Key Points

• Carrying a balance does not improve your credit score and wastes money on unnecessary interest charges.
• Closing old credit cards usually hurts your credit score by reducing available credit and account history.
• Making only minimum payments can trap you in debt for years with compounding interest costs.

Introduction

Let's talk about three credit card myths that keep circulating—and costing people thousands of dollars. I've heard these misconceptions repeated so many times, from well-meaning friends to financial advice columns that should know better. The problem? Following this bad advice can seriously damage your finances and credit score.

Here's the truth about carrying balances, closing cards, and minimum payments—plus what you should actually do instead.

Quick Answer

No, you don't need to carry a balance to build credit. Pay your statement balance in full every month, keep old cards open (even if unused), and always pay more than the minimum. Your credit score improves through on-time payments and responsible utilization, not by paying interest to credit card companies.

Myth #1: "Carrying a Balance Improves Your Credit Score"

Why This Myth Persists

I hear this one constantly: "You need to carry a small balance and pay interest to show lenders you're responsible." It sounds logical—wouldn't lenders want to see you can manage debt? But it's completely wrong.

The Truth About Credit Scores

Your credit score doesn't care whether you pay interest. Here's what actually matters for building credit:

Payment History (35% of your score)Making on-time payments every month is the biggest factor. Notice it doesn't say "making interest payments"—it says on-time payments. You can pay your full statement balance and still build excellent payment history.

Credit Utilization (30% of your score)This measures how much of your available credit you're using. The key is keeping your utilization low—under 30% of your total credit limit, and ideally under 10%. But here's the crucial part: utilization is calculated based on your statement balance, not whether you carry that balance past the due date.

The Real Cost of This Myth

Let's say you follow this bad advice and carry a $1,000 balance on a card with an 18% APR, making minimum payments. Over a year, you'll pay roughly $100 in interest. Over five years? That's $500+ down the drain for absolutely zero credit score benefit.

What You Should Do Instead

Pay your statement balance in full every month. Your credit card reports your statement balance to the credit bureaus regardless of whether you pay it off or carry it over. So you get all the credit-building benefits without paying a cent in interest.

If you're working on building credit and want a starter card with no annual fee, consider the Chase Freedom Unlimited. You'll earn 1.5% cash back on all purchases while building your credit history—just pay that balance in full every month.

Myth #2: "Closing Old Credit Cards Helps Your Credit Score"

The Misconception

Many people think having "too many" credit cards looks bad, so they close old accounts they're not using. Or they pay off a card and immediately close it, thinking they're being financially responsible.

Why Closing Cards Usually Hurts

Closing a credit card impacts your score in two significant ways:

Increased Credit UtilizationWhen you close a card, you lose that available credit. Say you have three cards with $5,000 limits each ($15,000 total) and you're using $3,000. Your utilization is 20%—pretty good. Close one card, and suddenly you're using $3,000 of $10,000 available credit. Your utilization just jumped to 30%, which can ding your score.

Reduced Average Age of AccountsThe length of your credit history matters. While closed accounts stay on your report for up to 10 years, they eventually fall off. When that old card you opened in college disappears from your report, your average account age drops—potentially hurting your score.

When Closing Actually Makes Sense

I'm not saying never close a card. Sometimes it's the right move:

• The annual fee isn't worth the benefits anymore
• You genuinely can't control your spending with that card
• The card is causing you financial stress

But don't close cards simply because you're not using them. An unused card with a $5,000 limit is helping your utilization ratio.

The Smart Alternative

Keep old cards open but put a small recurring charge on them—like a Netflix subscription—and set up autopay. This keeps the card active, maintains your available credit, and continues building your account history. Our complete guide to credit and credit cards explains more about managing multiple cards strategically.

If you're considering closing a card, read our detailed article on how to close a credit card safely to understand the full implications first.

Myth #3: "Minimum Payments Are a Manageable Way to Handle Debt"

The Minimum Payment Trap

Credit card companies are required to show you how long it'll take to pay off your balance making only minimum payments. Most people don't read that disclosure. If they did, they'd be shocked.

The Math That Banks Don't Advertise

Let's run a real example. You have a $5,000 balance on a card with a 20% APR. The minimum payment is typically 2-3% of your balance—let's say $100.

Making minimum payments:

• Time to pay off: 30+ years
• Total interest paid: $9,700+
• Total cost: $14,700 for that $5,000 purchase

Paying $200/month instead:

• Time to pay off: 3 years
• Total interest paid: $1,700
• Total cost: $6,700

The difference? Paying an extra $100 per month saves you $8,000 and 27 years of payments.

