Credit cards have become a ubiquitous aspect of modern life, enabling people to make purchases and access credit conveniently. Despite their widespread use, many people are unaware of some surprising aspects of credit cards that could impact their finances. Here are 10 things you might not know about credit cards.
1. They can improve your credit score
By using a credit card responsibly and paying your balance in full each month, you can establish a positive credit history and increase your credit score.
2. You may not be liable for fraudulent charges
If your credit card is lost or stolen and unauthorized charges are made, you’re generally only responsible for up to $50, and many credit card companies offer $0 fraud liability.
3. You can negotiate your interest rate
If you have a good credit score and a history of making on-time payments, you can negotiate a lower interest rate with your credit card issuer.
4. Closing a credit card can hurt your credit score
Closing a credit card can increase your credit utilization ratio, which is a factor in determining your credit score. This can cause your score to drop, especially if you have a high balance on other credit cards.
5. You may be able to earn rewards for paying your rent or mortgage
Some credit cards offer rewards for paying rent or mortgage payments through their platform, which can help you earn cash back or other rewards.
6. Cash advances come with high fees and interest rates
If you withdraw cash from your credit card, you’ll likely pay a higher interest rate and fees than you would for a regular purchase.
7. Your credit limit can impact your credit score
Having a higher credit limit can positively impact your credit utilization ratio and, in turn, your credit score. However, it’s important to use your credit responsibly to avoid overspending.
8. Some credit cards offer extended warranties
Certain credit cards offer extended warranties on purchases made with the card, providing additional protection beyond the manufacturer’s warranty.
9. You can use a credit card to build credit for your business
Using a credit card responsibly for business expenses can help establish a credit history and improve your business credit score.
10. Balance transfers can be a useful tool for debt consolidation
If you have high-interest credit card debt, transferring your balance to a card with a lower interest rate can save you money on interest and help you pay off your debt faster.
What did you learn about credit cards today?
Credit cards can be a powerful financial tool when used responsibly, but it’s important to understand their nuances to avoid costly mistakes. By taking advantage of rewards programs, negotiating interest rates, and using balance transfers strategically, you can make credit cards work for you and improve your financial situation.