Money

Nearly half of millennials get one crucial detail wrong about credit cards

Some millennials still have a lot to learn about using plastic, according to a LendEdu survey.

The survey, of 500 respondents, found that 45 percent of millennials didn't know their credit-card interest rate.

About half said they carry a balance from month to month. 36 percent said they had maxed out a credit card, 34 percent said they were not aware of how much the late fee would be if they missed a payment and 17 percent said they don't know their current card limit, the survey shows.

For the 29 percent of respondents who had missed a payment, 17 percent thought their credit score would remain unchanged afterwards and almost 6 percent believed a missed payment made their credit score go up.

Also "the majority of millennial credit card holders are unaware of a rule that allows them to protest an interest rate hike from their credit card company," the survey says. When asked, "If your credit card company increases your interest rate, can you do anything about it?" 68 percent of respondents wrongly believed they would have to accept the increase.

Under the Credit Card Accountability and Disclosure Act, cardholders actually have the right to refuse to pay a higher annual percentage rate set by the credit card company if they meet certain requirements.

What's encouraging, though, is that the majority of respondents were correct about what could happen if they misuse a credit card. Aware of the risks, 41 present even saw using cards as "scary," according to the survey.

Carla Dearing, chief executive officer of financial-advice website SUM180, has some tips to quell that fear and become more efficient with your plastic: "Do not get a credit card while you're in college," she says. "Wait until you graduate and have a job that lets you to pay off your credit cards in full every month."

Mark Cubanavoids using credit cards altogether, and that's one option. But many experts agree that, if you follow the guidelines, using a card in college can help you build good credit early on.

"When you do open a credit card," Dearing says, "understand the terms. Know your credit limit and pay attention to the fine print about what happens when you miss a payment."

Be aware of high interest rates, too. And "you probably don't need more than one or two credit cards," Dearing adds. "The fewer cards you have, the more carefully you will be able to manage your account."

Try your best to pay off your balance in full every month. If you can't, she says, then you might be living beyond your means and need to make some adjustments to your spending.

Tom Corley, an accountant and financial planner who studied the habits of millionaires for five years, also subscribes to that idea. In fact, he says, it's one of the keys to getting rich.

Credit cards can carry significant risks if not used properly, according to the survey. But if you follow the rules, they can be "extremely useful and greatly enhance your credit profile."

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