Credit Card Debt: Fact Vs. Fiction

There seems to be this good vs. evil two faced idea in the credit card world. Everybody hears the same warnings for credit cards along with their perks. Yes, not paying the full amounts will rack up massive debt amounts, while on the other hand you want to use your credit card in order to better your credit score. Then you here all the experts say as long as you pay your credit card debt in full and spend wisely you will be a o.k. Yea well we’re human and sometimes things happen. Whether your car you use to get to work every day breaks down and you need to get it fixed or you just really wanted that new stereo system. The point I’m trying to get at is most people will always find themselves in debt, it’s a part of life. Knowing that the average American consumer will find themselves in debt, it is important for them to distinguish fact vs. fiction concerning credit card policies. Below is a list credit card misconceptions along with an explanation of the truth.

1) So when I write “see i.d.” on the back of my credit card that will take away my liability of fraudulent charges.


Nope sorry, actually when you write that the card is technically not valid. A credit card is not active until it is signed by you with your name. The clerk ringing up the charge should ask the person to sign the back of the card and compare it to the signature on your driver’s license. We all know that your average store clerk probably doesn’t care that much and wants to get things done as fast as possible. If your card is stolen and fraudulently charged you are still liable to up to $50 dollars even if you sign it “see i.d.” To sum things up it really doesn’t matter when you write that on the back of your credit card.

2) Some places don’t take certain kinds of credit cards, so that means I should just get all the major ones just in case.

That’s just a bad idea. For one thing having too many credits makes balancing your budget a pain. Just when you think you have paid all your credit card debt you realize you forgot about one of your cards and now the payment is late, meaning now you have to pay the interest along with the principle amount. In actuality you only really need two major ones and you will be alright. If you are at a store that doesn’t accept two of the major credit cards, then you probably shouldn’t be shopping at that store. Also, a little personal finance tip, you should always carry an emergency $20-40 cash with you. Hey life happens and sometimes you find yourself in unfortunate situations. Just remember cash is king.

3) I want to boost my credit score so sometimes I pay the credit card companies more than I actually owe.

It does not work this way. This has the ability to increase your credit availability. It’s also true that keeping the debt to credit ratio percentage low will help your credit score. The Credit companies see this as a temporary situation. Essentially you can have a bill of $1000 and pay $1500 and this will be seen as a balance of zero to the credit scorers. The credit card companies will see this as a credit of $500. Your FICO credit score does not change. In conclusion just pay the amount that is owed for credit cards.

NOTE: this is not true for all other kinds of debts.


4) I went to a bar last night and they had a sign that said “$20 minimum for credit cards”, they are allowed to do this.

We’ve all been to stores and restaurants that have a minimum sales amount for purchasing with a credit card. They are absolutely not allowed to this under their contract with the credit card companies. So why do they do this? Well for every transaction that takes place with a credit card, stores are charged an average 2% of the total sales amount. If you buy a $5 drink, the restaurant pays the credit card company $1. In order to get more bang for their buck, stores and restaurants require a minimum purchase amount when using a credit card. So next time a store says you have to pay a certain amount when paying with a credit card, you can object. They might go tell you to take a hike, but you can call the credit card company and they will take actions into their own hands since it is a violation of contract.