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7 Common Myths About Credit Card Rewards

7 Common Myths About Credit Card Rewards

It seems that few Americans are actually bothering to carry cash around these days, partly as a result of credit card convenience and reward programs. However, when so many credit card rewards seem too good to be true, how can you separate fact from fiction and myth from truth? Let’s get to the bottom of some of the most persistent credit card myths out there right now.

1. Applying for a Credit Card Hurts Your Credit Score

Simply put, applying for a credit card will not hurt your credit score—up to a certain point. “New credit” enquiries account for about 10% of your credit score; in other words, your credit score will always carry a record of how many credit cards you’ve applied for.

That said, most people have nothing to worry about. Unless you’re applying for a new credit card every month, you’re not going to see much of an impact on your credit score.

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2. Your Credit Score Improves When You Cancel an Unused Credit Card

Conventional wisdom seems to hold that canceling the cards you don’t use will improve your credit score; but keeping those accounts open, even if you’re not using the card, can actually work in your favor.

Your credit score is determined in part by how much of your available credit you’re actually using. For any of your unused credit cards you’re using 0% of the available credit on that account. This works to your advantage.

However, if the cards in question have a monthly fee that you don’t want to pay, closing the unused, fee-laden ones is probably the right move.

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3. You Can Earn Rewards While Carrying a Balance

One of the biggest advantages of carrying a credit card is the promise of earning rewards. To fully take advantage of card-holder perks, you want to make sure you’re paying off your entire balance every month.

The credit cards that have the best perks typically make up for it with astronomical interest rates. While you might be earning small rewards by paying just the minimum balance every month, you’re almost certainly going to be paying more in interest than you’re earning back in rewards points.

4. Earning Points and Miles Isn’t Worth It

You might be tempted to think that earning points or miles isn’t worth it. The truth is, if you pay off your balance on time every month, credit card rewards are definitely worthwhile.

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Studies have revealed that paying with cash can be a big help when you’re trying to stick to a budget. A psychological switch is flipped in our heads when we pay with a credit card, which tricks us into thinking we have more money than we do.

That said, forswearing credit cards entirely isn’t necessary. If you make a habit of paying off the balance promptly, the points you earn simply by making your regular purchases can definitely add up over time.

5. You Can’t Get a Credit Card Just for the Sign-Up Bonuses

Here’s another myth that’s false, but carries a number of caveats. There are some great credit card sign-up bonuses out there right now, which can make it pretty tempting to sign up for a card, make off like a bandit with the bonuses and then stop using the card.

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Remember what we covered above: signing up for an excessive number of credit cards (i.e. just for the sign-up bonuses) will begin to impact your credit score over time. That said, if an offer is too good to pass up, applying for a new credit card now and then for the sign-up bonuses isn’t going to kill your credit score.

6. Lowering Your Credit Limit Can Improve Your Credit

Having a large credit limit on your cards can be a double-edged sword. Maintaining a lot of available credit is beneficial to your credit score, but you might be more likely to spend since you know you have credit available.

However, before you use your credit card to make the down payment on that new Mustang you’ve been coveting, remember that a high credit limit will only help you if you don’t use it. What you definitely don’t want to do is ask for a lower limit; keeping a lot of unused credit will work in your favor in the long run.

7. Your Credit Score Will Take Care of Itself

Finally, let’s finish off with a reminder that having good credit is more complicated than just paying off your credit cards every month. Credit scores have a number of purposes, and chief among them is to help determine your overall fiscal responsibility.

Even if you’ve never let a balance carry over from month to month, there are still a number of factors that go into determining your credit score: how many open accounts you have, how many cards you use regularly, etc. Maintaining good credit requires something of a strategy, and knowing how to play the game is something we all have to learn at one point or another.

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Published on October 8, 2018

13 Incredibly Useful Tactics to Help You to Stick to Your Family Budget

13 Incredibly Useful Tactics to Help You to Stick to Your Family Budget

Are you having trouble sticking to a family budget? You aren’t alone.

Budgeting is difficult. Creating one is hard enough, but actually sticking to it is a whole other issue. Things come up. Desires and cravings happen. And the next thing you know, budgets break.

So how can you stick to a family budget? Here are 13 tips to make it easier.

1. Choose a major category each month to attack

As the saying goes, “Rome wasn’t built in a day.” With that in mind, one approach to help you get into the habit of sticking to a budget is simply starting slow.

Spend too much on Starbucks runs, eat out too often, and have an out-of-this-world grocery bill? Choose one bad habit and attack.

By choosing one behavior to focus on, you’ll prevent yourself from being overwhelmed. You’ll also experience small victories, which help you gain positive momentum. This momentum can then carry over into your overall budget.

2. Only make major purchases in the morning

If you’re making large purchases in the evening, there’s a good chance you’re doing so after a long day and you’re probably tired.

Why does this matter? Because our judgement tends to be off when tired – our willpower is compromised.

Instead, only make major purchasing decisions in the morning when you’re energized and refreshed. Your brain will be firing on all cylinders and your resolve will be high. You’re less likely to give in and settle at this point.

3. Don’t go to the grocery store hungry

Have trouble with impulse buys at the grocery store? If so, there’s a good chance you’re going grocery shopping while hungry.

The problem here is that when you’re hungry, everything looks good. So you’re more likely to make split decisions on things that aren’t on your grocery list.

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Instead, make sure you eat prior to your grocery store trip. Then take your list, along with your full stomach, and go shopping. Notice how food doesn’t look quite so good when you’re not fighting cravings.

