6 Common Money Myths That Can Hurt Your Finances


Taking control of your finances is one of the most empowering things you can do. But a lot of people have misconceptions about how their money should work for them.

A recent financial literacy survey from LendingTree shows that 96% of Americans believe at least one money myth.

That figure is based on a survey of 1,550 Americans in January 2021.

Do You Believe Any of These Money Myths?

The survey answers prove that many U.S. consumers have a lot to learn about their finances and how they work.

See if you agree with the financial myths listed below.

Myth 1: Carrying a Balance on Your Credit Card Can Help Your Credit Score

  • 73% have heard this before
  • 45% think it’s true

While you always want to keep your balances low, a major part of maintaining a good credit score is paying off your credit card balances in full every month.

This is because payment history and how much debt you’re carrying make up more than two-thirds of your FICO score.

Resource: Common Credit Myths and Mistakes

Myth 2: It’s Bad to Use a Credit Card. You Should Always Use a Debit Card or Cash.

  • 69% have heard this before
  • 31% think it’s true

Debit cards come with inherent security dangers that credit cards are fundamentally protected against.

With credit cards, in the case of theft, there are protections in place that usually allow you to recoup your money. But if thieves use your debit card, that money’s typically gone.


Clark’s Take: “Your checks start bouncing and, depending on your bank or credit union, the institution may not cover the bounced check charges that result from debit card fraud.”

Resource: Why You Should Never Use a Debit Card

Myth 3: It’s Best To Change Your Tax Withholding to ‘0’ So Your Paycheck’s Bigger

  • 65% have heard this before
  • 40% think it’s true

While we all can appreciate a bigger paycheck, many people choose to put “0” on their tax withholding to guarantee that they get a tax refund.

But here’s why that may not be a sound financial strategy.

Clark’s Take: “I’d prefer that you get no refund at all,” Clark says. “If you are getting one, it means that you’ve made an interest-free loan to the government and your money has been working for them — not you — all year long.”

Here’s what Clark suggests you do instead: Let’s say you customarily get a $1,200 tax refund every year.

Take these three steps to make that money work for you:

  1. Reduce the withholding from your paycheck by $100 a month.
  2. Take that amount and have it direct-deposited into a high-yield savings account.
  3. Sit back and watch that money gain interest throughout the year.

Resource: Why You Do Not Want To Get a Big Tax Refund

Myth 4: Renting Is a Waste of Money

  • 77% have heard this before
  • 57% think it’s true

While it’s true that rent money doesn’t appreciate no matter how long you stay in the apartment or home, tenant life can actually be part of a well-prepared financial strategy.

In fact, if you are of retirement age and thinking of moving to a more affordable city, Clark recommends renting.


Clark’s Take: “One of my key rules is you should always rent first for six months, a year or even two years if you’re thinking about relocating for retirement. If it turns out that you don’t like it, at least you’re not all-in owning a home that you’ve now got to get rid of.”

Resource: Money-Saving Tips for Renters

Myth 5: You Shouldn’t Invest Until You’re Debt-Free

  • 63% have heard this before
  • 42% think it’s true

You definitely want to be in a good financial condition before you start investing your money, but that doesn’t mean you have to be 100% debt-free.

Clark’s Take: “I disagree with the strategy of focusing solely on paying off other debts instead of having any savings,” Clark says. “I’ve always felt that you should try to do both at the same time, even if it means that you pay off your debt slower.”

Resource: How To Save and Invest the Clark Howard Way

Myth 6: You Don’t Have To Save for Retirement if You’re Under 40

  • 58% have heard this before
  • 21% think it’s true

When it comes to saving for retirement, the earlier the better.

Clark’s Take: “It can be easy to build some level of comfort and security into later life if you’ll just start saving early. But most people don’t start thinking about saving until they hit 40. If that’s you, it’s never too late to start saving.”

Resource: How to Start Investing and Saving for Retirement

Read the complete financial literacy survey from LendingTree.

Final Thoughts

Clark is adamant that saving money is the best way to prepare for your financial future. The way to do that is by setting a financial goal.


 “It’s like when someone says, ‘You know, I really should be saving money,’ and they’re guilt-tripping themselves. Let’s say that they make enough money and they should be saving money, but they’re not: They’re not going to change their behavior unless they have a goal. So you have to set a goal.”

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