6 Credit Card Myths You Should Stop Believing

Credit card misinformation can cost you money and affect your credit score. Here are the most prevalent credit card myths that you need to know about.

Credit cards can be a complex subject -- just try reading through their lengthy terms and conditions for evidence of that.

We've all probably believed something incorrect about credit cards at one point or another, but following the wrong advice can come back to bite you. You could end up hurting your credit score or paying unnecessary fees.

That's why we're going myth busting on the biggest pieces of credit card misinformation.

1. You need to carry a credit card balance to build credit

We're starting with this myth because it suggests the exact opposite of what you should do with credit cards.

You don't need to carry a balance to build your credit. That just means you're paying unnecessary interest charges every month. It's always better to pay your bill in full to avoid that interest.

You do need to use your credit card regularly so you can build a positive payment history, which is the most important factor in how your credit score is calculated. But simply charging at least one purchase per month and paying it off by the due date will accomplish that for you.

2. You should cancel credit cards you're not using

Although it's normal to cancel products and services you're not using, this doesn't always apply to credit cards.

When you cancel one of your credit cards, you lose its credit line, so you'll have less available credit to your name. If you're currently carrying any credit card balances, this can cause your credit utilization to go up, and that accounts for 30% of your FICO® Score (the most widely used type of credit score).

Because of that, canceling a credit card can make your credit score decrease. It's often better to keep a card open so you still have its available credit and its account history.

3. You should never cancel credit cards

Sometimes people take the information above to mean that they should never cancel a credit card, but that's not quite correct. It may be better to cancel a credit card if you never use it or it has an expensive annual fee and you can't downgrade it to a no-annual-fee card.

You shouldn't cancel a credit card if doing so will significantly increase your credit utilization or if it's one of the cards you've had the longest, as the lengthy account history will be good for your credit. Otherwise, don't feel like you need to keep cards open for no reason, as it just gives you one more thing to keep track of.

4. Having multiple credit cards is bad for your credit

When you have several credit cards, one of the most common questions people will ask you is, "Isn't that bad for your credit?" It's not, because your number of credit cards isn't a criteria used in calculating your credit score.

To be fair, there are indirect ways having multiple credit cards can affect your credit score. Each credit card application requires a hard inquiry on your credit file, and those can decrease your score by a few points. Since account history length is a scoring criteria, having many new credit cards can also make an impact.

Those are two of the less-significant factors, though, and they shouldn't deter you from carrying multiple cards if you want to do that. If you already have excellent credit, it can make sense to get a few of the best credit cards to maximize your rewards.

5. Missing a payment always affects your credit score

There's always a feeling of panic when you get a notification about missing your credit card payment. You think your score is doomed. Late payments can do some serious damage to your credit score, but only if you miss the mark by at least 30 days.

Here's why -- your bank reports your credit card payments to the credit reporting agencies using codes. The code that corresponds to current accounts covers those that paid on time to those that are up to 29 days past due. The codes for past-due accounts start with those that are at least 30 days late.

While you should obviously get into the habit of paying on time, you don't need to worry about your credit score unless you're at least a month late. Now, banks can charge late fees the first day you're late, but you can usually call and get a late fee waived if it's your first one.

6. Credit card terms are non-negotiable

Many consumers assume that they need to accept whatever terms their bank has given them. In reality, banks want to keep you as a customer, and they'll occasionally make concessions to do so.

If you're paying a lot of interest on a credit card balance, ask them to lower it. If you're not sure a card is worth the annual fee, see if the bank will waive it for another year or give you a retention offer, such as bonus rewards, to make it worth your while.

You'll only know what you can get if you ask. The worst-case scenario is that your bank says no, so there's zero downside in trying.

Don't believe everything you hear

Believing credit card myths can have you paying fees and interest unnecessarily, keeping cards you don't need, or not getting cards that could earn you big rewards. Before you take anything at face value, do a little digging to make sure it's the real deal.