I’ve talked about credit card myths before, but I’ve discovered there are more out there. You may have heard of these, but let’s talk about them and see what you think!

Myth # 1: Your credit is not affected until you activate the card.

There has been some misconception about this with people – particularly those new to credit – that they can undo the damage by simply not activating the card. Sorry, but it doesn’t work that way. The hit against your credit is done when you submit the application, giving the credit card company to pull your report. The account shows as active on the books shortly after it’s approved, whether you activate the card or not.

Myth # 2: Merchants may require identification when using a credit card.

This one is a little bit of a gray area. Technically, it could be considered true as many merchants do ask for some form of ID when using your credit card. However, their agreements with Visa, MasterCard, American Express, and Discover specifically forbid them to require it – your signature is supposed to be enough.

Contracts with Visa and MasterCard are supposed to prevent them from even asking for ID, but many retailers do as a deterrent for fraud. No such provisions exist within the American Express and Discover contracts, though merchants are strongly discouraged from asking.

Myth # 3: There is such a thing as no-limit cards.

These are really marketing ploys more than anything else. EVERY card – even the Amex – has a spending limit. It’s determined by your income, your credit report, and several other factors. These cards are certainly more flexible than others, but there are limits on these as well.

For example, if you have a regular green Amex card that you spend about $3000-5000 on every month and you decide you want to purchase a $50,000 item, if you’re smart you’ll call Amex first to make sure it goes through. That kind of purchase is outside of your normal limits and they may cut you off – not necessarily because they think it’s fraud, but simply because it’s outside your limit based on spending patterns. Now, the Amex Centurion may be the closest thing to a no-limit card, but I’m sure, even then, there are limits.

Myth # 4: Credit card companies can’t change my rate unless I default

Wrong. Read the fine print. Credit card companies have the right to change the rates for any reason. They do have to notify you and give you the option to “opt-out” which, simply put, means you elect to close the card. As of now – it may change with the new Fed laws – they can change the rate for a variety of factors that may have nothing to do with your performance with them.

Myth # 5: Rewards cards are all the same.

Now, we’ve had lengthy discussions about rewards cards here on this board, so I know most people here don’t believe this one. Even still, there are those that think the best they can get is a 1% rebate. If you’re going the rewards card route and you pay your balances in full every month, it’s a good idea to rewards-shop for what suits your needs best. There are different rewards out there geared towards the different types of consumers. Don’t assume they’re all the same.

What’s your take on these myths? Do you know of any more?

Related posts:

1. Credit and Debit Card Blocks at the Pump
2. 20 Common Credit Card Fees to Watch Out For!
3. Watch Your Back: 8 Up and Coming Credit Card Fee-Creep Tricks
4. Virtual Credit Card Numbers: A Security Risk?
5. Watch out for the traps