3 credit card myths that could be holding you back financially

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Millions of Americans have credit cards in their wallets, but they might not know how to use them responsibly.

This is no surprise given the amount of misinformation that circulates around credit cards. In this article, we’ll dispel three common myths.


Myth #1: You need to keep a balance on your credit cards to build great credit scores.

Fact: You don’t need to carry a balance or pay a dime of interest to have great scores. Those who keep their credit card utilization rate below 30% tend to have the highest scores, but you can show lenders you’re using credit responsibly and still pay off your balance in full each month by timing your payments correctly. Carrying a balance could cause you to pay unnecessary interest that can negate any rewards you’ve earned by using the credit card. On the other hand, used responsibly, a good credit card could save you money, in the form of cash back or other rewards.

Myth #2: You should close any unused credit cards as soon as they’re paid off.

Fact: If your card charges an annual fee that outweighs the benefits you typically reap from the rewards program, you might be better off closing it. But for cards with no annual fee, it could be more beneficial for your scores to keep those accounts open.

Credit cards with low fees

Having more open accounts generally means a higher overall credit limit, which can help moderate your credit card utilization rate. If you close a card with a high credit limit, you could see your utilization rate go up and your scores fall.

Myth #3: Paying with a debit card is safer than paying with a credit card.

Fact: Identity theft and data breaches are on the rise, and there can be a security distinction between these two payment methods — consumer protections against fraudulent charges are typically stronger for credit cards. Paying with a debit card can expose your bank account to the possibility of fraud, and it can take weeks to have fraudulent charges reversed.

How to protect yourself from ID theft

In addition, if your bank account is drained, the money you need to pay your bills could be tied up while the bank investigates. On the other hand, by law, consumers can only be held liable for unauthorized charges on credit cards up to $50. With a debit card, your entire balance could be tied up if the fraud isn’t reported quickly enough.


Bottom line

Myths like these could be standing between you and great credit scores, or even putting your bank account in jeopardy. Don’t let misinformation negatively impact your financial life — by getting educated, you can use your credit cards to their full potential and better protect yourself from fraud.