4 Tips for Paying Off a Large Credit Card Bill

You know which three little words no one wants to hear? Credit card debt. It can go from zero to thousands with one quick swipe or build at a slow creep—a nice dinner here, a trip to the mall there, a gas fill-up to get you through until payday—and before you know it you could be staring at a credit card balance that’s a lot higher than you thought it was.

For Alicia Hintz, a member of the SoFi community, the debt creep started in 2016 with a large and unexpected loss of income—the day before she and her husband were to leave on their honeymoon. (Thanks, universe.)

Prior to that, they’d been toying with the idea of selling their Minneapolis home and moving closer to family in Wisconsin. The income reduction sealed the deal. But their house needed some work to be market-ready. The total bill was more than their savings, and their income wasn’t enough to pay in cash, so to the plastic they went.

For them the improvements were worth the investment—in that they sold their house for more than they paid for it, but almost every penny of it went toward fees, commissions, closing costs, and other expenses.

Alicia’s financial journey is likely to resonate with the 41.2% of American households that carry an average of about $9,300 in credit card debt, according to data reported by the Federal Reserve for Outstanding Revolving Debt. The statistics are sobering to be sure, but here’s a spoiler alert—thanks to some smart planning and a lot of stick-to-it-iveness, Alicia’s story ends on a high note.

4 Debt Payoff Strategies

Fast forward a few months and Alicia and her husband live in Wisconsin but on a much-reduced budget. In fact, it would be six more months before they were able to get their finances back up and running—that’s a lot of time for savings to shrink and debt to grow.

1. Zero Interest Credit Card

To try and combat the loss of income, Alicia opened a 0% interest (also known as a deferred interest) credit card with plans to pay it off within the year. “Before I opened that card, I had always paid off my credit card balance each month in full,” she said in a written interview with SoFi.

But, as is life, things didn’t go as planned. “The first month I didn’t pay off my full balance made me panic,” said Alicia. And on top of day-to-day financial challenges, the couple was invited to a destination wedding in the summer of 2017. In order to get the discounted room rate, they had to pay upfront for the flight and resort—close to $5,000.

“That extra money added to our credit card debt was a steep mountain to climb,” Alicia said. “After we had to pay that, I knew it would be years to get everything paid off.”

A 0% interest promotional period on a new credit card can last as long as 18 billing cycles , which could be a long enough time to make a large dent in the card’s principal balance.

But once the promo period expires, the interest rate can climb to as much as 27% (or higher). A credit card interest calculator can give you an idea of how much that rate will affect your total balance, and it’s important to consider whether you can achieve your payoff goal before the rate rises.

2. Creating a Debt-Focused Budget

Tackling a large credit card bill isn’t likely to be easy, so an important part of the process could be a hard look at what putting extra money toward credit card bills means for the rest of your budget.

One way to approach a solid debt-payoff plan is to begin with an organized budget. You can start by taking a look at the big picture, including all of your monthly expenses as they currently stand, all your income, and all your debt.

One way to make this task easier on yourself is to download an app like SoFi Relay, which pulls all of your financial information into one place.

Your next step might be to focus on your spending. You may see obvious areas where you can cut back, or see if you can get creative to come up with some extra cash flow each month.

“We definitely tried to eat out less and cut back on shopping for clothes,” Alicia said. “But it seemed like every month there were more unexpected expenses that needed to be put on the credit card.”

From there, you can start to focus on a plan that makes credit card payments as equally important as the electric bill. And while you may not be able to pay more than the minimum on all your cards, it’s important to ensure that you pay at least that much if you want to avoid accumulating additional debt.

That’s because, while paying only the minimum can lead to compounded interest rates and larger overall balance over time, skipping payments can also lead to higher, penalty interest rates, late payment fees, and can even affect your credit.

3. The Snowball, The Avalanche and The Snowflake

The snowball and avalanche debt repayment strategies take slightly different approaches to pay down debt, and both involve maintaining the minimum payment on all but one card.

The debt snowball method focuses on the debt with the lowest balance first, regardless of interest rate, putting extra toward that payment each month until it’s paid off.

