Let’s get this out of the way right up front: All of the following myths are false! Let’s talk about why.
You should pay off your credit card before the statement posts.
Not if you want any reward points! In my experience, you only receive points/miles/cash back based on the spending that is reflected on your credit card statement. If you don’t wait for the statement before paying off the card, then you won’t get the rewards.
I did this a few times with my first credit card during college, wanting to make sure the payment was taken care of before I forgot about it. I stopped once I realized that my reward points weren’t accumulating! You can set up automatic payments if you are worried about forgetting – or there is often the option to customize your billing cycle so that all of your statements are posted around the same time.
You should carry a balance on your credit card.
Hopefully I have convinced you to wait for your credit card statement to post before you make a payment. The next step is deciding how much to pay. I have heard several people recommend that you should avoid paying the bill in full, or “carry a balance” to improve your credit score.
While this will NOT increase your credit score, it will accomplish two things:
- You will pay more than you need to in the long run because your future bills will include interest on whatever you didn’t pay off.
- It will actually damage your credit score if you are leaving a high balance on your card. (Check out this post for more information.)
So… I pay in full.
Of course, it’s a different story if you can’t afford to pay your full credit card bill each month. Do what you need to do, but you may end up paying quite a bit extra in credit card fees because their interest rates tend to be fairly high.
You can't access credit if you don't have a credit history.
It’s harder, but we all start somewhere!
Credit cards
“Beginner” credit cards usually have high interest rates and limited perks. That’s fine as long as you pay off your balance in full every month so that you don’t have to pay any interest.
A secured credit card is another option, where you will have to make a refundable security deposit in exchange for the credit line.
If you don’t need to access your own line of credit right away, a family member (or friend) can add you as an “authorized user” of their credit card. You will benefit from their responsible credit management if the credit card company reports activity to authorized users’ credit files. Be careful, though! It is risky to tie yourself to someone else’s credit if they are not responsible with it.
Other types of credit
Loans (student loans, car loans, etc.) are part of this whole credit situation, too. Similar to beginner credit cards, you may find yourself with a higher rate on your loan if you have no credit or poor credit. You will also likely need a cosigner with good credit who agrees to pay off the debt if you don’t make the payments.
Thanks, Investopedia and Credit.com, for helping to inform this post!