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4 Credit Cards Fears and How to Manage Them

By understanding how credit cards work and developing good financial habits, you can guard against common credit card mistakes and control your credit profile.

June 18, 2021

If you’re afraid of getting a credit card because you fear racking up debt, you’re not alone. It’s also common to worry about becoming the target of fraud. Many people fear credit card pitfalls — credit card misconceptions abound — but once you learn which mistakes to avoid, you’ll see that a credit card can be a powerful way to build a solid credit score. Credit cards can also be life-savers in an emergency situation.  

Healthy wariness is, of course, a good thing. Credit cards deserve your respect. The trick is making them work for you, not the other way around, and not defaulting to credit card myths and misconceptions just because someone you know has poor financial habits. 

By understanding how credit cards work and developing good financial habits, you can guard against common credit card mistakes and control your credit profile. Here are 4 common credit myths and facts to combat those fears.

Credit Card Phobia: You’ll Rack up a Big Bill

Well, yes, frankly, you could — if you don’t put spending limits on yourself. A credit card in your pocket doesn’t mean you can suddenly afford extras you couldn’t last month. 

Credit cards are a type of revolving credit. That means you have access to advance funds as long as your payment habits are in good standing. It means you can put off paying for something and have that thing right now. So, you have to watch yourself, because when the bill comes due, those cool, spendy boots you bought might not look so cool anymore — just spendy. 

Pro tip: Don’t use your card to buy things you wouldn’t buy within your usual monthly budget. Think of the credit card like a debit card: a tool to pay your regular monthly expenses that also helps you build credit. Charge a regularly budgeted subscription like Netflix or your utility bills and then pay off the credit card every month. 

Credit Card Phobia: You’ll Be Hit With Unexpected Fees

Taking on unexpected fees is one of the credit card misconceptions that keeps people from using credit. This fear could come true if you don’t research the card’s terms and conditions. Does the card have an annual fee? What is the annual percentage rate (APR) if you carry a balance? Whether a card holder is charged a fee is completely dependent on the card they choose and how they use it.

Average annual fees run $95 according to a 2020 Credit Card Fee Study. The survey found that 74 of the 100 cards surveyed never charge an annual fee. Others waive the first year’s fee, while others charge a fee every year.

The APR is the interest you pay for carrying a balance. Typical rates range from 16% to 23%. Compounding interest adds to your bill when you don’t pay it in full each month. However, if you pay off your bill in full every month, you won’t pay interest—ever. And if you pay your bill early or on time, you won’t be hit with a late fee, which can average $36. 

You might snag a 0% introductory rate for a new card, but those may be harder to find this year than in years past. The 2021 Balance Transfer Survey from found that the credit score threshold has risen this year for people seeking to qualify for a balance transfer card.

Other fees to be aware of include cash advance fees (withdrawing cash from an ATM machine) that often include a higher APR and no grace period on interest accrual, as well as foreign transaction fees if you’re abroad. 

Pro tips: 

  • Compare all the fees on different cards before choosing one, and avoid transactions that incur fees.  

  • Pay your bill in full. If you can’t, consider negotiating with your card issuer for a


  • Avoid using a credit card for cash advances unless it’s an emergency situation. Instead, use your debit card at your bank’s ATM. 

Credit Card Phobia: You’ll Ruin Your Credit Score

Another credit card myth is that you’ll ruin your credit score just by having a credit card. However, the way to ruin your credit score through credit card use is by mismanaging your card. Conversely, good card habits, which start with a solid payment history, improve your scoreOn-time payments account for 35% of your FICO score, more than any other scoring element, so if you get that part right, you’re off and running. On the flip side, a single late payment made 30 days late can have a serious adverse impact. 

One way to make sure your bill is paid on time is to set up auto-pay to pay at least the minimum payment due each billing cycle — or the full balance or something in between. If you auto-pay the full balance, make sure your bank account has the funds when it comes due, or you could get hit with an overdraft fee (typically around $35). Another option is to pay your bill manually online each month. Set a calendar reminder on whatever type of calendar you use, analog or digital, so you don’t miss the deadline. 

Also, keep your credit utilization rate low. Ideally, it’s best to charge no more than 30% of your card limit, preferably less. So on a credit card with a $3000 limit, don’t charge more than $1,000 or carry more than that amount on the card. 

Pro tip: If you use your card for a larger one-time purchase, try to budget paying it off in a timely way to avoid compounding interest. 

Credit Card Phobia: You’ll Be The Target Of Credit Fraud 

Credit fraud is real, that’s true. But anyone using some kind of plastic can be targeted. Credit cards are actually safer than debit cards. That’s because your debit card is tied directly to your bank account. If your debit card falls into the wrong hands, the money is gone until you get things sorted with your bank. Recovering your money can take days or even weeks. 

In contrast, the Fair Credit Billing Act provides significant protection for a credit card that isn’t available to debit card users. When someone uses your credit card number fraudulently, your bank account hasn’t lost any money, and you’re not liable for any charges. If your physical card was stolen and used, you won’t be liable for more than $50. 

Pro tip: Watch your monthly statements for unusual activity. Use a credit card instead of a debit card to limit your liability in case you are the victim of fraud. 


Have spending habits strained your credit card balances? Learn how Tally can help you consolidate your credit debt and pay down your debt faster.