Then, that entire monthly payment is added to the next payment—on top of the minimum you were already paying. Rinse and repeat with the next card, and it’s easy to see how this method can quickly get the (snow)ball rolling.

The debt avalanche is based on the same philosophy but targets the highest-interest payment first. Getting out from under the highest debt can save a lot of money in the long run, and just like the snowball method, applying that entire payment to the next-highest-interest debt can lead to quick results.

The third snow-related strategy, the debt snowflake, emphasizes putting every extra scrap of cash toward debt repayment. This method played an active role in Alicia’s debt-elimination strategy. “If you have extra money to throw at your loans, even $20, that can still make a difference in your overall amount owed,” she said.

4. Personal Loan

As Alicia’s credit card utilization went up, her credit score went down. She decided to research her options and was ultimately approved for a SoFi credit card consolidation loan at a considerably lower interest rate than her credit cards, which along with making extra payments, helped save her money in the long run.

Now facing one personal loan payment vs. multiple credit card bills, Alicia anticipated being able to pay down the debt sooner than the three-year term she selected. And once again, life happened.

Over the course of those years, her husband took a new job, and they both changed cars, bought a house, and had a baby. They also went to two more destination weddings. This time, though, the extra expenses didn’t derail the plan.

“The loan was paid off within two years,” she said, thanks in part to a conservative budget and using an annual work bonus as a snowflake to make a dent in the balance.

From Someone Who’s Been There

One of the biggest things to remember, Alicia said, is that debt elimination doesn’t happen overnight. “Paying off debt is hard work,” she said. “Take it one month at a time. Some months are easier on your wallet, and others are not—looking at you, December!”

She suggested using the time you’re working to pay off debt to develop good budgeting and spending habits so that your post-debt finances are about saving, not spending.

And another tip from Alicia? Celebrate even the little victories. “When I paid off half my SoFi loan, I celebrated by taking a nice long bath,” she said.

When they reached zero balance, she and her husband went out for ice cream. “You can celebrate by going to the park with your kids, reading an extra chapter in a book, or finding a new series to watch,” she said. “Always celebrate your loan payoffs, no matter how small!”

SoFi personal loans also have no fees and no surprises—just a helpful way to manage your money. Additionally, applying is all online. If you’re looking for ways to consolidate your credit card debt, you can check your rate at SoFi in just two minutes.


External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Member Testimonials: The savings and experiences of members herein may not be representative of the experiences of all members. Savings are not guaranteed and will vary based on your unique situation and other factors.
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SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Business Oversight under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.

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Credit Card Statement Balance vs. Current Balance

Swiping a credit card to pay for everyday things is so easy and so frictionless. Swipe here for a smoothie, swipe there for a new pair of shoes.

When you buy on credit, it’s easy to forget that you’re paying for that item with money that doesn’t belong to you. In essence, it’s almost like taking out a short-term loan to make a purchase. Depending on how long you keep that “loan”, you may or may not be charged interest.

If you’re putting charges on your credit card throughout the month, you likely understand that the value of that short-term loan (your credit card balance) fluctuates.

You may also notice that there are other numbers that you see reflected on your credit card statement, particularly when you go to make a monthly payment.

One such number is your statement balance. But wait a minute, you may be asking, “What’s the difference between statement balance and current balance?”

Here is helpful information about the difference between the two, along with a few tips for managing your credit cards.

Statement Balance vs Current Balance

As you get familiar with your credit cards, you’ll notice that each issuer may have a slightly different method of presenting and even calculating the numbers that are presented to you on both your monthly statement and your online portal. Still, you will likely see one number called the statement balance and one called the current balance.

First, what does statement balance mean? The statement balance includes all transactions during a designated billing period, called a billing cycle.

For example, if a billing cycle covers one month and starts on the 15th of each month, this statement balance may include all of the activity on an account between, say, Jan. 15 and Feb. 15, in addition to any previously unpaid balances. Then, the next billing cycle would begin on Feb. 15 and end on March 15.

At the close of each billing cycle, the statement balance will reflect one figure—the total balance on the card at the close of that cycle. Until the close of the next billing cycle, this number—the statement balance—will remain unchanged.

