3 common credit card debt myths that could be impacting your finances now

Credit card debt has a way of sneaking up on you. One month, you're charging a few essentials to a rarely used credit card, and the next month you're staring at a balance that grows despite your best efforts to chip away at it. While there are a lot of factors at play in that equation, right now, a major part of the issue is that credit card interest rates are hovering above 22% on average, which means that even small balances can snowball into serious financial burdens if you're not careful.

What makes managing credit card debt even trickier currently, though, is the sheer amount of conflicting advice out there. You may read advice that touts one strategy and then find advice from another financial expert that suggests something completely different. Some of this guidance is solid, of course, but a lot of credit card guidance is based on outdated information or myths that are so prevalent they're now considered a source of truth.

The problem here is that following bad credit card debt advice isn't just ineffective. It can also actively hurt your finances, keeping you trapped in debt longer, damaging your credit score and costing you significant money in interest charges. So what are some of the common credit card debt myths that could be impacting your finances right now? 

Find out how you can get your credit card debt issues back on track now.

3 common credit card debt myths that could be impacting your finances now

Here are a few of the most persistent — and potentially costly — credit card debt misconceptions that could be having a big impact on your overall financial health currently:

Carrying a credit card balance helps your credit score

One of the most common myths is that you should carry a small balance each month to improve your credit score. The idea is that showing you're using credit and not paying it off entirely somehow boosts your creditworthiness. This is generally false, though. Your credit score doesn't improve when you pay interest, and credit scoring models don't know whether you're carrying a balance from month to month or paying in full.

What actually matters for your credit utilization ratio is the balance reported to credit bureaus, which typically happens on your statement closing date. You can have a low utilization ratio (which is good for your score) and still pay your balance in full every month to avoid interest charges. There's absolutely no benefit to paying interest, and depending on your balance and interest rate, this myth could be costing you hundreds of dollars annually for literally no gain.

Learn how you may be able to pay less on your high-rate credit card debt.

Minimum payments are enough to manage your debt

Another damaging myth is that making minimum payments means you're managing your credit card debt effectively. While paying at least the required minimum on your credit cards is crucial to avoid late fees and help protect your credit score, it's actually not a sustainable strategy for getting out of debt.

Minimum payments vary by lender but are typically set at between 1% to 3% of the balance plus interest and fees. That structure benefits lenders more than borrowers. For example, if you owe $10,000 at 22% and make only the minimum 2% payment, it could take decades to pay off the balance, and you'd pay thousands of dollars in interest over that time, an outcome that's clearly less than ideal.

This myth can also create a false sense of security. As long as the payment is made, it feels like progress is happening with your debt. But in reality, the bulk of the payment is often just covering interest, leaving the principal balance barely touched. To actually reduce your debt, you'll need to pay well above the minimum or pursue other strategies, such as balance transfers or enrolling in a debt relief or credit counseling program.

Closing old credit cards helps your credit

It can be tempting to close unused credit cards, especially if you've recently paid them off. And, many people assume that shutting down accounts will improve their credit score or protect them from overspending. But closing old credit cards can actually hurt your credit in two ways:

• It can increase your credit utilization ratio. By closing your credit cards, you're reducing your total available credit. That means any existing balances on other cards make up a larger share of your overall limit, which can lower your credit score.
• It can shorten your credit history. The length of your credit history makes up about 15% of your FICO score. Older accounts help anchor your credit profile, even if you rarely use them.

In most cases, it's better to keep old cards open (especially if they don't charge annual fees), use them occasionally for small purchases to keep them active and then pay them off promptly. This maintains both your credit history and your available credit, which are two key factors in keeping your score strong.

The bottom line

Credit card debt myths are deceptively powerful because they often sound like smart financial habits. But in today's high-interest environment, misunderstanding how credit works can be expensive. Carrying balances won't boost your credit score, minimum payments won't get you out of debt efficiently, and closing old cards may actually hurt your credit. By shedding these misconceptions and focusing on proven strategies, though, you can avoid unnecessary interest costs, which is a simple but powerful step toward better financial health.