Why Minimum Payments Barely Make Progress

Here's the problem: most of your minimum payment goes toward interest, not principal. In the example above, that first $100 payment breaks down to roughly $83 in interest and only $17 reducing your actual debt. You're barely making a dent.

The Strategic Use of 0% APR Cards

If you're already carrying high-interest debt, don't just accept minimum payments as your fate. Consider a strategic balance transfer to a 0% APR card, which gives you breathing room to actually pay down the principal.

The Citi Diamond Preferred offers one of the longest 0% APR periods on balance transfers. But here's the key: this is a tool for getting OUT of debt, not a way to keep spending. You need a concrete payoff plan.

How to use a balance transfer strategically:

Calculate exactly how much you need to pay monthly to eliminate the debt before the 0% period ends. If you transfer $5,000 with a 21-month 0% period, you need to pay about $240/month to be debt-free before interest kicks in. Set up automatic payments for that amount and stick to it.

Our guide on best credit cards for large purchases also covers 0% APR options for planned big expenses—used correctly, these cards can be powerful financial tools.

Breaking Free from Minimum Payments

If you're stuck in the minimum payment cycle:

1. Stop using the card immediately - No new charges until it's paid off
2. Pay more than the minimum - Even $25 extra makes a significant difference
3. Use the avalanche method - Pay minimums on all cards, then put extra money toward the highest interest rate card first
4. Consider a balance transfer - But only with a solid payoff plan

The Chase Slate Edge is designed specifically for people working to pay down existing balances, with a lengthy 0% intro APR period and no balance transfer fee.

The Real Path to Credit Success

Now that we've debunked these myths, here's what actually works:

Build Credit the Right Way

Use your cards regularly - But only for purchases you can afford to pay offPay statement balances in full - Every single month, no exceptionsKeep utilization low - Under 30%, ideally under 10%Maintain old accounts - Even if you're not actively using themMake payments on time - Set up autopay to never miss a due date

Our article on 5 strategies to build credit fast provides a complete roadmap for establishing strong credit without falling into these common traps.

Use Cards for Rewards, Not Loans

Credit cards are incredible tools when used correctly. The rewards, protections, and conveniences are genuine benefits—but only if you're not paying interest that wipes out those rewards.

A 2% cash back card is worthless if you're paying 20% interest. But pay your balance in full every month? Now you're essentially getting a 2% discount on everything you buy.

Check out our guide to the best cash back credit cards to find cards that maximize your rewards—rewards you'll actually keep because you're not paying interest.

When Debt Happens: Address It Strategically

Life happens. Sometimes you need to carry a balance temporarily. When that occurs:

Make a plan immediately - Don't let it lingerConsider a 0% APR card - Give yourself breathing room to pay it downPay aggressively - Not just minimumsDon't add to it - Stop using that card until it's paid off

The difference between someone who uses credit cards wisely and someone who ends up in debt isn't about having cards—it's about having a plan and sticking to it.

Common Questions About Credit Card Myths

Does closing a credit card hurt your credit immediately?

Not necessarily immediately, but it can. The impact depends on your overall credit profile. If the closed card represents a large portion of your available credit, you might see an immediate utilization increase. The bigger impact often comes later when that account eventually falls off your credit report and reduces your average account age.

How long does it take to build good credit?

With responsible use—paying on time and keeping utilization low—you can typically build a good credit score (670+) within 6-12 months of opening your first card. Excellent credit (740+) usually takes 2-3 years of consistent positive history. Our guide on getting your first credit card walks through the entire process.

Should I ever carry a balance on my credit card?

Only when strategically using a 0% APR offer with a concrete payoff plan. Otherwise, no—you're paying 15-25% interest for zero benefit. Even emergency expenses are better handled with a 0% APR card than by carrying a balance on a regular high-interest card.

Will having multiple credit cards hurt my score?

No, having multiple cards can actually help by increasing your total available credit (lowering utilization) and diversifying your credit mix. The key is managing them responsibly. Our article on best credit cards for couples shows how households can strategically manage multiple cards.

What's the ideal credit utilization percentage?

Keep it under 30% of your total available credit, but under 10% is ideal for the best credit scores. If you have $10,000 in total credit limits, try to keep your reported balances under $1,000. Remember, this is based on statement balance, not what you carry past the due date.

Conclusion

These three myths—that you need to carry balances, that closing cards helps your score, and that minimum payments are manageable—cost Americans billions in unnecessary interest every year. The truth is simpler and cheaper: pay your balances in full, keep old accounts open, and always pay more than the minimum if you're carrying any debt.

Credit cards are powerful financial tools. Use them for the rewards, protections, and convenience they offer, not as expensive loans. Your credit score will improve, your wallet will thank you, and you'll actually get to keep those rewards you're earning.

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