Don’t Believe These 7 Credit Card Myths
by John Morell
Myth No. 1: Writing ‘See ID’ on the signature line on the back of your cards will stop a credit card thief cold and absolve you of any liability if a thief uses it.
The Reality: An unsigned credit card is invalid, technically, according to the agreements that card issuers have with retailers. Moreover, many clerks don’t even check for signatures at all, meaning that they’re unlikely to see “See ID” on the back of your card, even if it is there.
Myth No. 2: There’s no credit limit on your American Express card, so you can buy anything.
The Reality: AmEx has changed; it no longer issues only charge cards — the type that allow you to rack up a lot of debt, as long as you pay off the entire debt every month. They issue credit cards, too, which allow you to carry a balance you want.
“There is no preset spending limit. It’s dynamic. It can change based on your financial situation and how you use the card,” says Mona Hamouly, a spokeswoman for American Express. “We have customers who make extremely large purchases with their cards, but that may be part of their profile.”
Myth No. 3: You need one of each of the big cards — Visa, MasterCard, American Express and Discover — in your wallet because you may be stuck someplace that accepts one and not the others.
The Reality: “If you have two of the big four, you’re not likely to have any problems,” says Linda Sherry, national priorities director for Consumer Action in Washington, D.C., “and millions of people just get by with one. It’s much simpler.”
“Remember: All those cards with your name on it don’t make you rich and powerful, and in the end, you could become poor because of them.”
Myth No. 4: You can give your credit score a boost by paying more than you owe.
The Reality: “Even though you may be below zero on an account, it’s assumed that’s a temporary situation,” says Roslyn Whitehurst, a spokesperson with the credit bureau Experian. “Whether you’ve got a credit of $100 or $1,000, it still shows as a zero balance for scoring purposes.
Myth No. 5: Using your debit card wisely can help your credit score.
The Reality: “Having a bank account with a debit card and maintaining it properly shows that you’re a responsible consumer,” says Sherry. “But it is not taken into account” in credit scores, she says.
Myth No. 6: Retailers can set a minimum amount you can charge on a credit card when you buy something from them.
The Reality: Retailers who set minimum charges are breaking their agreements with the card companies.
If you need to use a card for a small transaction that’s against store policy, you can object, although you may be invited to take your business elsewhere.
The other thing to do is contact the credit card company. “We want to know about retailers who do this,” says Matt Towson, a spokesman for Discover Financial Services. “It violates our contract with them.”
Myth No. 7: If you go over your credit limit and pay it back before the due date, you’ll be fine.
The Reality: It’s true that credit card companies don’t want to decline your purchase when you go over your limit. And if you’re buying something that puts you a few dollars or more over the top, there’s a good chance they’ll give you the green light. But remember, every time you pass that credit limit, even for a short period, you could give the issuer a reason to boost your interest rate to penalty rate levels — sometimes more than 30 percent.
You’ve also triggered one of those nasty fees that can eat up your account. Taken over time, those fees can add up and hinder your ability to draw down your debt. “It just makes sense for the company,” says Sherry. “They know you don’t want to have the card declined, so they quietly penalize you the $30 or $40 over-limit fee.”
To avoid it, try calling before your purchase to see if they can give you at least a little bump in your credit line.