{"id":15372,"date":"2021-04-28T12:05:37","date_gmt":"2021-04-28T18:05:37","guid":{"rendered":"https:\/\/www.lexingtonlaw.com\/blog\/?p=15372"},"modified":"2024-05-06T13:28:21","modified_gmt":"2024-05-06T19:28:21","slug":"common-money-myths-debunked","status":"publish","type":"post","link":"https:\/\/www.lexingtonlaw.com\/blog\/finance\/common-money-myths-debunked.html","title":{"rendered":"10 common money myths debunked"},"content":{"rendered":"\n
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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice.<\/em> See Lexington Law\u2019s editorial disclosure for more information.<\/em><\/a><\/p>\n\n\n\n

Personal finance can be a complicated topic. People don\u2019t often openly discuss personal finance, so it\u2019s hard to know if you\u2019re holding onto some incorrect money beliefs.<\/a> And yet, understanding financial matters is crucial. Personal finance knowledge empowers you to better manage your finances and understand your options. It also helps ensure other people can\u2019t take advantage of your lack of information. <\/p>\n\n\n\n

Luckily, if you don\u2019t have a money expert in your life to discuss these matters with, you can find answers online. This is a great place to start. Keep reading to learn about these 10 common money myths. <\/p>\n\n\n\n

1. Credit cards are too risky to use<\/h2>\n\n\n\n

This first myth is heavily debated in the personal finance community. You\u2019ll find many people standing behind the statement that credit cards are too risky to use. In fact, famous American radio host and finance advisor Dave Ramsey tells his viewers they should cut credit cards out of their lives. But while Ramsey has helped thousands of people get out of debt and does excellent work, we disagree with him on this point.<\/p>\n\n\n\n

Let\u2019s set the record straight: Credit cards can be a good thing as long you\u2019re careful with them and understand the factors that impact your score. When used responsibly, a credit card can improve your score, which will open the door to many other opportunities. A great credit score means you can get better interest rates and be approved for auto loans, mortgages, personal loans and much more. <\/p>\n\n\n\n

Additionally, many credit cards offer benefits such as cash back, gift cards or travel points. If you use your credit card responsibly and never pay interest, these are free benefits you can take advantage of. <\/p>\n\n\n\n

Of course, you can only reap these benefits if you pay your credit card in full and on time. Racking up debt, missing payments or making late payments will all lower your credit score.<\/p>\n\n\n\n

Those who are anti-credit cards fail to touch on what happens when you don\u2019t have a credit card. Unfortunately, if you don\u2019t have one, you may not have a very detailed credit history. And if you have a thin credit history, you\u2019ll have trouble getting approved for items most people need, such as a rental lease, a mortgage or an auto loan. <\/p>\n\n\n\n

That\u2019s why it\u2019s recommended you get a credit card early on and start building your credit history. This will also help you establish responsible spending habits at an early age, which means as you get more credit later in life, you\u2019ll know how to handle it without being tempted to spend beyond your means. <\/p>\n\n\n\n

If you\u2019re not sure you can be responsible with your credit card, start with a low credit card limit or a secured credit card<\/a>. This allows you to start small without risking significant debt. <\/p>\n\n\n\n

2. Bankruptcy wipes the slate clean<\/h2>\n\n\n\n

Bankruptcy may seem like a clean, fresh start, but in reality, it\u2019s only one option. You should never have bankruptcy as your first solution. In fact, you should do everything in your power to avoid filing for bankruptcy. <\/p>\n\n\n\n

Bankruptcy has hugely negative consequences on your credit history and immediate financial opportunities. Depending on what type of bankruptcy you file (Chapter 7 versus Chapter 13)<\/a>, it can stay on your credit report for seven to 10 years. This will make acquiring any type of financial services (loans, credit cards, rental leases, etc.) extremely difficult. <\/p>\n\n\n\n

Additionally, you don\u2019t actually get to escape all your debt. Many people assume bankruptcy will wipe all their debts away with one bankruptcy filing, but this isn\u2019t the case. Bankruptcy is meant to help people in a dire financial situation come to terms with their debts. <\/p>\n\n\n\n

The situation is evaluated on a case-by-case basis. Some people\u2019s debt is restructured and they still need to continue with (reduced) payments. Some people will have their debts discharged, but certain debts can\u2019t go away. <\/p>\n\n\n\n

The following debts typically can\u2019t be discharged:<\/p>\n\n\n\n