But that doesn’t mean that your credit card’s current balance won’t change. Your current balance reflects the current total of all transactions that occur on your account. Did you swipe your credit card for some Chinese take-out three days ago? That purchase is added to your current balance.

Return a shirt that didn’t fit right yesterday? Your current balance will reflect that refund. You can think of the current balance as a running total of all transactions that occur on an account.

To understand the interplay between the statement balance and the current balance, take a look at the example from above. On Feb. 15, the statement balance reflects $1,000, meaning that the total charges between Jan. 15 and Feb. 15 add up to $1,000.

Two days later, say you make a $50 charge to the card. Hypothetically, your current balance would reflect $1,050 while the statement balance would remain the same. In this case, the current balance is higher than the statement balance.

The reverse can also be true, and the current balance could potentially reflect a smaller number than the statement balance. Using this example, say you received a refund on your card several days after your billing cycle closed. The current balance would reflect a number that is lower than the statement balance.

What to Know About Paying Off Your Credit Card

As each billing cycle closes, you will be provided with a statement balance. You will also likely be provided with a due date. At the time you make a payment, you may decide to pay off the statement balance, the current balance, the minimum payment, or some other amount of your choosing.

If you regularly pay your statement balance in full, before or by its due date, you may not be subject to any interest charges. Most credit card companies only charge interest on any amount of the statement balance that is not paid off in full.

The period in between your statement date and the due date is called the grace period. During this period, you may not accumulate interest on any balances.

It’s worth mentioning that not every credit card has a grace period, and it is possible to lose a grace period by missing or making late payments. If you have any questions about whether your card has a grace period, you may want to contact your credit card company.

If you’re using your credit card regularly, it is possible that you will use your card during the grace period. This would increase your current balance. At the time in which you make your payment, you will likely have the option to pay the full current balance.

If you have a grace period, paying the current balance is often not necessary in order to avoid interest payments. (This is generally true if you are consistently paying your statement balance each month.)

But, paying your current balance in full by the due date could have other benefits. For example, it is possible that this move could improve your credit utilization ratio, which is factored into credit scores.

Next, you could pay just the minimum monthly payment. Generally, this is the lowest possible amount that you can pay each month while remaining in good standing with your credit card company—it also can be the most expensive.
Typically, the minimum payment will be an amount that covers the interest accrued during the billing cycle and some of the principal balance.

Making only the minimum payments may be a slow and expensive way to pay down credit card debt. (Especially because you can continue to make charges to a card that exceed the minimum payment, ultimately growing the balance.)

To understand how much you’re paying in interest, you can use a credit card interest calculator. Although minimum monthly payments are not a fast way to get rid of credit card debt, making them is important. Otherwise, you probably risk being dinged with late fees. Also, missing or making a payment late can have a negative impact on your credit score.

So, if the minimum payment is all you can swing right now, it’s okay. But, you may want to consider avoiding additional charges on your card. Your last option is to make payments that are larger than the minimum monthly payment but are not equal to the statement balance or the current balance.

That’s okay, too—you’ll still potentially be charged interest on remaining balances, but you’re likely getting closer to paying them off. You can keep working on getting those balances lowered. A good goal is to get to a place where you are paying off your balance in full each month.

Your Credit Utilization Ratio

The balance you currently carry on your credit card could impact your credit utilization ratio. Credit utilization measures how much of your available credit you’re using at any given time.

Credit utilization is one of a handful of measures that are ultimately used to determine your credit score—and it has a big impact. Credit utilization can make up 30% of your overall score, according to MyFICO™.

Not every credit card will report account balances to the consumer credit bureaus in the same way or on the same day. Also, the reported number is not necessarily the statement balance. It very well could be the current balance on your card, pulled at some time throughout or after the billing cycle.

Again, it may be worth checking with your credit card issuer to find out more. If your issuer reports current balances instead of statement balances, asking them which day of the month they report on could be helpful.

Sometimes, the lower your credit card utilization, the better your credit score may be. While you may feel in more control to know which day of the month that your credit balance is reported to the credit bureaus, it may be an even better move for your general financial health to practice maintaining a low credit utilization all or most of the time.

