Here is the continuing saga of the TMM Top 20 Dumb Credit Rumors, #11-15.
(If you missed #6-10, you can find them here)
11. “I don’t need to check my credit score.”
Hmm… I think someone just stole your identity for saying that.
No, just kidding. But seriously, if someone really wanted to, they could steal your identity today and you would never know it. Why? Because you chose not to go online once a year to do a financial check up.
All you need to do is go to annualcreditreport.com to get your free credit report. The FTC requires the Big Three credit bureau’s to allow everyone to have access to their report for free every 12 months. So do not be fooled by the credit monitoring scam websites. They charge you for their “services” after 60 days anyway.
Make sure that you check your credit report thoroughly because no one else will. I fell victim to this at an early age. At the age of 18, I had two social security numbers, four aliases, lived in three states, and had a mortgage. Do you think that sent a red flag to the credit bureau? Nope. You are the only one that cares about your credit report. And if you don’t, no one will… well, except maybe the person who pretends to be you.
12. “Credit cards are the same as loans.”
Close, but no cigar.
Credit cards are different from loans in a lot of ways. While the same basic concept is that you borrow money and have to pay it back, plus interest… you missed the fact that credit cards are subject to the one of the most aggressive forms of interest calculation, fees and terms. Take for example the calculation of interest. Instead of interest compounded monthly on your principle, or your “balance owed” on a loan, credit cards charge interest based on the daily compounding of your “average daily balance.” This means that if you do not pay off the credit card every month, you could be paying interest on top of interest, interest on the new purchases that you make, in addition to paying interest on any carry-over balance from the previous month.
13. “Credit card contracts are standard and I do not have to worry about the details.”
No two credit cards are alike. Credit card companies do not have a “standard” industry-issued contract. And if you sign up for a credit card, read the fine print. It may take a while, but it will be worth it. If you do not understand it, take it to someone who does and ask him or her to explain it to you. Sure, it may be embarrassing to ask for help, but imagine how embarrassing it will be when you are up to your neck in debt and don’t know why. The excuse, “I didn’t know…” does not work anymore. So get reading.
14. “If I miss a payment, my terms won’t change (much).”
You better believe that if you miss a payment, the credit card companies will be all over that. Even a genuine error can turn into a fiasco with them because they have every incentive (and legal recourse) to charge you a late fee, slap on higher interest rates and demand higher minimum payments. Simply put, they make more money when you screw up. It’s all in your contract terms. Like I said, read.
15. “My credit cards terms will not change for as long as I have it.”
Denial, denial, denial… I feel like I am beating this concept over the head, but I have to do it.
You must make sure that you understand the terms of your credit card contract because the terms can (and will) change from time to time, even if you do not screw up. Credit card companies are required to let you know about any changes they make, but they usually do it by sneaking in the “Changes in Terms Agreement” into your monthly statement. Sometimes you have the option of not accepting the terms, if reject in writing by a given deadline. But if you do not see it, that’s not their fault. Some people do not open their statements, so they miss these changes in terms. Moral of the story: Make sure that you open your mail and READ!!!
Check back tomorrow for #16-20!
~K
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Top false beliefs about credit cards…
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