7 Common Debt Myths That Are Holding You Back (and the Truth Behind Them)
Debt Myth-Busting: 7 Common Debt Myths You Need to Stop Believing
Debt can feel confusing, overwhelming, and sometimes downright scary. But a lot of what people believe about debt simply isn’t true. These myths can lead to bad financial decisions—or even prevent you from making progress.
Let’s bust some of the most common debt myths so you can take control of your finances with confidence.
Myth #1: You Should Always Pay Off the Biggest Debt First
While paying off large debts feels satisfying, it’s not always the smartest first step. Many people benefit from the debt snowball method, which focuses on paying off the smallest debt first for quick wins and motivation.
Reality: Paying off smaller debts first can build momentum, even if it’s not the “math-perfect” option. Learn more about the “Debt Snowball” method and the dreaded “Debt Avalanche” here.
Myth #2: Closing Old Credit Cards Helps Your Credit Score
It might seem like closing old accounts would improve your credit, but in many cases, it actually hurts your score.
Reality: Length of credit history and total available credit both impact your credit score. Keeping older accounts open (even unused) can help.
Myth #3: Debt Is Always Bad
Not all debt is created equal. Some debts—like low-interest student loans or mortgages—can be useful tools when managed responsibly.
Reality: It’s more about how you manage debt than whether you have it. The key is borrowing wisely and not overextending.
Myth #4: You Should Avoid Credit Cards Completely
Many people fear credit cards because of the risk of overspending. While caution is smart, avoiding credit cards entirely can limit your financial options later.
Reality: Responsible credit card use can build your credit history, which is often needed for loans, apartments, or even some jobs.
Myth #5: Minimum Payments Are Enough
Minimum payments keep you in “good standing,” but they can trap you in debt for years. Especially with high interest rates.
Reality: Always aim to pay more than the minimum, even if it’s just a little extra each month. Calculate how much you can save with a debt calculator.
Myth #6: Debt Settlement Companies Can Erase Your Debt Easily
Debt settlement companies often promise fast fixes—but these offers can come with hefty fees and long-term credit damage.
Reality: There’s no magic solution. Be wary of companies that guarantee immediate results or tell you to stop paying creditors.
Myth #7: You Can’t Save Money While Paying Off Debt
Some people believe every extra dollar must go toward debt, but the fact is, saving matters too, especially for emergencies.
Reality: It’s smart to balance debt payments with building a small emergency fund, so you don’t rely on credit when unexpected costs pop up.
Final Thoughts
The more you understand how debt really works, the easier it is to manage. Don’t let common myths hold you back from making progress.
If you’ve fallen for any of these myths before, you are not alone. The key is to keep learning and take steady, realistic steps toward your goals.
Disclaimer: This article is for informational and educational purposes only. It is not intended as financial advice, investment advice, or a recommendation to buy or sell any securities or financial products. Always consult with a licensed financial advisor or other qualified professional before making any financial decisions. Investing involves risk, including the possible loss of principal. This post may contain affiliate links. If you click through and take action, we may earn a small commission at no additional cost to you. We only recommend products and services we believe in.
