Earning points and miles is a great hobby, but I know a lot of folks still think that it’s some sort of scam, or that it’s too good to be true. While some are based on misinformation, a lot of these doubts are based on false assumptions that people have about credit cards. We get questions all the time that revolve around some of these ideas, especially on how credits card affect your credit score. So in this video, we’re going to review our top 10 credit card myths and misconceptions.

1. Credit cards lead to debt:

This one can be true. I’ve discussed how it’s important to be responsible with your credit cards if you want to engage in this hobby. Like a lot of things in life, a credit card is a tool that can easily be abused and cause a person to fall into debt. If you’re using credit cards to earn points and miles, it’s important to make sure that your financial house is in order. That means tracking your budget and spending so you can pay your bill in full. If you’re carrying a balance and paying interest, then you’re negating the value that you would earn from points.

2. Applying for a new credit card will hurt your credit score:

This one is also somewhat true. Though it’s not as bad as a lot of people think. When you apply for a credit card, you often get a hard credit inquiry, which is different than when you use a service like Credit Karma or Credit Sesame to check your credit score. The number of hard credit inquiries can have a negative effect on your score, so you’ll often see a bit of drop when you apply. However, your score is also influenced by the amount of available credit that you have. By getting a new card, you’re increasing your amount of available credit and lowering your credit utilization, which is the amount of credit that you’re actually using. Assuming that that your spending level doesn’t change, this should cause your credit score to increase over time.

3. Having too many cards hurts your credit score:

This is also a common misconception. I think it’s rooted in the same idea as the previous tip about applying for cards. However, having more available credit and a lower credit utilization usually means that your score will go up.

4. You should never pay an annual fee:

This is definitely false. We did an entire video on why it’s sometimes worth paying an annual fee, especially when if you’re able to get value from the card. If you haven’t seen the video, check it out.

5. You must carry a balance in order to build your credit history:

I know a lot of older folks have this misconception. I think that there was a time when this was actually true. However, this is no longer the case. You can build your credit score by making sure you pay your bills on-time and using your credit responsibly.

6. Your minimum spend timeline starts the moment you activate your card:

Contrary to what a lot of people think, this is not true. I actually didn’t even know this until recently. The clock starts when you are approved, so the window to complete your minimum spend is often less than you think.

7. American Express cards don’t have spending limits:

Several of the traditional American Express cards, like the Green, Gold, and Platinum cards are considered charge cards and not credit cards. This has led a lot of folks to believe that there is no credit limit, since you have to pay the full balance every month. This is false. If you check the American Express Platinum card’s fine print, you’ll see that “no preset spending limit” doesn’t actually mean unlimited spending. The limit is based on your usage and payment history, along with your credit record and income.

8. If you stay at a specific hotel brand or fly a specific airline, you should get their co-branded credit card:

This can sometimes be true. However, with the rise of flexible points programs, it can often be better to earn points that you can use with different partners. For example, I can earn 3 Hyatt points per dollar using my Hyatt credit card when staying at an Andaz Hotel. However, I can also earn 3 Chase Ultimate Rewards points using my Sapphire Reserve card, which I can then transfer to Hyatt or other airlines and hotels. In this case, I prefer to use my Sapphire Reserve as I like having the extra flexibility with my points.

9. You should close a credit card before getting a new one:

This is also false. It’s rooted in the idea that having too many cards is a negative thing. Much like what I explained earlier about getting more credit and lowering your credit utilization when you get a new card, the reverse is also true. When you cancel a card, you’ll often lower the amount of available credit that you have, which can also increase your credit utilization. It’s like you’re shrinking the size of the pie so it looks like you’re eating more, even if you’re actually eating the same amount. There are tricks to get around this, like converting cards to no-annual fee versions in order to keep the account open. See our “Top Credit Card Mistakes” video for more info.

10. It’s better to use your debit card for daily purchases:

This one is completely subjective. A lot of people tell me that they just prefer to use their debit card to pay for things. While there’s nothing wrong with that approach, there are some compelling reasons to use your credit card instead. It’s not just the points that you’re not earning, but also the protections that you get when using your credit card. When you use your debit card, you are actually pulling money from your bank account. If there is a dispute or your information is stolen, you may not have access to the affected money until the bank completes their investigation and verifies information. I’ve heard a lot of horror stories about this situation, so I personally prefer using my credit card. Having a payment dispute or false charge on a credit card seems much easier to resolve. It’s also less likely to involve freezing my funds until there is a resolution.

For those of you who collect points, what do your friends and family think of your hobby? I’m curious whether you all experience the same things that I do.

If you’re interested in applying for any of the cards mentioned, check out our Credit Card Offers page for some of the latest offers. We do get a percentage if you use our link. It doesn’t cost you anything extra, but it helps us to continue creating content for this site.

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