The truth behind five common credit card myths

A woman lays down on a yellow couch with her laptop in front of her while holding a credit card
March 06, 2024 | Ben Heinze

There may not be a single personal finance tool more debated than the credit card. These little pieces of plastic have generated ample discussion for decades, with some claiming they’re destined to lead you into debt and others using them for purchase after purchase without a second thought. So, what’s the truth? Is using a credit card always bad, or is that merely a myth? We’ll delve into five common credit card myths and discuss what is and isn’t true.

Myth: Paying with a credit card means paying interest

Truth: While credit card bills with high-interest rates are certainly a thing, this claim ignores that paying interest on credit card purchases is entirely avoidable.

When you use a credit card, that purchase is applied to your next statement bill. At the end of your credit card’s billing cycle, you can choose to pay that statement in full or simply pay the minimum balance. While opting for the latter will incur interest, paying your statement in full will not. You can even automate paying your credit card bill to ensure you pay the full balance every month, thus never paying interest.

Myth: Credit card rewards aren’t worth their cost to earn

Truth: There are some layers of truth to this credit card myth, but the reality is more complex. Whenever you pay with a credit card (or a debit card) as opposed to cash, the merchant has to pay a small percentage of any transaction fees. These fees are almost always baked into the price of everything you buy. If you’ve ever gone to a business that offered a cash discount, this is likely why.

There’s also the case of some credit cards costing you an annual fee. But many cards, such as Alliant’s cards, have no annual fee. Even for cards that do charge an annual fee, effectively using their perks can often make it worth your while. Before applying for a card with an annual fee, do research on what the perks are, how much you have to spend on the card to receive them and gage whether it will benefit your financial situation.

In short, credit card rewards are possible in large part due to the transaction fees merchants have to pay. However, if you’re going to pay the same price regardless of payment method, credit card rewards are a great way to get some of that additional expense back. Just don’t make additional purchases for the sake of earning more rewards.

Myth: Using a credit card makes it easy to spend more money

Truth: This may be true for some people, but there are steps you can take to reduce and eliminate overspending. The most important one is making a budget. Hold yourself to spending a certain dollar amount in different expense categories and it won’t make a difference what method you use to pay.

Without a budget, overspending with a credit card can happen easily for several reasons. Paying with credit means you don’t need money in your bank account to buy something. In other words, the “how am I going to afford this?” question can be answered after the purchase is completed.

There are also psychological elements at play. With a credit card, all you see when purchasing an item are some numbers on a screen displaying the purchase price. You swipe, insert or tap your card and you can worry about the payment later! Meanwhile, paying with cash forces you to count out and physically hand over currency. While this argument is often used to dissuade credit card use, the same reasoning also applies to debit cards.

To avoid overspending, both when using a credit card or other payment method, it is best to stay aware of your spending tendencies and proactively make and hold yourself accountable to a budget. This will help keep your spending remain consistent across all payment sources.

Myth: Building credit is only important if you want to go into debt

Truth: No matter your feelings on credit scores, building your credit and obtaining a good score can pay off in huge ways throughout your life. Unless you can pay for large expenses such as your house and car completely in cash, a good credit score will be indispensable.

A good credit score will give you access to better rates and terms. Some lenders also choose not to work with individuals with lower credit scores. Additionally, a good credit score is often required when renting an apartment and on other financial applications.

If you’re apprehensive about opening a credit card but still want to build your credit, one idea is to get one and set up a couple of recurring purchases you already make on it. For example, you could set up just your phone and internet bills to be paid by credit card and then set up automatic payments from your checking account to your credit card for that amount. This way, you won’t get into the habit of only using a credit card, you will boost your credit score and you won’t have to worry about missing a credit card payment.

Myth: The more credit cards you have, the worse off you are

Truth:There’s no magic number of credit cards you should have. For people who know they struggle with impulse purchases and debt, opting to have no credit cards at all may be the best choice. On the other hand, someone who meticulously tracks their finances and wants to maximize credit card perks may want a handful of credit cards with benefits that complement one another.

When evaluating if you should get another credit card, always consider the potential impact on your credit score. Applying for a new credit card typically creates a hard inquiry into your credit history. Having too many hard inquiries can temporarily reduce your credit score. After a while, however, demonstrating that you can use a greater amount of available credit can actually increase your score.

Finally, having credit cards from multiple networks, such as Visa, Mastercard, American Express and Discover, can be beneficial. Some merchants only take cards from certain networks, so having multiple makes it unlikely you’ll run into an issue when it comes time to pay. This is especially true when making an international purchase.


If you’ve been given mixed signals in the past, knowing the truth behind some of the most common credit card myths and misconceptions can put your questions to rest. Always remember that while credit cards are a great tool when used effectively, it’s important to evaluate your own financial situation to determine the best choice for you.

Want to learn more about credit cards? Check out these articles:

Debit card or credit card? Yes! By Suze Orman

Should you get a rewards credit card?

When is your credit score pulled?

Ben Heinze is a marketing content specialist with a passion for financial education. Instilled with a strong sense of frugality from a young age, he views money as a means to building the life you want, rather than an end in itself. From reading Money Mentor, he hopes you discover new ways money can be used to build your ideal life - whatever that may look like.

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