4 Big Credit Card Myths Debunked

In high school, I was told “Having multiple credit cards is dangerous.”

My ninth-grade teacher meant well. But she was inadvertently contributing to a widespread misconception: that multiple credit cards are nothing but a path to financial ruin.

The reality? Carrying more than one credit card can be advantageous. By debunking this and other common credit card myths, we open the door to valuable financial opportunities.

Myth No. 1: You should only have one credit card

Truth: There are benefits to carrying multiple credit cards, so long as they’re managed responsibly.

Now, before we dive into the perks, let’s get one thing straight: there was a kernel of truth to the warning issued by my ninth-grade teacher. Having more than one credit card can put you at risk of overspending and racking up debt. According to a 2023 J.D. Power study, 34% of Canadian cardholders have credit card debt they’re carrying month to month[1].

“If the balances on a credit card are not being paid in full each month, the interest charged on credit cards can far outweigh the benefit received,” Randolph Taylor, an accredited financial counsellor with Credit Canada in North York, Ontario, said in an email. However, as Taylor points out: “how the credit card is used is more important than the number of credit cards.”

So, let’s assume you aren’t struggling to stay afloat amid a rising ride of credit card debt. The rewards of responsibly wielded credit cards are numerous:

Increased spending power. Multiple credit accounts increase your spending power and the size of your financial cushion in the event of an emergency.
Reduced credit utilization. Having more credit available reduces your credit utilization: a measurement that represents how much of your credit you use at any given time. A lower credit utilization ratio typically has a positive impact on your credit score.
More rewards. With multiple credit cards in your wallet, you have the opportunity to earn a wider range of rewards.

Myth No. 2: You can’t get a credit card with bad credit

Truth: There are credit cards designed specifically for people with low or no credit.

Your credit score is one of the factors lenders use to assess your creditworthiness. Generally, the higher your score, the greater your chances of being approved for new credit.

That must mean if you have low or no credit, you have a low or no chance of getting a credit card, right? Not necessarily.

Secured credit cards are designed for folks with poor credit scores or no credit history. In lieu of a credit check, secured credit cards require a cash deposit. The deposited funds typically become the card’s credit limit. For example, if you paid a $500 deposit to the card provider, your card limit would be $500. You wouldn’t be able to make purchases in excess of that limit until you paid your balance down. The deposit acts as collateral for any purchases made with the card. If the cardholder fails to make a payment, the lender uses the deposit to cover what’s owed.

In addition to their more lenient eligibility criteria, secured credit cards contribute to your credit report. Whether you’re looking to rehabilitate your credit or start building your credit history, a secured card can help.

Myth No. 3: Credit card annual fees are a waste of money

Truth: By using your card strategically, you can recoup the value of your card’s annual fee and then some.

As a basic rule of thumb, the steeper a credit card’s annual fee, the more luxurious its perks. For those on a strict budget, an annual fee may not be worthwhile. But if you stand to gain more from a credit card’s features than it costs to keep it in your wallet, the annual fee may make sense.

Take the TD Aeroplan Visa Infinite Privilege Credit Card. Its annual fee is nothing to sneeze at — a hefty $599. But it’s possible to extract that value (and more) if you put the card’s perks to good use.

For example, the card offers the first checked bag free for the cardholder and up to eight travel companions on Air Canada flights. The cost to check a bag on an Air Canada flight ranges from $30 to $60, depending on the fare and destination. So, the TD Aeroplan Visa Infinite Privilege’s offer of up to nine free checked bags could be worth $270 to $540. Combine this with the card’s additional benefits, like NEXUS fee rebates and airport lounge access, and a cardholder could more than recoup the annual fee.

A credit card’s annual fee can be worthwhile, but it depends on your spending habits and how you use the card’s perks.

Myth No. 4: Closing old credit card accounts is good for your credit score

Truth: Old credit accounts can positively impact your credit score by lengthening your credit history and increasing your credit utilization ratio.

The time has come for a new credit card. You’ve compared your options and found a card you like. You get an email from the card provider: you’ve been approved. Congrats! But think twice before you close your old credit card account.

Part of your credit score is determined by your credit history. The longer a credit account remains open, the more positive its impact on your credit score.

Plus, keeping your old account open will add to your total available credit and lower your credit utilization ratio. Both are favourable as far as your credit score is concerned.

That said, there are situations in which closing an old credit card is a practical move. A card with an annual fee, for instance, may be an unnecessary expense if you no longer plan to use the card or take advantage of its perks.

Bottom line

No piece of financial advice should be followed blindly, no matter how well-intentioned the source. By questioning and investigating these claims, we have the opportunity to determine what’s right for our finances and enhance our financial health.