Most Americans Don’t Know About This Key Credit Card Benefit

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More than half of Americans don’t know how credit cards can help you do something important for your finances. Are you one of them?

Credit cards have a bad reputation because of their high interest rates. And, indeed, it’s a bad idea to go into debt on a credit card and keep a balance – it gets expensive very quickly.

Corn credit card have some important benefits you should be aware of when deciding whether or not to get a card. Any of these benefits can impact most aspects of your financial life – and a large portion of Americans don’t even know it.

The key credit card benefit that most people don’t know about

What is this major benefit of credit cards that so many people don’t know about?

It’s building credit.

A recent Investigation of the hiding place found that only 44% of women and 39% of men knew that having a positive credit history is a benefit of having a credit card.

In fact, the ability to use a credit card to build credit is one of the most important reasons to get a card. There are three main ways to do this:

First, credit cards help you build a positive credit history as you make purchases each month and pay off what you owe. Paying off what you owe each month shows lenders that you can be responsible for your debt and meet your obligations. Payment history is the most important factor in determining your credit score, accounting for 35% of your FICO score. Thus, on-time monthly payments to creditors have a major impact on your overall score.

Second, your credit utilization rate – the amount you owe relative to your total available credit – is also a key component of your credit score. So if you are responsible for not having a balance, you will increase your credit score.

Finally, the length of your credit history is also part of your score. A credit card is one of the first types of credit that many people have access to, allowing them to start building their credit history. You can even get a credit card if you have bad credit as a secure credit cards. These cards – which require you to put down a deposit equal to your credit limit – are available to almost anyone, including people who have recently filed for bankruptcy. They can be a lifesaver when you need to build (or rebuild) credit and no other lender will trust you to borrow.

Americans misunderstand how credit cards can help

Nearly a quarter of Americans also have another major misconception about using credit cards to build credit. About one in four respondents to the Stash survey believe that maintaining a balance on a credit card will help improve their credit rating.

Having a balance is neither necessary nor recommended to obtain the credit benefits that credit cards provide. Your score will not increase if you allow a balance to accumulate. And if it gets too high, your credit score could suffer due to a higher rate of credit utilization.

You can pay your balance in full when the bill comes in, never pay a dollar in interest, and use your credit card to boost your credit score.

Don’t miss the help with building credit provided by credit cards

Now you know some key facts that most Americans don’t know. Credit cards help you build credit, but you don’t need to have a balance to take advantage of this benefit.

If you’ve been hesitant to use a credit card, don’t wait any longer. Apply for a card today, make a few small purchases, and pay off the balance each month. Your account history will be added to your credit report and your new card will help show lenders that you are a responsible borrower they would like to do business with.

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