Common Credit Card Myths:
When it comes to personal finance, few topics are as misunderstood as credit cards. Many people shy away from using them, thinking they’re a fast track to debt. Others believe that carrying a balance improves their credit score or that closing old cards will boost it. Unfortunately, these are all common credit card myths that can harm your financial well-being.
In this article, we’ll debunk the top 10 myths about credit cards, explain the facts, and share how you can use credit cards to your advantage without falling into financial traps.
1. Myth: Having a Credit Card Automatically Means Debt
One of the biggest credit card misconceptions is that owning one means you’ll end up in debt. The truth is, a credit card is simply a tool. It becomes harmful only if used irresponsibly.
If you pay off your balance in full each month, you can enjoy rewards, build credit, and access financial flexibility — without paying a single rupee in interest. In fact, responsible use of credit cards can make your financial life easier, not harder.
Reality: Debt only comes from overspending, not from the card itself.
2. Myth: Carrying a Balance Improves Your Credit Score
This myth has persisted for decades, but it’s completely false. Carrying a balance does not help your credit score — it actually hurts it.
Credit bureaus reward consistent, on-time payments and low credit utilization. If you keep a balance, you’ll not only pay unnecessary interest but might also increase your utilization ratio, which can reduce your score.
Reality: Always pay your full statement balance every month to build a healthy credit history.
Read More about Saving Money Tips for Students.
3. Myth: You Should Avoid Credit Cards Altogether
Some people believe the best way to stay out of debt is to avoid credit cards entirely. While it’s true that avoiding credit means avoiding potential debt, this approach can make it difficult to build creditworthiness for future needs — like renting an apartment, getting a car loan, or even securing a mortgage.
Reality: Using a credit card responsibly helps you establish credit history and unlock financial opportunities later.
4. Myth: Applying for a Credit Card Hurts Your Credit Permanently
When you apply for a new credit card, lenders perform a hard inquiry, which might slightly reduce your score — typically by 5 points or less. However, this effect is temporary and your score usually rebounds within a few months.
Over time, a new card can actually improve your score by lowering your overall credit utilization and adding to your credit mix.
Reality: A single application won’t harm your credit in the long term.
5. Myth: All Credit Cards Have Hidden Fees
It’s easy to think that all credit cards are traps filled with hidden charges, but that’s not true. Many cards today are transparent about their fees, and plenty of them come with no annual fee and straightforward terms.
To stay safe, always review the cardholder agreement before applying. Watch out for charges like late fees, foreign transaction fees, or cash advance fees — and you’ll have nothing to worry about.
Reality: You can find honest, fee-free cards if you do your research.
6. Myth: You Should Close Old Cards You Don’t Use
Many people close their old credit cards thinking it will simplify their finances or improve their score. In reality, closing old accounts can lower your credit score by shortening your credit history and reducing your total available credit.
Reality: Keep your oldest cards open, even if you rarely use them. They strengthen your credit age and utilization ratio.
7. Myth: Credit Card Rewards Are Just Marketing Tricks
While it’s true that banks design reward programs to encourage spending, savvy users can still benefit immensely. If you pay your balance in full and use your card strategically, you can earn cashback, travel points, and exclusive discounts without paying extra fees or interest.
Reality: Credit card rewards are valuable — when used wisely.
8. Myth: Minimum Payments Are Enough
Making only the minimum payment might seem convenient, but it’s one of the most dangerous credit card habits. When you do this, the remaining balance continues to accrue high interest, keeping you in debt longer.
For example, a ₹10,000 balance at 36% APR can take years to repay if you only make minimum payments.
Reality: Always pay more than the minimum — ideally the full balance — to avoid expensive interest charges.
9. Myth: Credit Cards Encourage Reckless Spending
While it’s true that easy access to credit can tempt some to overspend, the real issue is behavior, not the card itself. A disciplined user can leverage credit cards for convenience, protection, and rewards, while tracking spending carefully through apps and monthly statements.
Reality: Credit cards don’t cause overspending — poor budgeting does.
10. Myth: Credit Cards Are Unsafe for Online Shopping
Some people still fear using credit cards online, thinking they’re unsafe. In reality, credit cards are more secure than debit cards. They come with fraud protection, chargeback rights, and zero-liability policies.
If fraudulent charges occur, you can dispute them and avoid being held responsible. Always shop on secure websites (https://) and avoid sharing your details over email.
Reality: Credit cards are one of the safest payment methods for online purchases.
Read More about Investopedia: Understanding Credit Cards.
11. Myth: Checking Your Credit Score Lowers It
This myth confuses hard inquiries with soft inquiries. When you check your own score through a credit bureau or an app, it’s considered a soft inquiry and has no impact on your credit rating.
Only lender-initiated checks for loan or card approval count as hard inquiries.
Reality: You can check your own credit score as often as you like without consequences.
12. Myth: All Credit Cards Are the Same
Every credit card has unique benefits, interest rates, and fee structures. A travel rewards card, for instance, may offer free flights and lounge access but come with annual fees. Meanwhile, a student or cashback card may be better for beginners.
Reality: Always choose a card that matches your lifestyle and spending habits.
Read More about: RBI – Credit Card Guidelines
How to Use Credit Cards the Right Way
Now that we’ve debunked these common credit card myths, here are some proven strategies to make credit cards work for you, not against you:
-
Pay the full balance monthly – Never carry debt forward.
-
Track spending – Use budgeting tools to stay within your means.
-
Keep utilization under 30% – For example, if your limit is ₹1,00,000, try not to spend more than ₹30,000.
-
Avoid unnecessary applications – Only apply for cards you need.
-
Review your statements regularly – Spot fraud or incorrect charges early.
By doing this, you’ll build a strong credit profile and enjoy the financial perks credit cards offer — without the stress.