If you are worried about your credit utilization rate being too high during any point throughout the month, you could make an additional payment. You don’t have to wait until your billing cycle due date to reduce the current balance on your card.

According to Experian , one of the credit reporting agencies, keeping your current balance below 30% of your total credit limit is ideal. For example, if you have two credit cards, each with a $5,000 limit, you have a total credit limit of $10,000. To keep your utilization below 30%, you’ll want to maintain a balance of less than $3,000.

3 Tips for Managing Credit Card Balance

If you’re struggling to juggle multiple credit cards and make all of your payments, here are some tips that may help.

1. Organizing Your Debt

A great first step to getting a handle on your debt is to organize it. Getting to know it—intimately—can also help. Consider listing out each source of debt, along with the monthly payments, interest rates, and due dates. It may be helpful to keep this list readily available and updated.

Another option is to use software that aggregates all of your finances, such as your credit card balances and payments, bank balances, and other monthly bills.

Whether you use existing software or your own calendar system, keep in mind that staying on top of your due dates and making all of your minimum payments on time is one of the best ways to stay on track.

(Bonus tip: Consider asking your credit card providers to change your due dates so that they’re all due on the same day. You can pick something easy to remember, such as the first of the month.)

2. Making All Minimum Payments, But Picking One Card to Focus On

While you’re making at least the minimum payments on all your cards, you might want to pick one—that you haven’t paid off—to focus on first. There are two versions of this debt repayment plan, known as the debt avalanche and the debt snowball, respectively.

With the debt avalanche method, you’d attack the card with the highest interest rate first. With the debt snowball method, you’d go after the card with the lowest balance. The former strategy likely makes the most sense from a mathematical standpoint, but the latter may give you a psychological boost.

If and when possible, you may want to apply extra payments to the card’s balance that you’re hoping to eliminate. Once you’ve eliminated one card, you could move to the next. (You’re trying to get your balances to a place where you’re paying them off in full each month.)

3. Cutting up Your Cards

Whether you do this literally or proverbially, as you get better at managing credit card debt, putting a moratorium on your credit card spending may be a great strategy.

If you are consistently running a balance that you cannot pay off in full, you may want to consider ways to avoid adding on more debt—like literally cutting up your cards.

Taking Out a Personal Loan

If you’re accumulating credit card debt and feel like there’s no end in sight, it may be time to look at other options to help crush your debt.

One option is to take out a personal loan to pay off your credit card debt. By taking out a personal loan you would consolidate all of your credit card debt.

That way you would only have to make one monthly payment moving forward instead of having to keep up with paying off multiple credit cards.

SoFi offers low rate personal loans with no fees. Plus, there is an easy online application and access to live customer support seven days a week.

See if a SoFi Personal Loan can help you get on top of your credit card debt—check your rate to get started.


Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
website
.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Business Oversight under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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Can You Pay a Credit Card with a Credit Card?

Your credit card payment is fast approaching. And this month? You’re freaking out. The problem isn’t just that you’re struggling to pay the total balance—it’s that you can’t even afford to make the minimum required payment.

We all have our own reasons for using a credit card. When we use them responsibly, they do offer benefits, such as helping us establish credit, cover the expenses of emergencies, rack up frequent flyer miles, or earn cash back. However, chances are that on at least one occasion, you’ve swiped your credit card because you couldn’t afford what you were buying at the time.

Sometimes when people don’t have the money to make a purchase, they put it on their cards and deal with it later. So if you don’t have the cash to make a credit card payment, wouldn’t it make sense to pay with another credit card?

Is that even an option? Can you pay a credit card with a credit card?

Well, yes and no.

Most credit card companies will not allow you to pay one credit card with another. At least not directly. It’s simply too expensive for them to process these transactions. They typically require you to pay directly from your checking account.

There are a couple of indirect ways you can pay one credit card with a second card, though. Even better, there are some long-term solutions that don’t involve a second credit card and can prevent this same problem from arising when it’s time to make another payment next month.

