5 Credit Card Truths Your Parents Probably Didn't Teach You

by Lyle Daly | Updated Sept. 16, 2021 - First published on May 21, 2021

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Two young women paying for purchases with a credit card.

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Many of us learn about credit cards from our parents, but we don't always get the full story.

Who first taught you about credit cards? Quite a few Americans got these early credit lessons from their parents.

But there were likely some things your parents didn't teach you, which is normal. Most people, after all, don't know everything about credit cards. And since credit cards have changed significantly over the years, the info you got when you were young may not be 100% up to date. To fill in those gaps, here are the credit card truths you might not know about.

1. A credit card is almost always the best way to pay for purchases

Credit cards have a few key advantages over debit cards and cash. When you make purchases with a credit card and pay the bill on time, it helps build your credit. Your credit score doesn't benefit at all from debit card and cash payments.

If you have any rewards credit cards, you can earn cash back or points on purchases. Some debit cards offer this type of benefit, but it's uncommon, and credit cards tend to offer much more back.

Since credit cards aren't directly connected to your money, they add an extra layer of security. A thief could potentially drain money from your bank account if they stole your debit card. They couldn't do that if they only had your credit card.

Credit cards also offer better fraud protection. Legally, you're only liable for up to $50 in fraudulent credit card transactions, and most card issuers have zero-liability policies. For debit cards, your maximum liability depends on how quickly you report the fraud. If you do so within 48 hours, you're not liable for anything. After 48 hours, you're liable for up to $500 in fraudulent transactions. And after 60 days, there's no maximum.

There are really only two situations when it doesn't make sense to pay by credit card. If the transaction could be considered a cash advance or if there's an extra surcharge for credit card payments, then a debit card or cash are better options.

2. A 0% intro APR credit card is a smart way to finance major expenses

It's typically not a good idea to finance big purchases with credit cards because of their high interest rates. But 0% intro APR credit cards are the exception. This type of credit card has no interest on purchases for an introductory period, such as 12 months.

When you have a big purchase that you can't pay in full, a 0% intro APR credit card is a good way to go. Let's say you have to pay for a $2,000 home repair, and you don't have that much money saved. You could get a credit card with a 0% purchase APR for 12 months and pay off the repair bill for just under $170 per month.

With that method, you wouldn't pay a penny of interest. Just keep in mind that the APR shoots up after the introductory period ends, so you should try to pay off your balance before that happens.

3. A balance transfer card can help you get out of credit card debt

Credit card debt can be hard to handle. You'll keep getting charged credit card interest every month, which cuts into any progress you've made.

This is another area where a 0% intro APR offer can help. In this case, you should look into balance transfer credit cards. These offer a 0% introductory balance transfer APR. Once you open a balance transfer card, you can transfer your credit card debt to it. You'll then have the entire introductory period to pay off as much as possible interest free.

4. Many credit card terms are negotiable, but you need to ask

Your credit card's terms aren't set in stone. Credit card companies want to keep their clients happy, and they'll often be flexible about fees, rewards, and interest rates. Here are a few examples of how this works:

  • Charged a late fee because of a missed payment? Most card issuers will waive your first late fee if you call and ask.
  • Don't want to pay your card's annual fee? Contact the card issuer. It may waive the fee or mention another retention offer, such as a spending credit or bonus rewards.
  • Is your credit card's balance costing you lots of interest? Try asking for a lower interest rate.

The common denominator here is that you need to get in touch with the card issuer to ask for what you want. That saying "the squeaky wheel gets the grease" definitely applies when it comes to credit cards.

5. Think twice about closing a credit card

Closing a credit card isn't necessarily a bad decision. But before you do, consider the alternatives -- and the possible consequences.

Closing a card can affect your credit score. The age of your credit accounts is one factor in how your credit score is calculated. For that reason, it's recommended to keep your oldest credit cards open.

Your credit utilization ratio is another important factor. This is your credit card balances compared to all of your available credit. If you close a card, you'll lose its credit line. That can raise your credit utilization if you're carrying balances on any other credit cards.

If you're thinking about closing a card because it has an annual fee, there could be another option. You can often downgrade a credit card with an annual fee to a no annual fee card from the same card issuer. This allows you to keep the account open without a yearly cost.

There's a lot to learn if you want to get the most out of your credit cards. Now that you know these credit card truths, you should have a greater understanding of credit cards and the value they offer.

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