Common Credit Card Misconceptions
I grew up in Dave Ramsey country, so I've always had the assumption that credit cards are bad. Or, if not bad, something that you don’t mess around with. And they are — if not managed correctly.
Some Common Misconceptions of Credit Cards or “Travel Hacking”:
People who have multiple credit cards will go into debt
This is true for those who can’t manage their cards, but we open multiple cards and use them as debit cards then pay them in full every month so we don’t pay interest. We also don't spend beyond our means just to get free travel. If you’re spending more than what your budget allows or you’re paying interest on your travel rewards credit cards, reevaluate and come back to this hobby when you can make time to better understand the strategy. It’s definitely worth it but not if it causes financial anxiety. You can always start slow with one card and see how that works for you before moving on to another.
It’s too difficult to learn how to use credit card points
I used to see these YouTube channels where people would show their binder full of credit cards, and I would think, “How insane. We would never do that.”
Well, joke’s on us. But it’s okay! Now we have our own stash of cards!
So how do we keep all of our cards organized? The TravelFreely app! This is an amazing and free tool that you can use to keep track of which cards you open and when you’re due for a yearly fee. There's no personal credit card info you have to enter, just which card you opened and when. It also keeps track of the points from welcome offers you’ve gotten over the year! Unless you want to keep a spreadsheet to keep organized yourself, I highly recommend getting this app to keep track.
My credit score will tank opening that many cards!
Opening multiple credit cards won’t automatically harm your credit score, as long as you manage them responsibly. The key to maintaining a healthy score is ensuring that you make timely payments and keep your credit utilization low. Each new credit card may cause a small, temporary dip in your score due to a hard inquiry, but if you consistently pay on time and avoid maxing out your cards, your credit score can improve over time. Additionally, having multiple cards can increase your overall credit limit, which can help lower your credit utilization ratio—a factor that contributes positively to your score. As long as you’re mindful of your spending and stay disciplined, multiple credit cards can be a tool for building and improving your credit history.
Here is the breakdown of what contributes to your credit score:
• Payment History 35%
• Credit Utilization/Amounts Owed 30%
• Credit Age / History 15%
• Account Mix 10%
• Account Inquiries 10%
So you can see the account inquiries, or opening of cards, does not as negatively affect your credit score as you would think.
Using your credit card like a debit card and paying it ON TIME and IN FULL every month will increase your credit score over time. Along with your low card utilization with the amount of credit you’re being given, this is a recipe for a healthy credit score and getting free travel as a bonus!
What is a misconception about credit cards that you have always heard or been stuck on?