Indirect Ways to Pay a Credit Card with Another Credit Card

Taking a Cash Advance

You can’t pay a credit card with a credit card directly, but you might be able to pay a credit card with cash from another card. Let’s say you have two credit cards, Card A and Card B. You can’t afford to make your minimum payment on Card A, so you’re looking to Card B for a little help. You have the option to take a cash advance from Card B.

In this case, you’d insert Card B into an ATM and withdraw cash from your account. This is known as taking a cash advance. Then, you’d deposit that money into your checking account and make an online payment from your bank account or with a debit card.

The Pros of a Cash Advance

Taking out a cash advance may be the right option if your situation meets three criteria: you’re trying to pay a small amount on Card A, you already have a second credit card to use for this transaction, and Card B has a lower interest rate than Card A.

Completing a balance transfer, which is the second option we’ll cover below, involves applying for a brand new credit card. Taking a cash advance is the better option if you already have a second credit card.

Why is taking a cash advance ideal for making a small payment? Most credit card companies place limits on how much cash you can withdraw with your credit card per month.

If your withdrawal limit from Card B is $5,000 and you only want to make a payment of $500 on Card A, things shouldn’t get too sticky.

Also, the money you withdraw accrues interest. If Card B has a lower interest rate than Card A, then you could save money using Card B to pay off Card A, and then making more manageable payments on Card B.

The Cons of a Cash Advance

It doesn’t make much sense to take a cash advance to make a huge payment. First, your credit card company might not allow you to withdraw enough money per month to make that payment.

Your cash advance limit isn’t necessarily the same as your monthly spending limit. Before you take a cash advance, you may want to contact the company for Card B to inquire about your cash advance limit.

Second, interest usually starts accruing on the amount you withdraw from the moment you take the cash advance. This could make it easy to go even further into debt.

Also, you’ll likely pay a fee to take a cash advance. The amount will vary depending on the credit card company, but you can usually expect to pay around $10 or 5% of the amount you withdraw.

Furthermore, it’s important to note that the annual percentage rate (APR) for a cash advance will typically be higher than the purchasing APR on the card, so you’ll want to check on that as well.

Completing a Balance Transfer

With a balance transfer, you’ll transfer the balance on Card A to Card B, which ideally would have a lower interest rate or even none at all. You could potentially pay off your total balance more quickly because interest isn’t building on the original amount you owe.

In the case of a balance transfer, you’d transfer the amount to a designated balance transfer credit card.

The Pros of Completing a Balance Transfer

Certain credit card companies offer balance transfer credit cards with no interest rates for the first six months or more. When you shop around for a new card, you’ll typically hear this grace period referred to as an “introductory balance transfer APR period” or “promotional period.”

Balance transfers do have some perks over cash advances. When you take a cash advance, the money you withdraw automatically starts accruing interest, meaning you could owe more in the long run if you aren’t careful.

When you transfer the money you owe to a balance transfer card, the low-interest rate could mean you end up paying less; as a result, you might be able to pay off your debt more quickly.

The Cons of Completing a Balance Transfer

Yes, balance transfers may be godsends for paying off your total balance in a shorter amount of time. What if you can’t pay off the total balance quickly, though? Once the introductory balance transfer APR period ends, the interest rate will shoot up, and the balance transfer card won’t seem so magical anymore.

If you miss a payment, most companies will suspend the introductory APR period on Card B, and you’ll have to pay what’s known as a default rate, which could end up being even higher than the rate on Card A. Even if you consider yourself responsible enough to make all your payments on time, an unexpected financial emergency could throw you off track.

There are also generally fees associated with balance transfers. Granted, they’re often lower than cash advance fees. As you can see, indirect methods of paying a credit card with another card have the potential to become slippery slopes.

Before you rush to the ATM to take a cash advance or apply for a balance transfer credit card, you may want to explore other strategies for making this month’s credit card payment.

Taking out a Personal Loan

If you’re wondering, “Can I pay one credit card with another?” you may be asking the wrong question. The right question might be, “What’s a better way to pay off my credit card?” The potential answer: taking out a personal loan.