4. Read one-star reviews for products

Is there a product you just have to have (but maybe not really)? Check out the one-star reviews.

By reading all the horrible reviews, you may be able to basically trick yourself into deciding that the product isn’t worth your time and money.

Next thing you know, you didn’t make the purchase, you saved the money, and you feel good about the decision.

5. Never buy anything you put in an online shopping cart until the next day

If you are making a purchase online, it’s typically a two-step process. First, you click “Add to Cart” and then you go in to review your cart and pay.

The problem is that there not typically much reviewing during step two. It’s generally click pay and there you go. However, this is the perfect point to stop for reflection.

Once you add to your cart, your best bet is to step away until the next day. Let the item sit there and grow cold, so to speak.

This gives you a night to “sleep on it” and decide if you really want and need to spend that money. If you wake up the next day and still find the purchase viable, then perhaps it’s time to go for it.

6. Don’t save your credit card info on any site you shop on

One of the other pitfalls of shopping online is that fact that most sites ask you to save your credit card information.

While the sites will frame it as a method of convenience, the truth is they know you’ll spend more money in the long run if your credit card information is saved.

The “convenience” takes away one last decision-making point in the purchasing process. True, it’s a pain to get out your credit card and enter the information every time. But guess what? That’s the point. If that inconvenience helps you stay on budget, then it’s worth it. Which leads into the next tip.

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7. Tape an “impulse buy” reminder to your credit card

Credit cards make spending much easier than cash. When you spend cash, you can literally see your wallet emptying. A credit card comes out, then goes back in. No harm, no foul.

That’s why it’s a good idea to tape a reminder to your credit card. Customize a message that is something along the lines of “do you really need this?” or “does it fit the budget?”

That way when you pull out the card, you get one last reminder to help you question your decision and stick to your budget.

8. Only use gift cards to shop on Amazon

Amazon is probably the easiest place online to blow money. It’s just so easy to click and buy. However, one way you can slow the process down is buy only using gift cards. Here’s how it works.

If you plan on making a purchase on Amazon, go to the grocery store and purchase a pre-loaded Amazon gift card of the proper amount. There’s no convenience fee, so you literally pay for the money you’ll spend.

Now take that gift card home and load it to your Amazon account. There’s your money to spend.

Why does this help? It makes you have to purposely go to the score and purchase the card in order to purchase the item. That’s a pretty deliberate thing that takes some time, commitment, and thought.

This process will effectively kill the impulse buy.

9. Budget using cash and envelopes

As mentioned earlier, it’s a lot harder to spend cash than swipe a credit card. You can take this even farther by using only cash, and separating that cash by budget category.

Create an envelope for each category and stick the cash in there at the beginning of each month. When the envelope is empty, no more spending on that category, unless you borrow from another (be careful of that approach).

This can be pretty helpful for people that have a hard time following transactions in their checking account, or keeping a budgeting spreadsheet.

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The envelopes simplify the tracking process, leaving no room for error. Nothing hides from you because it’s tangible in the envelopes in front of you.

10. Join a like-minded group

Making the decision to stick to something like budgeting is difficult. It takes long-term commitment.

You’re going to feel weak sometimes. And sometimes you may fail. That said, support from others can help strengthen resolve.

Support can come from a spouse or a friend, but they won’t always have the exact same goal in mind. That’s why it’s a good idea to join a support group that’s likeminded.

No need to pay here, as there are tons of free communities that fit the bill online.

For example, reddit has multiple subreddits that deal with budgeting and frugal living. You can follow, subscribe, and get active in those communities.

This will open your eyes to new tips and strategies, keep your goal fresh on your mind, and help you realize there are others dealing with the same struggles and being successful.

11. Reward Yourself

When you set a budget, it’s usually with a large goal in mind. Maybe you want to be debt free, or perhaps you want to see $10,000 in your savings account.

Whatever the case, the end goal is great, but the end is often far away, making it hard to see the end of the tunnel.

With that in mind, it’s a good idea to set mini-goals along the way. This helps you still look at the big picture but have something that’s attainable in the short-term to help with momentum.

But don’t stop there – set rewards for yourself when you reach that small goal. Maybe it’s an extra meal out. Or a new pair of shoes.

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Whatever the case, this gives you something in the near future to look forward to, which can help with the fatigue that can result in pursuing long-term goals.

12. Take the Buddhist approach

You don’t have to be a Buddhist to recognize some of the wisdom in the teachings. One of the tenets of the philosophy involves accepting that we can’t have everything we want. And that’s okay.

Sometimes you won’t feel good. Sometimes you’ll have cravings. You can’t deny them. But you can recognize them, accept them, and let them pass by. Then you move on.

Apply this to the times you want to do things that will break your budget. You’re going to have the desire to eat out when you shouldn’t. You might want to stay out and spend too much at happy hour with your work friends.

The feelings will come. Recognize them, accept them, but let them go.

13. Set up automatic drafts to savings

If you wait until you’ve spent all your budgeted money to deposit money into savings, guess what? You probably aren’t going to put any money into savings.

It’s too easy to see that as extra money and end up using it to treat yourself.

Instead, set up automatic savings withdrawals. That way, the money is marked and gone before you can even think about it. It becomes a non-issue. It’s no longer “extra.” It’s just savings.

Conclusion

Sticking to a budget can be difficult. No one is denying that.

However, if you can do a few things to set yourself up for success, and put some practices in place to curb impulse buys, then you can (and will!) be successful sticking to your family budget.

Featured photo credit: rawpixel via unsplash.com

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