Just about everyone has a credit card that they use-nearly 80% of Americans has at least one. Over 50% of the population in the US has at least two credit cards, and there are millions of people with many more credit lines open than that. Every demographic, from college students to senior citizens, is reporting wider use of credit cards. Because of these facts, it’s important to understand the impact credit cards have on your credit report and how to use these cards effectively without causing credit problems for yourself.

-Opening a New Credit Card Does Ding Your Credit: A lot of consumers think that if they don’t use their new credit card, it won’t have an impact on their credit score, but the impact to your credit score comes when your new credit card is issued, not when it’s first used. The average credit score is reduced by about 5 points with each new credit card. Don’t be fooled into thinking that you won’t see an impact if you never activate the card—by the time you receive your card in the mail, it’s already been reflected in your credit score.

- You Can Opt Out Of New Credit Card Offers: If you’ve tried the old “return to sender” trick asking card issuers to take you off their list, you’ve probably noticed that not much has changed. It costs them time and money to remove your name from their list. However, you can sign up on the credit bureaus’ “opt out” service and your name will be removed from the list that gets sold to credit card issuers. You can reach this service by dialing 1-888-5-Opt-Out and providing your information.

- You Don’t Have To Have ID to Use Your Credit Card: A lot of merchants require card users to show ID for every purchase, but your credit card and signature are legally sufficient for Visa and Mastercard purchases with any merchant as long as the back of your card bears your signature. Showing a clerk your ID along with your credit card can actually increase the potential for identity theft if the clerk memorizes your name, address, and date of birth.

- Your Credit Can Go Down Even If You Pay Off Your Balance In Full Every Month: Many people believe that paying off credit balances each month will result in a pristine credit score. The truth is that your credit score can still be hurt if you use too much of your available credit limit each month, regardless of when you pay off that amount. You can minimize this risk by charging less or asking for a higher credit limit, which could be hard to get in today’s financial environment.

- You Don’t Have To Pay A Fee To Get a Rewards Card: The idea that all rewards cards are created equal is false and if you look around at offers from various issuers, you’ll notice a wide variety of programs with a wide variety of costs. You should choose the reward program that offers rewards that you’ll actually use, but there are several that are issued at little or no cost to the consumer.

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Tags: credit cards, credit score, reward cards

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