6 Credit Card Myths You Need To Know The Truth About

As someone who works in the financial space, I have heard tons of bad advice regarding personal finance. People just love giving others advice (sometimes it is good). And, some of the worst advice I’ve heard has been credit card myths. I know that most people are only trying to help, but sometimes the advice…

Michelle Schroeder-Gardner

Last Updated: April 12, 2021

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credit card mythsAs someone who works in the financial space, I have heard tons of bad advice regarding personal finance. People just love giving others advice (sometimes it is good). And, some of the worst advice I’ve heard has been credit card myths.

I know that most people are only trying to help, but sometimes the advice is so bad that you wonder if that person is purposely trying to spread bad information!

Money is a funny subject like that, though.

Until we start having more open conversations about it and spend as much time learning about finances as some of us do reading the latest gossip, watching sports, or something else, then we still have a long way to go.

Talking about money, such as credit card tips and how to save money, can help everyone improve their financial life. After all, if no one talks about it, then you would never even know what mistakes you’ve made in the past. It would also be very hard to correct those mistakes.

Believing and following some of the most common credit card myths can be a major money mistake.

Some people rack up large amounts of credit card debt, and they do so because they aren’t aware of the credit card mistakes they might be making. According to a study done by NerdWallet, the average household in the United States (that has debt) has an average credit card debt of $15,482.

To add to those statistics, the National Foundation for Credit Counseling released their 2018 Financial Literacy Survey and found that one in four Americans don’t pay their debts on time, one in 10 has debts in collections, and 38% of Americans carry debt from month to month.

In fact, I’ve seen many people fall into those statistics over the years because they believe in credit card myths and think those myths are helping them.

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What I find so upsetting about the statistics I listed is that credit card debt is what leads many people to living in a debt cycle. That leads to stress, depression, frustration, and more.

While there are some instances when using credit cards may be a necessity, it sounds like some people may be able to avoid some (or all) of their credit card debt in the first place. 

While you may be a person who has accidentally listened to and fallen for credit card myths in the past, it’s never too late to make a change for the better.  

Today, I’m here to tell you the truth about credit cards.

Below are the top credit card myths I’ve heard.


Myth 1: You should ALWAYS carry a balance on your credit card.

I’ve heard this one quite a few times. Many people believe that the only way to improve your credit score is to carry a credit card balance and pay interest fees.

That can be horrible financial advice because interest fees on a credit card can be expensive, sometimes more than 20%!

Recently, I was reading comments on an article about credit card debt. Everyone was giving awful advice, such as:

  • You should always carry a 5% balance on your credit card.
  • You never want to pay off all of your debt because then the credit card company will automatically cancel your card and delete your account history.
  • You should always carry a 30% balance on your credit card.

And so on and so on.

There are plenty of ways to improve your credit score, and paying interest fees month after month for the rest of your life is not one of them.

If you want to use a credit card to improve your credit score, I recommend paying off your balance in full each month, before any interest charges are made, and using less than a 30% utilization rate (the total amount of credit you have used).

There are other ways to improve your credit score too. Here are my general tips for increasing your credit score:

  • Make sure to pay your bills and accounts on time. Late payments can hurt you.
  • Regularly check your credit report.
  • Keep your balances and utilization rate low.
  • Ask for your credit limits to be raised, but don’t spend up to that new limit.
  • Pay before your credit card balance is reported.
  • Keep your credit card accounts open if it makes sense, such as to lengthen your credit history. However, if you think having them open will cause you to go into debt or if the annual fees aren’t worth it, you may want to think about closing them instead.

Note: If you do not know your credit score or are interested in learning more, please check out How Your Credit Score Affects Your Life + Credit Sesame Review. It includes a link to Credit Sesame so that you can check your credit score safely for free.


Myth 2: Credit cards are free money.

Credit cards are not free money, but too many people treat them like they are and this is a common misconception about credit cards. If you are using a credit card, you should always make sure that you have the money in cash or in your personal bank account before you think you can afford something.

