6 Credit Card Debt Myths No One Should Believe in 2024


Credit card debt is a common problem. According to a TransUnion report, the average U.S. consumer's credit card debt is $6,218. In addition, according to the latest data from the Federal Reserve, the average annual interest rate on credit cards is 22.63%. If you understand how credit and debt work, you know that a high balance combined with a high interest rate can quickly get out of control.

But when it comes to credit card debt, high balances and APR aren't the only things you should worry about. It is crucial to separate fact from fiction.

Here are the credit card debt myths you need to know to help you manage your finances wisely.

Myth 1: Carrying a balance can improve your credit score

This is one of the most common myths, says Dennis Shirshikov, director of growth at GoSummer and professor of finance at CUNY.

“The reality is that carrying a balance won't improve your credit score and may actually hurt it,” he said. “Credit scores are affected by your credit utilization ratio, which is the percentage of your credit limit that you are using. A high credit utilization ratio can lower your score. Additionally, carrying balances accrues interest, resulting in unnecessary financial costs.

Instead, Hirshikov says, you should pay off your credit card balance in full each month.

“This ensures you avoid incurring interest charges and keeps your credit utilization ratio low, which has a positive impact on your credit score,” he explains.

Myth 2: Closing old credit cards is good for your credit score

While you may think closing old credit cards that you no longer have any debt on will be good for your credit, it could actually hurt your credit score.

“This is because the length of your credit history accounts for a large portion of your credit score,” explains Hirshikov. “Closing old accounts lowers the average age of your credit accounts, which can negatively impact your score. Additionally, it reduces your overall available credit, which may increase your credit utilization ratio.

Hirshikov recommends keeping your old credit accounts, especially those with no annual fees.

“If you don't use them,” he advises, “charge them a small recurring fee and pay them off each month to keep the account active.”

Myth 3: Just apply for multiple cards in a short period of time

“While it may seem advantageous to have multiple credit cards to manage spending and earn rewards, applying for multiple credit cards in a short period of time can have a negative impact on your credit score,” Shirshikov explains. “Each application will Run rigorous inquiries on your credit report, and multiple inquiries within a short period of time may signal to lenders that you are in financial distress or seeking excessive credit.”

Instead, Hirshikov recommends spacing out your credit card applications and applying for new cards only when necessary.

“Consider your credit needs carefully and plan your application strategically to minimize hard inquiries,” he says.

Myth 4: Accepting a higher credit limit is always the right move

“While a higher credit limit can help improve credit utilization, it can also lead to overspending if not managed well,” explains Shirshikov. “Accepting a higher limit may make it easier for you to accumulate debt that you can't repay, leading to high interest rates and financial stress.”

Hirshikov recommends evaluating your spending habits and financial discipline before accepting a higher credit limit.

“Make sure you have a stable budget and stick to it, using increased limits only when it fits your financial goals and not as an excuse to increase spending,” he said.

Myth 5: Paying the minimum payment is enough

Kelan Kline, a personal finance expert and co-owner of the personal finance blog The Savvy Couple, says that while paying the minimum payment may keep you in good standing, it won't help you get ahead if you have a large balance.

“The rest of the balance accrues interest, which makes paying off the balance take longer,” he explains.

To avoid getting stuck in a cycle of permanent credit card debt, Klein recommends paying more than the minimum when possible. “It will save you money in the long run and help you pay off debt faster,” he said.

Myth 6: Debt relief will forever ruin your credit score

Emma Davidson, MBA, high-risk payments advisor at eMerchant Authority, says credit card debt relief strategies like debt cleanup can affect your credit, but the effects don't have to be permanent or catastrophic.

“Believing this myth may prevent people from seeking help when they need it,” she said.

Davidson says you should understand the actual impact of different debt relief options. “Consult a financial advisor or credit counselor to understand how various strategies may affect your specific situation,” she advises.

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