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Ten Myths About Your Credit Card Debt


Nov 23, 2015 5 min read

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Ten Myths About Your Credit Card Debt

Credit card debt is rife with myths. What is really the truth about your debt and your credit score? Should you increase your limit or take that extra discount. And what about reward points?

Here are some popular myths about credit cards that I will dispel.

Myth 1: Holding several credit cards shows you have good credit

Quite the opposite. Holding more credit cards does not necessarily demonstrate that you have good credit. When the two major credit reporting agencies evaluate your credit score, they factor in the possibility that you could go out tomorrow and max out all of your cards. So, think twice before signing up for another credit card.

Myth 2: Keeping a balance on your credit card increases your credit score

Keeping a balance on your credit card and paying minimums does neither increases nor decreases your credit score. Instead, you are paying interest to the credit card company each month that are you carrying a balance. As a balance does not improve your credit score, but does not improve your overall finances, it only makes sense to completely pay off your credit card each month and avoid paying interest.

Myth 3: You need to pay an outside company or organization to relieve yourself of all credit card debt

This is one of the biggest myths out there. No one company is going to solve your problems without making you pay a pretty price. Calling the credit card companies and negotiating your own debt is your best defense. Another option is to go online and take out a lower interest loan from a company such as Borrowell.

Myth 4: You are getting a great deal when using your credit card and getting a 20% off discount

Stop the madness now! That discount may seem great on that new pair of jogging shoes or jacket. If you do not pay off your credit card in full, the credit card company may charge you far more than the 20% discount, costing you more money in the long run. If you are disciplined enough, take advantage of that discount and when you get home, pay the entire amount of your purchase on your credit card bill or else just say no.

Myth 5: Don’t ever accept that credit limit increase

Should you never accept a credit limit increase? This all depends on how disciplined you are. If the bank offers you an increase on your credit card limit, and you continue to use your card with the same amount of your lower limit, your credit score will increase. The percentage of unused credit helps improve your credit score. The key to improving your credit score is to be disciplined and keep from going to the limit.

Myth 6: Reward points are worth running up the credit

Again, this depends on your self-discipline. Nowadays, the big trend is to get credit cards with airline reward points to fund vacations. It is very tempting to use your reward credit card to pay for everything from utility bills, to groceries to home appliances. While this is a great way to hack your way to an exotic Bali vacation, if you do not pay your credit card in full, you may wind up paying more money than the trip is worth. The tip here is to have the money before you make the purchase, then use the card and pay it off immediately. This way, you can get that fab vacation without it getting back at you!

Myth 7: Paying the minimum balance is enough

Paying the minimum balance on time, will satisfy the monthly obligation to your credit card company and not harm your credit. But, and there is a but, this cycle will eventually spiral out of control and you will soon be kicking yourself. You don’t have to be a math genius to figure this out. If you pay that minimum, your next balance will be 10%-20%, or whatever your interest rate is. This may lead to a higher minimum payment the following month because of the larger balance. Perhaps charge a latte’ or a movie ticket and suddenly, your credit card is maxed out. Continue to pay the minimum and suddenly you find that the interest brings your over your credit limit. Suddenly, you have expensive fees on top of that interest and higher minimum payment. Bite the bullet and pay more than your minimum, or at least, pay double your minimum.

Myth 8: Paying off my credit card bill with a bank loan is easy to do

Although your credit card company is essentially a bank you do not physically see, dealing with a real bank is a different bird. Banks are not in the business of solving your problems. Banks are in the business of making money. The bank is not going to offer you such a low interest rate. In addition, they may even ask for a secured loan with collateral, such as your house or your vehicle. Odds are, you have not developed a relationship with your bank during the good times, so that they are not ready to help you through the bad ones. Find a different place to get a loan from one of the many online sources or from your folks. Yes, it may be a little embarrassing to ask them, but don’t you want piece of mind again?

Myth 9: Getting a good loan will lead to saving well

Although it is neat and tidy to have a loan that pays off all of your bills, if you have not already started a savings program, this is not going to give you the incentive to do so. Starting today, automatically put a certain amount of money into your savings every month. Whether it is 25 dollars or 10% of your income, saving money will give you future options that you currently do not have. Period.

Myth 10: You should be ashamed to have credit card debt

If there was shame in credit card debt, than half of everyone you know should be holding their heads down. Credit card debt is something that no one wants to talk about, but everyone has experienced or is currently experiencing. Half of Canada is in credit card debt! This is tough stuff, but you can do it. You can gain ahold of your finances and you should hold your head up.

Once you begin to tackle this problem, you will suddenly find a spring in your step and the world around you will again be filled with possibilities.

If you’re interested in refinancing expensive credit card debt, check your rate for free with Borrowell.  It only takes a minute and it won’t affect your credit score.

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Borrowell is dedicated to making financial stability possible for everyone. With over 3 million members, the company offers free credit scores in Canada, education, weekly credit monitoring, credit building solutions, as well as digital tools like AI-powered credit coaching and personalized financial product recommendations. For more information, visit or download the mobile app for Android or iOS.

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