Credit card myths

Did you see The Early Show on CBS News yesterday (Wednesday)? It included a report by Rebecca Jarvis about some of the myths surrounding credit cards. In case you missed it, here are some highlights.

Credit cards and supporting ID

Did you know that most credit card companies prohibit merchants from asking for supporting ID when they swipe a card? With so much fraud around that’s crazy, right? Wrong. If a clerk in a store has access to your credit card details AND personal information contained in your ID (address, date of birth) then you could be much more vulnerable to identity theft.

That’s why credit card companies say that your signature is ID enough. It’s true that American Express and Discover don’t have an outright ban on stores asking for extra ID, but even they actively discourage it. And so should you.

Credit reports aren’t infallible

CBS News quotes experts who say that 80 percent of credit reports contain wrong information, even if your credit history is spotless.

It’s important to correct any error as soon as you can. However, attorney John G. Watts–whose firm, Watts Law Group, PC, of Birmingham, Alabama, advises many victims of inaccurate credit reporting–says that credit bureaus often refuse to remove erroneous information when asked, even if evidence of the mistake is provided. This blog will soon be passing on to readers John’s advice about what to do if you find yourself in that situation.

Credit scores aren’t boosted by positive balances

Some people think that they can improve their credit score if they overpay their cards, and keep a positive balance on their accounts. That’s a myth, and all that you’re doing is giving your credit card companies interest-free loans.

CBS News quoted a spokesperson from the Experian credit bureau who said that all positive balances are reported as zero balances for credit scoring purposes.

Credit cards–how to pick ‘em

Also yesterday, The Christian Science Monitor ran a feature about how to choose a credit card. Its advice? “Pick the issuer, then the card, to get the best deal.”

This tip was based on J.D. Power and Associates’ 2010 U.S. Credit Card Satisfaction Survey, which was reported on this blog on August 23. And it’s not a wholly bad idea.

However, there is another way of looking at this. If you’re serious about getting a great deal, you first need to analyze your credit card use in detail. If you regularly carry balances forward, then credit card rates may be your first priority. If you always pay on time and in full, then you may want to avoid annual fees, or find a good rewards program. If you need a balance transfer credit card, then you should look for a card with a long low- or zero-percent introductory rate.

Actually, that last one is a good example of where the Monitor’s advice falls down. Right now, the Citi® Platinum Select® MasterCard® is offering a zero annual percentage rate (APR) on balance transfers for an extraordinary 18-month introductory period. That could be exceptionally helpful to someone with a substantial balance on an existing card. But Citi didn’t top the J.D. Power survey, so wouldn’t be on a Monitor reader’s list of possible choices.

The best of both worlds

Of course, if you can find a great deal from one of the credit card companies that did head the J.D. Power list, then go for it. American Express holds the No. 1 spot, and it has products that could suit many people. For example, those who like cash back rewards, and spend a lot on their cards, might be tempted by the Blue Cash® from American Express card. It pays up to five percent cash back on gas, groceries and drug store purchases, and up to 1.25 percent on all other purchases. However, those rates only kick in after you’ve spent $6,500 on the card. Before then, the rates are a more modest one percent and 0.5 percent respectively.

The point is to always match the card you choose to your credit card use patterns.

Most popular / best credit cards according to IndexCreditCards.com visitors:

  1. 1. Discover® More Card – 0% APR on balance transfers for 12 months & 6 months on purchases, 5% cashback bonus in popular categories, up to 1% cashback bonus on all other purchases
  2. 2. Chase Freedom Card – 0% Intro APR and no Annual Fee, 5% bonus cash back in popular categories , 1% cash bank on everything else
  3. 3. Citi® Platinum Select® MasterCard® – 0% on purchases & balance transfers for Up to 18 months, APR as low as 9.99% variable. $30 statement credit.
  4. 4. Blue Cash® from American Express – Earn up to 5% cash back on gas, groceries and drug store purchases, and up to 1.5% back on all other purchases, no annual fee, fast approval under 60 seconds
  5. 5. Slate SM from Chase – 0% Intro APR, Now with Blueprint, patented fraud protection

  6. 6. American Express® Gold Card – 10,000 American Express Membership Rewards bonus points when you use the card for at least $500 in purchases within the first 3 months.
  7. 7. TrueEarnings® Business Card from Costco & American Express – 4% cash back for annual gas purchases up to $6,000, 3% restaurants, 2% travel, 1% everywhere else, 0% APR on purchases for first 6 months

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