Credit cards are surrounded by so many myths that it’s hard to know what’s fact and what’s fiction. Some people believe carrying a balance can improve their credit score (spoiler: it doesn’t), and others believe that closing an old credit card will help (it won’t).
The simple truth is that grasping how credit works will help you save money, maximize rewards, and protect your score. Based on Capital One Shopping Research, 82% of U.S. adults have at least one credit card as of 2024, but some still get duped by these common myths. Now, let’s bust these credit card myths once and for all to separate fact from fiction.
You Only Need to Make the Minimum Payment
The minimum payment can keep your account in good standing but will keep you paying interest for years, possibly decades! With a $1,000 balance at 20% APR and making minimum payments, you could be paying this for over 5 years.
Always try to pay more than the minimum to avoid paying extra in interest. If you can, the best thing to do is pay off the full balance.
Carrying a Balance Helps Your Credit Score
Leaving a balance on your card might seem like a good idea to many people thinking it improves the credit score, but this is completely false. The easiest way to raise your score is to pay your balance in full each month.
Having a balance means running up high-interest charges, which gives you no credit benefit but costs you money. A 2025 LendingTree report notes that America’s average credit card interest rate is 24.21%. Want a higher score? Your credit utilization should be low, and you should pay on time.
Closing an Old Credit Card Improves Your Score
Closing out an old credit card can hurt your credit score because it decreases the length of your credit history and increases your credit utilization ratio. 15% of your FICO score is made up of your credit history length.
As such, the longer your accounts remain open, the better. Use an old card for small recurring purchases to keep it active instead of closing it.
Checking Your Own Credit Score Hurts It
Some people believe that checking their credit reports will lower their scores. Fortunately, checking your credit (a “soft inquiry”) does not affect your score. It is not dependent on a particular credit application, which means it does not indicate new borrowing activity to other lenders.
A dip can only be caused by hard inquiries, such as applying for a new credit card or loan. As explained by Accounting Insights, following your credit helps you catch errors and fraud early.
Debit Cards and Credit Cards Offer the Same Fraud Protection
Credit cards are way less protected against fraud compared to debit cards. As per the Fair Credit Billing Act (FCBA), the maximum liability on your credit card if you are a victim of theft is $50. Credit card issuers usually waive this fee, making you not liable for any unauthorized charges.
When it comes to a debit card, con artists can tap into your entire bank account, and you could wait weeks to get back that cash! A credit card is safer when you are in the process of shopping online or while traveling.
Maxing Out Your Credit Card Is No Big Deal
Using 100% of your credit limit is a red flag to lenders in terms of credit utilization. Experts advise that you should strive for a credit utilization below 30%. Ideally, it should be below 10% for the highest scores.
If you are making a large purchase, pay off part of the balance before your statement closes so your utilization stays low.
All Credit Cards Have the Same Rewards
All credit cards are not equal! Some give travel miles, others give you cash back for groceries, and large welcome bonuses are also available. So, it is possible for you to pocket free money if you pick the right card based on your spending habits.
If you spend a lot in a particular category and just have a basic card, you are leaving hundreds (or even thousands) of rewards out there. Be smart!
If You Pay Late Once, Your Credit Score is Ruined Forever
37% of Americans have been charged a late fee on their bills in the past year, based on a NerdWallet survey from 2024. Yes, late payments can affect your score, but by no means does one hit or one bad mistake mean the end of your good credit.
Often, if you catch it within 30 days, you can call your issuer and ask for a late fee waiver. Consistent on-time payments will help your score to bounce back over time. In the future, setting up autopay can prevent this incident.
You Should Avoid Credit Cards Altogether
Some people think that purposefully staying away from credit cards is the way to avoid debt. CNBC reports that roughly 26 million (about 10 percent) of Americans are considered “credit invisible,” because they don’t have a credit history with major credit reporting agencies.
However, having no credit history can damage you in the long haul – conceivably while applying for a mortgage, car loan, or even an apartment. The key to using credit is to balance it well. Pay on time, keep balances low and use rewards.
Increasing Your Credit Limit is Dangerous
Having a higher credit limit doesn’t equate to the need to spend more. You will actually increase your credit score. Why? It reduces your credit utilization ratio.
For instance, if you have a $5,000 limit and spend $1,500, it is 30% utilization. So, if your limit goes up to $10,000 and you still spend the same $1,500, your utilization immediately falls from 30% to 15%—which equals a score boost!
You Can’t Negotiate Your Interest Rate
Interestingly, many people do not know that you can call your credit card company and ask to reduce your APR—they may even agree! Your issuer is likelier to lower your interest rate if you have been a good customer (on-time payment, low balance). There’s no harm in asking. This simple phone call could save you hundreds of dollars with respect to interest.
Even credit card companies can offer temporary APR reductions in the case of financial hardship, so don’t get intimidated, and don’t be afraid to negotiate. The only worst thing they can do is say no; however, if they say yes, you just hit a huge financial win!
Using a Credit Card Means You’re Bad with Money
Having a credit card does not mean you’re reckless—it’s building a foundation. If used wisely, credit cards assure an increased credit score, traveler perks, and even cashback on the usual expenses.
The trick is staying in control of the card, only using it for things you can afford, paying in full, and never letting it dictate you. In fact, responsible credit is recommended by financial experts for long-term wealth creation.
Credit Card Companies Always Win
Credit card companies profit from the people who carry a balance, pay interest, and incur fees; however, smart users can use the same game to beat them. Using rewards strategically, paying in full, and never missing payments means you can enjoy all the perks without the pitfalls.
Credit can be a good thing as long as you use it wisely! In fact, if you can take advantage of 0% intro APR offers and get the most out of cashback rewards, you can even make money with credit cards. Your credit card is a tool; use it strategically. It works for you and not against you.
Disclaimer – The Finance Key does not provide and does not intend to provide financial, investment, tax, or legal advice. Information contained in this article is for informational and educational purposes only. This list is solely the author’s opinion based on research and publicly available information. The inclusion of links to third-party content is not an endorsement by The Finance Key of such content or services. Please do your due diligence and use your discretion.
Disclosure: For transparency, this content was partly developed with AI assistance and carefully curated by an experienced editor to be informative and ensure accuracy.
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