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Ever wondered if having too many credit cards will hurt your credit score or if checking your credit score will affect it? Or if you should close a card before opening a new one?
There are a lot of myths surrounding credit cards and the world of miles & points. But I’ll help set the record straight. 🙂
I’ll share some common misconceptions that might be holding you back from the points & miles hobby.
11 Credit Card Myths Explained
Here’s a list of 11 credit card myths and why they could be hurting your chances for Big Travel!
1. Myth: Having Too Many Cards Will Hurt Your Score
According to the FICO website, your credit score is determined in part by your credit card utilization, or the amount you owe compared to how much credit is available to you.
When you have more cards, you have more credit available. And that helps your utilization! As long as you’re paying off your card in full every month and not maxing out your cards.
Million Mile Secrets team member Scott, for example, has an 800 score with over 20 cards open. He’s very diligent about paying his bills on-time and not carrying balances on his cards.
2. Myth for Many: Credit Cards Are a Dangerous Path to Debt
For some people, yes. If you know yourself and know that having the ability to spend a lot and only make minimum payments would be too tempting, then do NOT get in this hobby.
Collecting miles & points isn’t for everyone. So read my post on the 5 dangers of applying for credit cards before you get started.
The hobby probably isn’t for you if you don’t pay your bills on time, don’t pay attention to detail, and can’t track your credit card balances.
Folks in our hobby use credit cards the same way others use debit cards, in that we only charge what we can actually afford. And we pay our bills on-time (or early!) and in full.
So credit cards do NOT have to be a path to debt if you manage them appropriately!
3. Myth: Checking Your Credit Score Lowers Your Credit Score
One of the most important parts of getting Big Travel with Small Money is knowing your credit score.
When you check your own credit, it’s considered a “soft inquiry” and does NOT affect your credit score.
You can read more about how to get your free Experian FICO score here. Including all the ways to check your score for free.
And don’t forget my post about the best credit cards to help build your credit history and credit score.
4. Total Myth: You Must Carry a Balance to Build and Improve Your Credit History
This myth is absolutely NOT true. In fact, you can improve your score by paying your credit card bills early.
And carrying a balance will likely negate any rewards you’re earning.
If you don’t think you can pay your credit card in full, on time, every time, do NOT get in this hobby.
5. Myth: Annual Fees Are Always a Bad Idea
Many cards that earn miles & points come with annual fees. And often they’re waived the first year.
Sometimes it makes sense to cancel a card before the annual fee comes due, because the cost of the card isn’t worth the rewards you’re earning.
But that’s not always the case!
Some cards with annual fees, like the Chase Sapphire Preferred, are worth keeping because the points they earn are so valuable. I keep it because Chase Ultimate Rewards points are my favorite kind of points!
That’s well worth the $49 annual fee.
So if you’re deciding whether to apply for or keep a card with an annual fee, read my post about why some cards with annual fees can be worth it!
6. Myth: Your Minimum Spending Clock Starts When You Activate Your Card
Don’t make this mistake and risk losing out on your card’s sign-up bonus!
Credit card sign-up bonuses usually require you to spend a certain amount of money in a specific timeframe. For example, spend $3,000 within the first 3 months of opening your account.
So it’s important to keep track of dates when getting into miles & points!
Read my post about 4 common mistakes people make with minimum spending requirements.
7. Myth: When Deciding Which Card to Use, Only Look at Which Offers the Most Miles or Points
Big sign-up bonuses are great! But don’t choose a card solely based on the miles & points it earns.
For example, the Chase Sapphire Preferred card comes with primary rental car insurance, trip delay coverage, and lost or delayed baggage coverage. Meaning Chase will reimburse you a certain amount if your bags are lost or your trip is delayed!
8. Many Times a Myth: The Best Card to Use for an Airline or Hotel Purchase Is the One Affiliated With It
Sometimes the best card to use for an airline or hotel purchase is the one affiliated with it. But in some cases, it isn’t.
For example, the Chase Hyatt card earns 3X Hyatt points at Hyatt hotels. Sure, getting triple points is a good deal. But remember you’re earning Hyatt points.
Or consider the 4th night free perk from the Citi Prestige card.
When you book stays of 4 or more consecutive nights through the Citi Concierge and pay with your Citi Prestige card, you’ll get the 4th night free. And the free night will likely be more valuable than any points you’d earn.
Co-branded hotel cards I WOULD use for a hotel purchase are the AMEX Starwood Preferred guest cards.
With the Starwood Preferred Guest® Credit Card from American Express and Starwood Preferred Guest® Business Credit Card from American Express versions of the card, you’ll earn up to 5X Starwood points on purchases made at Starwood hotels.
Plus, using the AMEX Starwood Preferred Guest cards are one of the few ways to earn valuable Starwood points you can transfer to airline partners for Big Travel!
9. Myth: You Should Close a Card Before Opening a New One
In fact, you should NOT close a card before opening a new one. Because it will decrease the amount of credit available to you and hurt your credit card utilization. That could potentially lower your credit score.
As long as you’re able to pay your credit card bills in full every month, there’s no advantage to closing a credit card account. And keeping cards open for the long term will increase the average age of your accounts and possibly improve your credit score.
However, some banks limit the total number of cards you can have, like the 5 credit card limit from American Express. So if you’ve hit the maximum and want a new card, you’ll have to cancel an old one.
10. Myth: Once You Get the Sign-Up Bonus, You Can Put the Card Away and Not Use It Again or Cancel It Right Away
There are lots of cards with great sign-up bonuses. And some cards, like the Chase Freedom, Chase Sapphire Preferred, or AMEX Starwood Preferred Guest card, give you good reasons to keep using them because of ongoing perks, bonus points categories, and flexible points.
But other cards don’t offer great incentives. And you might consider not using or cancelling them.
I’d recommend using the card occasionally to build a relationship with the bank. And canceling a card right away could hurt your chances of being approved for more cards from that particular bank.
So if you have applied for cards with annual fees, it’s okay to evaluate the card for ~10 months. And then cancel the card to avoid the annual fee if you decide you don’t want it. It’s very easy to cancel a card.
Barclaycard, in particular, likes to see spending on your current Barclaycards before they approve you for more cards.
11. Myth: American Express Cards Are More Difficult to Get
There’s a rumor that it’s harder to get American Express cards. But that’s not the case!
In general, American Express uses the same credit score requirements as other banks. But it can help to have a longer credit history and to pay your bills on time.
But a lot of folks have misconceptions about credit cards, like having too many cards and checking your score will hurt your credit score. Or they think annual fees are always bad, and you’ll wind up in debt if you use credit cards.
These myths are just that…MYTHS! And it helps to know the facts so you can enjoy the miles & points hobby and get Big Travel with Small Money. 🙂
Are there any credit card myths you hear all the time? Let me know in the comments!