NEW YORK (MainStreet) – No, carrying a huge balance on your credit card isn't “building your credit.” It's holding it hostage.

As credit card debt returns to pre-recession levels, U.S. cardholders are attaching high stakes to some all-too-familiar credit card mythology.The Federal Reserve Bank of New York notes that credit card debt increased by $17 billion last year, to $700 billion. The Federal Reserve, meanwhile, put total revolving debt at $887.9 billion in January. As several financial advisors have shared with us, though, there are far too many people coming into their offices with the belief high card balances build credit.

“It is definitely not better for your credit to carry a high balance,” says Matt Schulz, senior credit card industry analyst for “In fact, job No. 1 for anyone with a credit card is to pay your balances off – on-time and in full – each and every month.”

Unfortunately, not a whole lot of people do. The average per card carried per person is as low as $1,098 for cards that don't carry a balance to $7,743 for those that do. TransUnion puts the national average in the middle at $5,234 per person, which is still less than the pre-recession high of $6,276 in 2008. That debt has crept steadily upward, though, even as the percentage of U.S. households with credit cards carrying revolving debt has decreased from 44% in 2009 to just 34% today, according to the National Foundation For Credit Counseling.

That means there's a smaller pool of cardholders to tell the younger generation how to use cards responsibly and effectively. Joe O'Boyle, a financial advisor with Voya Financial Advisors in Beverly Hills, Calif., specializes in educating younger investors in the importance of retirement planning and says his youngest clients enter his office completely misinformed about handling their credit card debt.

“So many Millennials come into my office with credit card debt or credit card balances and they say 'I don't want to pay it off in full because I'm trying to build my credit,” he says. “They don't understand that they're supposed to pay it off in full every month so they don't accumulate interest, so they'll tell me 'I'm just leaving a couple thousand on there so I can build my credit.'”

The truth is that the FICO score used by credit bureaus to determine the health of one's credit values on-time payment and low balances above all else. In fact, the combination of a spotless payment history (35% of a FICO score) and the amount of debt a cardholder carries in relation to their credit limit — or their credit utilization (30%) — account for nearly two-thirds of a person's overall credit score. This fact somehow eludes many cardholders.

“One of the unknowns out there is capacity: the difference between your balance and your limit,” says Kevin Murphy, senior financial services consultant at McGraw-Hill Federal Credit Union in East Windsor, N.J. “How much availability do you have or how responsible are you with the line you're granted by your creditor? It's such a huge part of the FICO scoring model.”

Murphy notes that a client who never misses a payment but uses $9,500 of their $10,000 credit limit is still doing considerable harm to their credit. O'Boyle and Schulz note that outstanding balances should be kept at zero when possible, but that they absolutely must be kept below 30% of a cardholder's total credit limit to avoid trouble. If you have a $10,000 credit limit and still maintain a $5,000 balance, that 50% credit utilization score will come back to haunt you.

“If you're holding a high-interest credit card with a double-digit interest rate, the cost of carrying that balance is too great considering the cost of paying down that interest each month,” O'Boyle says. “Those interest payments could be directed toward savings and helping achieve your financial goals.”

Murphy notes that he's had clients walk into his office with mortgage applications and declare that they've never missed a credit card payment, only to find out they have a middling 675 to 690 score because of their balance. That's not horrendous, but it isn't doing them any favors when applying for a mortgage. It can also be easily fixed just by paying down or paying off a balance.

“The greatest part is when you actually are able to take a member from a 690 credit score, provide them with the education, have them pay down the $8,000 debt that they have and run the credit score a few months later and have it be 730, 740,” he says. “It's great not only for the member, but for us, because it shows we can walk the walk.”

When you've paid down that credit card debt, however, don't cancel the cards. Cut them up, throw them into drawers, but don't decrease credit capacity that's actually helping your case. O'Boyle suggests monitoring your cards online just to make sure you're curbing spending on cards you're using and aren't seeing fraudulent activity on any of your cards. Also, even if you're feeling confident in your credit score, don't use that as your opportunity to apply for every card available.

“Another fiction is that the more credit cards you have, the better,” O'Boyle says. “If you open a bunch of credit cards at once, that can negatively impact your credit score. Get your credit increased later.”

Meanwhile, shunning credit entirely can have a similarly punishing effect. Murphy says a woman in her mid-40s who came into his office with a mortgage application put up a credit score of zero because she always paid for everything in cash. She's assumed that putting a large down payment on a house would help her, but she ended up having to apply for a secured Visa card and secured personal loan backed by money in her savings account. Eventually that payment history (35%), utilization (30%) and mix of credit (10%) will have a huge impact on her credit rating. For everyone else, the answer is a whole lot simpler.

“A lot of people make credit scoring seem more complicated than it actually is,” Schulz says. “Basically, if you pay on time, every time, and keep your balances low over the years, your credit will be just fine.”

— Written by Jason Notte in Portland, Ore., for MainStreet

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This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.