That jacket, dress, video game, and so on aren’t worth the debt that they may accrue if you use a credit card to purchase them without really being able to afford it.  A simple $50 dress may balloon into hundreds of dollars of credit card debt because of interest fees.

This is one of the worst credit card myths because believing it can cost you for months or years to come.

If you are finding that you are struggling with whether or not you can afford something, there are several things you can do.

  • Wait 24 hours, at least, to make a purchase.
  • Think about the other things you could use your money for.
  • Think about how much time you will have to work to pay for your purchase.
  • Think about whether you’ve made a similar purchase that you’ve regretted.

If you just take a minute to think about those four things, you may realize that you can’t actually afford the purchase in the first place. 

If you are wanting to get better about tracking your spending, check out Personal Capital. This free online tool tracks your purchases, your debt, investments, and more.


Myth 3: It’s fine to pay only the minimum payment each month.

This is probably one of the most common credit card myths. And, some make this mistake because they don’t have the funds to pay their full credit card balance each month. 

Others, however, only pay the minimum because they believe that’s all they need to pay in order to avoid interest charges. 

Yep, lots of people think that – this is one of the credit card myths that I’ve heard way too many people believe.

Everyone needs to fully understand what “minimum payment” means and what happens if that is all that you pay.

Here’s a basic breakdown of what minimum payments are:

  • Minimum payments are basically the smallest amount your lender will let you pay each month.
  • Minimum payments lead to paying more in the long run because of interest charges.
  • While minimum payments may keep you in good standing, they can impact your credit score in a negative way.

You should always try to pay more than the minimum. If you don’t, you will have to pay interest charges, which may increase your credit card debt by a significant amount each month and each year.



Myth 4: You will always pay interest if you use a credit card.

Surprisingly, many people don’t know how credit cards actually work. Many people think that you always have to pay interest fees when using a credit card, even if you completely pay your bill each month.

However, that is not true.

I use a credit card all the time and have never paid a penny towards interest, late charges, or anything like that.

The key here is that I always pay my balance in full before it is due.

This isn’t really one of the credit card myths that can hurt you, but knowing how credit cards work is something that can only help you in the long run.


Myth 5: Only people with money problems have credit cards.

I’ve had a credit card pretty much since the day I turned 18. I’ve always used them, have never carried a balance, and I have never paid money towards interest.

Several years ago, I took my credit card out to pay for a purchase. One of the people I was with told me to put the card away and that they would pay since I couldn’t afford the item I was about to buy.

I looked at them confused… 

I asked, “What do you mean I can’t pay for it?”

This person started to tell me that only idiots carry credit cards and that I must be tens of thousands of dollars in credit card debt, and that they couldn’t believe my debt had gotten that bad. 

They told me to get rid of my credit cards immediately because they would ruin my life. They also said there was no way to responsibly use credit cards. This person probably believed in many of the credit card myths in this post.

I remember laughing because I had no idea where all of this was coming from. I tried to convince them I was okay, but I’m positive they still don’t believe me to this day.

Don’t get me wrong. I DO understand there are people out there who should only stick to cash, but I also think there is a way to use credit cards responsibly and to your advantage.


Myth 6: Rewards credit cards are a scam.

This is one of the credit card myths I hear often, especially when I talk about travel hacking or earning rewards points.

In fact, one of my most popular posts on Making Sense of Cents is about just that. It’s called How To Take A 10 Day Trip To Hawaii For $22.40 – Flights & Accommodations Included.

Whenever I share it, half the people think it’s amazing, yet the other half think it’s too good to be true and that all travel rewards credit cards are a scam. 

Travel rewards credit cards are extremely popular right now. I’ve been interested in and using them for a few years now, and it seems like everyone going on a vacation is talking about them these days.

Note: Please head to Best Rewards Credit Cards to learn more.

I absolutely love travel rewards cards. In fact, I’ve gone on many extremely affordable vacations due to travel rewards credit cards.  I’ve also received lots of free cash back, they’ve allowed me super cheap first class flights, and more.

