11 Credit Card Myths That Could Be Holding You Back From Cheap Travel With Miles & Points
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INSIDER SECRET: In some cases, opening a credit card can improve your credit score long term because having access to more credit will decrease your credit utilization ratio as long as you aren’t carrying a balance. Many people on the Million Mile Secrets Team have 12+ cards and credit scores over 800!
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. So let’s separate fact from fiction.
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11 Credit Card Myths Explained
Here’s a list of 11 credit card myths and why they could be hurting your chances to travel cheaply with miles & points!
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 our 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 the miles & points hobby is knowing your credit score.
Having a higher score improves your likelihood of getting approved for credit. So you can earn more welcome bonuses from the best travel credit cards!
When you check your own credit, it’s considered a “soft inquiry” and does NOT affect your credit score.
There are lots of places to get your credit score for free, including myBankrate.
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 into 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 Card, are worth keeping because the points they earn are so valuable. Most of the Million Mile Secrets team keeps this card because Chase Ultimate Rewards points are amazingly flexible!
Paying the $89 annual fee(waived the first year)on a card like the IHG® Rewards Club Premier Credit Card can also make sense, because you get a reward night certificate each year on your cardmember anniversary (worth up to 40,000 points). And you can use it at any IHG Hotel that costs up to 40,000 IHG points per night!
So you can see why some cards are worth keeping even with an annual fee!
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 bonus!
Credit card intro bonuses usually require you to spend a certain amount of money within a specific timeframe. For example, spend $3,000 within the first 3 months of opening your account.
But remember, the clock starts from the day you’re approved, NOT the day you received or activated the card.
So it’s important to keep track of dates when getting into miles & points!
7. Myth: When Deciding Which Card to Use, Only Look at Which Offers the Most Miles or Points
Big intro bonuses are great! But don’t choose a card solely based on the miles & points it earns.
Consider perks like yearly airline fee credits, rental car insurance, extended warranty protection, and trip or baggage delay coverage, when you’re deciding between cards. (enrollment required).
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!
American Express credit cards offer various perks such as extended warranties, purchase protection, and baggage insurance.
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 United℠ Explorer Card earns 2X United miles at restaurants, hotels, and on United Airlines purchases. Sure you’re earning extra United miles, but then you’re stuck looking for award flights only with United Airlines and it’s partners.
Some might prefer a card like the Chase Sapphire Preferred that earns 2X Chase Ultimate Rewards points for travel & 3X Chase Ultimate Rewards points on dining purchases. And Chase Ultimate Rewards are more flexible because they transfer to United Airlines and 11 other airlines or hotels.
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 or online through the Citi ThankYou Travel Portal and pay with your Citi Prestige card, you’ll get the 4th night free based on the average nightly rate of your stay (excluding taxes & fees). That means you will be saving 25% off the total nightly rate (before taxes) of a 4 night stay. And the free night will likely be more valuable than any points you’d earn.
One thing to note is that as of September 1, 2019, you’ll only be able to use this perk 2 times per year and you’ll need to make the booking through Citi ThankYou (not the concierge).
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 ratio. 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. 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 Bonus, You Can Put the Card Away and Not Use It Again or Cancel It Right Away
There are lots of travel cards with great bonuses. And some cards, like The Platinum Card® from American Express and Chase Sapphire Preferred, 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 canceling them.
It’s a good idea to keep using a 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 in the future.
Remember, banks have been known to close accounts they feel have been idle for too long.
So if you have applied for cards with annual fees, it’s okay to evaluate the card for ~11 months. And then cancel it to avoid the annual fee if you decide you don’t want it. It’s very easy to cancel a card.
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.
The fastest way to earn miles & points is from travel credit card bonuses and spending.
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 travel cheaply.
Are there any credit card myths you hear all the time? Let us know in the comments!
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For rates and fees of the Blue Cash Everyday Card from American Express, please click here.
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Editorial Note: We're the Million Mile Secrets team. And we're proud of our content, opinions and analysis, and of our reader's comments. These haven’t been reviewed, approved or endorsed by any of the airlines, hotels, or credit card issuers which we often write about. And that’s just how we like it! :)