5 Credit Card Myths
Myth #1 - Keeping a small balance on your card will improve your credit.
Reality - Credit card companies report payment history and your debt-to-credit ratio to the credit bureaus. The amount of interest you pay to the credit card companies is not reported. Carrying a monthly balance will raise your debt-to-credit ratio and may actually have a negative impact on your score.
Myth #2 - Writing "See ID" in the signature field is an acceptable way to deter theft.
Reality - Look on the back of your card near the signature box. It should clearly state, "Authorized signature - not valid unless signed". By signing the card you are showing that you accept the terms of use. Visa's website frowns on the issue and states that merchants should request a signature before processing a transaction. Not having a signature on your card may allow thieves to create their own version and potentially use a fake photo ID to back it up.
Myth #3 - Fraudulent charges are your responsibility.
Reality - A federal law limits your responsibility for unauthorized credit card charges to $50. Some credit card companies offer even better protection, usually $0 liability on unauthorized purchases. If your card number is stolen, but your card isn't, you will not be liable for any unauthorized charges. The rules for debit cards are different. Liabilities can be up to $500 for debit cards depending on how quickly you report the loss or theft of the card.
Myth #4 - If your credit card company goes out of business your debts will be wiped clean.
Reality - Not a chance! If a credit card company goes out of business the accounts will be sold to another company or transferred to its creditors. You should continue sending in your payments on time to avoid late fees and dings to your credit profile.
Myth #5 - Being an authorized user will help you build credit.
Reality - Adding an authorized user to a credit card account allows that person to make purchases and do basic account actions. However, since authorized users are not responsible for the account, there are no benefits to their credit. When the credit card company reports to the credit bureaus, only the main account holder will see that information reflected in their credit report.