Actually, last year Wes went on a 3,000 mile sailing trip in Europe, and when he was done, I was able to book a last minute flight back to Arizona (where we were at the time in the RV) using travel rewards credit card points. He was able to sit in business class on a 12.5 hour flight (from London to Los Angeles, I believe) and it cost less than $100 after points. It would have cost even less if I booked it more than just a few days ahead of time. After a month on a boat sharing a bed with another crew member, we wanted to get him a roomier/comfier seat, and our travel rewards credit cards made it super affordable!

He told some of the people on the sailing trip about how much we saved using a travel rewards credit card, and they thought he was being scammed!

The credit card companies aren’t just giving away points and cash back because they are nice, so I’m sure you’re wondering what the catch is. Not understanding why they offer rewards is why this is one of the top credit card myths.

See, credit card companies offer these great bonuses and rewards because they are hoping that you’ll become a loyal customer. They know that having more customers means they’ll be able to make more money, which they make in various ways, such as:

  • Interest charges
  • Taking a percentage of each transaction when you use your credit card at a store
  • Annual fees
  • And more

I wrote a whole blog post on this subject here – Are Travel Rewards Credit Cards a Scam?


Please understand how to use credit cards.

The best way to avoid falling for any of these credit card myths is to learn about credit cards and how they work. That’s before you use them or sign up for any more.

Before you sign up for a credit card, you should understand all of the common terms. Sadly, many people do not fully understand credit card terms, and that’s a leading cause for why some fall into credit card debt.

You should do your research and understand:

While these things apply to all credit cards, not every credit card is the same. Thinking that could even be one more of the credit card myths people believe. Not all interest rates, terms, and fees are the same. Do your research on each card!

I know that the process of researching and understanding these basic credit card principles may seem like a lot of work, but if you don’t understand how your credit cards work, you may wind up in debt or further into debt than you already are. 

Your credit cards can work for you if you are careful, but if you aren’t, they can wreck your finances and your future.

Have you ever been guilty of following any of these credit card myths? What’s the worst credit card advice that you’ve heard?

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Michelle Schroeder-Gardner

Author: Michelle Schroeder-Gardner

Hey! I’m Michelle Schroeder-Gardner and I am the founder of Making Sense of Cents. I’m passionate about all things personal finance, side hustles, making extra money, and online businesses. I have been featured in major publications such as Forbes, CNBC, Time, and Business Insider. Learn more here.

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  1. I always make it a posiitve habit today to make small purchases. The moment I make the purchase with my credit card, I strive to pay the entire balance in full. I know I’ll get a quick credit score boost by paying the balance in full, because I know more today about the pattern of payment history creditors quietly look at.

  2. The Financial Freewill

    Thanks Michelle! Agree with the myths and have heard similar myths as well.

    Paying the balance in full to avoid interest charges and late fees is the most important aspect about credit cards that people need to understand. This will let you enjoy both: using the credit line and earning points on the credit card that you can redeem for free to payoff part of your monthly balance or toward a future purchase. That’s a win-win if you use credit cards the right way!

  3. Believe it or not, a financial officer at a mortgage lending place once told my husband and I many years ago that we should always carry a balance (myth #1) in order to improve our credit and improve our chances of getting a mortgage. My husband and I couldn’t believe it!

    I agree that for some people, credit cards can only be of help, especially if you have a good grasp of now to manage your money. However, for a family that’s already struggling with money, or for someone who has a history of bad money decisions, having a credit card available can only mean trouble. The temptation is too great and/or if you are struggling, then instead of looking for ways to improve (e.g. making more money, budgeting, etc) you could easily fall into the trap of covering your every day expenses with a credit card, and having no realistic way of paying off the balance at the end of the month.

    1. Surprisingly, whenever I hear someone give out tip #1, it’s almost always someone who works in the credit or loan industry!

      1. It’s crazy! You’d think they’d know better, right? Thanks for being truthful with your advice!

  4. Alicia

    I have a Kroger credit card that earns me free groceries everytime I use it. I evaluate my budget each month, decide what I can spend on groceries and what bills need paid, then I use my card on those. Then, I pay the credit card before the interest is charged. I earn my free groceries, I have good revolving credit, and I never pay more than I would have without the card.