Common Myths About Credit Cards You Need to Know

Disclaimer: We are reader supported.  We may be compensated from the links in this post, if you use products or services based on our expert recommendations. Please read our Advertising Disclosure.

Is it really necessary to have a credit card or can you get by without one?

When used correctly (paid in full each month), credit cards can be useful, but they can also be a liability that you neglect to manage.  

You can often get by with a credit card most of the time. If you're having problems with credit card use and credit card debt, it may be time to close your credit card accounts and switch to cash-only until your debt is paid.

Here are five common myths about credit cards that you need to know before you decide to get one for yourself.

To build my credit, I will need a credit card?

In reality, paying your bills on time can help you build credit. If you pay your rent and utility bills on time or even make a payment regularly, you can build credit that will allow you to get a mortgage.

You can also ask your landlord for information about reporting your rent payments to credit bureaus. If you are always late paying your bills, utility companies or other businesses could send you to collection agencies.  

To build credit, you don't need access to a credit card if you are trying to simply improve or build your credit score. While it might be easier to use a credit card to build your credit history, you need to make sure that the card is used appropriately.

If you have high debt-to-income ratios, a credit card balance can negatively impact your credit score. You should be careful with your credit card usage, and ensure that you pay all bills right on time and do so every month.

I need a credit card to shop online or rent vehicles

If you have to rent a car, shop online, or make other purchases, in most cases your debit card will be sufficient.

You can do nearly everything with a debit card, with the obvious exception of not having enough money in your bank account to pay your bills which credit can help you with.  To rent a car, you can use your debit card.

You can have a car rental company place a hold on your debit cards for a specified amount. Be sure that you have the right amount in your checking account.

Although it can be convenient to have a credit you can only use rent a hotel room, or even get a rental car, this is not necessary. 

A credit card can make it easier to manage a hotel room or rental car. You should make sure you have enough money to cover the entire amount when you use your credit card.

This will help you avoid having to carry a balance on the card and paying excessive credit card interest.

I need a credit card when emergencies arise

Credit cards should not be used as a last resort in case of an unplanned emergency. You should create an emergency fund so that you will have the money that you need.

It's a good idea to have $1,000 in emergency funds, but it's better to have three to six months' worth of expenses because, in the end, you are going to save money.  A good emergency fund will enable you to deal with any setbacks without incurring debt.

A good idea is to have your emergency funds in a savings account linked to your checking account. This will allow you to quickly transfer money between accounts as needed when you are faced with this type of situation.

I need a credit card to get discounts on what I purchase

A store credit card can be used to get discounts at many stores. However, stores don't offer cards to offer discounts. They offer cards because they understand that not everyone will pay the card off each month.

They earn more on interest than on the discount they offer. If you do not pay the card in full each month, you will most likely pay more interest than the 10% you saved.

You need a credit card to earn rewards

It can be risky to use credit cards to get rewards. This is a risky financial move if you don't pay your monthly balance. Also, consider whether any annual fees are worth the potential rewards, or if you will be losing money by simply having this card. 

You should also remember that most people will not pay their credit card bills in full every month. The rewards company makes a profit from the customer's balance on a rewards card.

There are also debit cards that offer rewards points simply because so many people are looking for those special deals that are only available through this type of points-based system.