Credit cards are a vital part of modern finance, but misconceptions about their use can lead to significant financial pitfalls. Take Charge America, a nonprofit credit counseling agency, highlights five common myths that consumers often believe. One myth is that closing unused credit accounts is beneficial; in reality, it can negatively impact your credit score by increasing your credit utilization ratio. Another misconception is that carrying a balance helps build credit, when in fact, paying off balances in full each month is the better strategy. Additionally, some believe that credit repair services can erase bad credit history, but only accurate information can be removed through diligent financial practices. The article also clarifies that while higher credit limits can lower utilization rates, they can also encourage increased spending, which can negate benefits. Lastly, balance transfer cards do not eliminate debt; they merely shift it. Understanding these myths is crucial for better financial management.
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