running around applying for every credit card in sight a couple inquiries won’t really hurt you and they can help you as you compare offers and pick the right card.
Myth #3:
Using all your credit builds your credit score. They say you have to spend money to make money. When it comes to credit you do have to spend some money to build your credit, that is, you need to use your credit cards. But you probably don’t need to use them as much as you think. How much of your credit is in use (your credit balances) accounts for about 35% of your FICO score. This is generally determined by your average balance for the month, even if you pay everything off at the end of the month. So be careful not to charge too much on your cards, that is not to get too near your credit limit, or you could actually damage your score.
Myth #4:
You should always apply for store cards if they send 0 APR credit card offers or other good incentives. Stores want you to shop there. Surprised? Probably not. But you need to be aware that they go to great lengths to customize your shopping habits. One way is to encourage you to get a card that is good at their store only. They may offer discounts or special financing for using the card, and also send you myriad coupons and discounts once you have the card. However, these cards are limited in that you can only use them at that one store. And applying for too many of them can impact your credit, so choose wisely.
Myth #5:
0 APR credit card offers are always Best. Yes, paying less interest is good. But sometimes there could be reasons for paying more. A zero percent interest credit card is not always the best way to go. Read this article about why higher interest might still be ok (LINK).
Myth #6:
Exaggerate your income to get the card you want. Some people believe that it is okay to stretch the truth about your income if you really want to get a certain card. This one is easy to debunk because this is illegal. In addition, usually it is not necessary, as credit cards do not require you to have a high income to get their card.
Myth #7:
Pre-approval offers are always a good bet. Most of us get many “pre-approved” and “pre-qualified” offers in the mail, but are they real? Some of these offers are just marketing, designed to get you to try and get their card. But they do mean something; usually, to pre-qualify or pre-approve you a company pulls your credit report and checks your score. Getting such an offer is a good sign that you may be eligible for credit, but it is not a guarantee. Always read the fine-print and apply only if the card seems valuable to you. Another note, though, don’t assume that the offer you received was the best one; check that same card online to see if there is a better offer (lower APR or better terms) that you might be able to get instead.
Bust the myths today by getting informed! And make the best choices for your financial future by running some numbers. This credit card interest calculator by CreditCards.com can help you figure out how long it will take you to pay off your credit cards and how much it will cost you:
http://www.creditcards.com/calculators/
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