The 5 Most Common Credit Card Myths

Are you looking to get off on the right foot with your personal finances? Then you should take a look at 5 Basic Personal Finance Facts People Overlook.

It can be tricky to know just where you stand with your finances. Many people are full of sage advice that’s just plain wrong, and it’s easy to get caught up in misinformation when managing your finances.

The way we use our credit cards is one of the biggest causes of misinformation out there. We’re myth busting and giving it to you straight, so you’ll know exactly where you stand and which myths you can ignore.

Read on to learn the common myths that you may have believed in the past.

The Most Common Credit Card Misinformation

As of October 2014, the Reserve Bank of Australia reported that there were more than 15 million charge accounts and credit cards. And credit card debt was heading close to $44 billion.

Big businesses are also investing more into the industry in Australia. IBISWorld reports that between 2010 and 2015, the industry had a revenue of $11 billion. Annual growth was also at 2.7%.

This is because consumers can get credit cards at department stores, supermarkets, and even while flying at 35,000 feet. That’s why it’s so important that people understand how their credit cards work. Here’s some of the most common misinformation:

Myth 1: You Should Always Carry a Balance

No one really knows how this misinformation became so popular, but it’s a big one. Many people think that once they have a credit card they can then buy things and pay them off over a period of time.

While this is possible, it’s not a good idea. Using your credit cards responsibly means paying off the balance in full each month.

This saves you interest charges, and will sometimes even give you interest-free days. Those interest-free days can be used when you make purchases the next month.

When you’re carrying a balance on your card, you’re losing money every month as you’re only paying off the interest. And if you are applying for credit elsewhere, you’ll have to declare the debt on your card and may look irresponsible to those lenders.

Don’t forget: If you fail to pay the minimum payment each month, you can be in huge trouble with your bank. You can expect to be charged fees for failing to meet your obligations. If you continue to default on your payments, your account will eventually be sent to collections.

Myth 2: Getting Credit Cards Hurts Your Credit Rating

The credit rating system works a little differently in Australia than it does in other countries. Unlike some countries, your credit rating usually isn’t common knowledge.

However, banks, mobile phone companies, and mortgage insurers will often check your rating. That’s why it’s so important that you’re being responsible with any credit you have.

Actually, a successful history of using credit cards is likely to have a positive impact on your credit rating. Your rating is made up of a number of different factors, including:

  • Types of credit
  • New credit
  • Length of history
  • The amount you owe
  • Payment history

Generally, the biggest attention is given to your payment history and the amount you owe. A good track record of paying off your balance each month will show a responsible credit history.

Successfully applying for a new credit card will help you generate more credit history, which is a good thing.

Myth 3: A Credit Card Equals Debt

Credit cards have gotten a bad reputation lately. There’s a lot of misinformation about healthy financial habits and credit card debt.

Some people automatically associate credit cards with poor financial habits and debt. This isn’t true, and people have credit cards for a variety of reasons including:

  • Airpoints
  • Financial backup
  • Flexibility
  • Convenience
  • To generate a credit history

The key is to manage your available credit well. Your credit limit is the total amount you can put on your card, but this isn’t a goal.

You may have a credit card that has a limit of $10,000, but if you’re paying it off in full each month, you have a period where you’re debt free.

Myth 4: Cutting up Your Card Will Fix Your Debt

For some reason, cutting up your credit card has become synonymous with dealing with debt. The actual action of cutting up your card doesn’t change the fact that you still have an open account and a balance on that card.

Cutting up the card will stop you from using it for any future purposes, which is great if you’re carrying a balance. But unless you actively pay down the balance, you’ll be getting a call from a collections company.

Once you’ve paid off your balance, cutting up your card can feel liberating. Just remember to cancel the actual account, otherwise, you’ll still need to pay annual fees.

Myth 5: Introductory Interest Rates are the Answer

There are now a number of 0% interest credit cards available. These can seem like the answer to all your problems- after all, you’re probably paying a big chunk of interest each month if you have a balance.

These can be a great choice if you’ve made a firm commitment (and a budget) and you’re ready to pay off your entire balance. But there’s a lot of misinformation about these cards.

Many people are unaware that these low rates are only for a short period of time. After your introductory period is up, you may even end up paying higher rates than you were with your old card.

Transferring your balance to another card can be a good option, but only if you have a solid repayment plan. The goal should be to have your balance completely paid off within that time period.

You also may not be able to transfer your entire balance. Some credit card issuers will only let you transfer a partial amount of your credit limit. This can range from 80%-90%, and that would mean you would have two credit cards to pay off.

It can also take some time for credit card companies to transfer your balance between them. It will often make more sense to simply focus on paying a large chunk off your balance each month.

Are you surprised by any of the above myths? Have we busted any that you were unaware of? Let us know in the comments below if you’ve been caught out by any of this misinformation!

Disclaimer: Please be aware that Cigno Loans’ articles do not replace advice from an accountant or financial advisor. All information provided is intended to be used as a guide only, as it does not take into account your personal financial situation or needs. If you require assistance, it is recommended that you consult a licensed financial or tax advisor.


Ordered by the Federal Court of Australia

The Federal Court of Australia has found that Cigno Australia Pty Ltd (Cigno Australia) and BSF Solutions Pty Ltd (BSF Solutions) have breached the law by engaging in unlicensed credit activity and charging prohibited fees.

In the period from July 2022 to 3 October 2023, over 100,000 consumers have been lent a total of $34 million, and charged fees of over $70 million, under the ‘No Upfront Charge Loan Model’ operated by BSF Solutions and Cigno Australia. At no time has either BSF Solutions or Cigno Australia held an Australian Credit Licence.

The Court also found that Mark Swanepoel (director of Cigno Australia) and Brenton James Harrison (director of BSF Solutions) were involved in these breaches of the law.

With effect from 24 May 2024, the Court has granted permanent injunctions preventing Cigno Australia and BSF Solutions from:

  • demanding, receiving or accepting fees or charges, including amounts of loan principal, from consumers in relation to credit provided under the ‘No Upfront Charge Model’; and
  • engaging in further credit activity pursuant to the ‘No Upfront Charge Loan Model’, including by entering into new agreements with consumers, for so long as they do not hold an Australian Credit Licence.

Cigno Australia was ordered by the Court to, by 5th July 2024, send written communications to consumers who between July 2022 and December 2022 entered into agreements with Cigno Australia and BSF Solutions under the ‘No Upfront Charge Loan Model’.

The Court will later determine whether (among other things) Cigno Australia and Mark Swanepoel ought to pay a pecuniary penalty in respect of this conduct, and whether Mark Swanepoel should be restrained from carrying on a business engaging in credit activity.

Cigno Australia, BSF Solutions, Mr Swanepoel and Mr Harrison intend to appeal the decision of the Court and have filed an application for leave to appeal. If the appeal is successful, some or all of the orders of the Federal Court of Australia may be set aside.

Where can you get more information?

Where to go for further support

You can access legal advice in your state at: Free legal advice –

If you are experiencing trouble with debt, or money worries in general, contact:

  • the National Debt Helpline on 1800 007 007 or online chat (9:30am to 4.30pm, Monday to Friday).

If you need someone to talk to, contact:

  • Lifeline on 13 11 14 (24 hours) or their crisis support online chat or
  • Beyond Blue on 1300 22 46 36 (24 hours) or their webchat