Yes, the word loan is a little scary. If you find yourself in over your head with credit card payments, though, a personal loan could be your best friend.

In this situation, you’d take out a personal loan from a lender such as SoFi, and use the loan money to make credit card payments.

The Pros of Taking out a Personal Loan

In America, many credit cards come with variable interest rates, meaning the rate can change over time. These rates often change along with the economy.

A big pro with taking out a personal loan is that lenders can issue fixed rates, so you’re unlikely to face any surprises. If you have a good credit score, your personal loan fixed interest rate could potentially be lower than your credit card rate.

If this is the case, you can take out a personal loan to pay off your credit card, then make payments on that personal loan at a lower interest rate. As a result, you’d likely end up paying less in interest overtime and might even be able to pay back the loan more quickly than you’d be able to pay off the credit card.

Taking out a personal loan could help improve your credit score in more ways than one. One factor that affects your credit score is your credit utilization, which is the relationship between your credit limit and the balance you are carrying against that credit.

For example, if your credit card spending limit is $10,000, it’s generally better to owe $1,500 on your credit card than $8,000. If you consolidate the credit card debt with your personal loan, your credit utilization ratio will go down, which could improve your credit score.

Your credit score may also improve as you consistently pay bills on time. If you use a personal loan to pay off your credit card, it could help increase your score. And the more monthly payments you make on time, the more likely your credit score is to increase—credit bureaus love responsible payment behavior.

A mix of credit accounts can also improve your credit score. If you have multiple credit types, such as a credit card, mortgage, and personal loan, it potentially bodes well for your credit score.

The Cons of Taking out a Personal Loan

Taking out a personal loan to pay off a card isn’t for everyone. Maybe you’ve realized you have trouble controlling your spending, and that’s why you have credit card debt to begin with. Having a personal loan to fall back on could tempt you to spend even more with your credit card and trap you in a vicious cycle.

The likelihood that your personal loan interest rate would be lower than your credit card annual percentage rate (APR) is pretty good. The average APR on credit cards is 22.84%, and unless your credit score falls to the lower end of average (640-679), there’s a good chance a personal loan will offer a lower rate.

However, a lower rate isn’t guaranteed. If you discover your loan rate could be higher than your card’s rate after talking with a lender, taking out a loan may not be the best choice.

No matter how low your personal loan interest rate, it will still be higher than the rate during an introductory APR period for a balance transfer. Although taking out a personal loan has several benefits over completing a balance transfer, the initial interest rate isn’t one of them.

Taking Control of Your Credit Card Debt

Sure, paying a credit card with another credit card indirectly may be a short-term solution. However, taking out a fixed-rate personal loan with a clearly defined payment schedule may be the better long-term option.

If you are thinking about this option, you can check out SoFi. SoFi offers personal loans with low rates and no fees.

Looking to get on top of your debt? Check out SoFi Personal Loans today.


Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
website
.

Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Business Oversight under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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When are Credit Card Payments Due?

Renting a car. Booking a hotel room. There are plenty of reasons a credit card can be a worthy addition to your wallet. But as you’ve doubtless heard, credit cards can also be dangerous: an easy way to rack up a towering debt total that can be difficult to pay off.

If you’re able to play it smart, credit card benefits can outweigh the drawbacks. And one of the most important parts of any smart credit strategy is to make your payments on time.

So how do you determine when your credit card payments are due—and what else should you keep in mind to ensure you’re using your credit cards wisely?

Are Credit Cards a Smart Financial Move?

These days, it may feel like you’re bombarded with news about the staggering credit card debt plaguing American households. Based on that, how can using credit cards ever be a wise choice?

After all, Americans often carry revolving consumer credit card debt in amounts that can be detrimental to overall financial health. According to the latest data from The Federal Reserve , Americans have trillions of dollars in revolving credit balances. And that debt total is steadily increasing year by year.

That doesn’t mean credit cards can’t be part of a smart financial strategy. In some ways, credit cards can be a factor in helping you get closer to some of your financial goals.

Credit Cards May Help You Build Your Credit

Even if you want to live a largely credit-card-free lifestyle, having a solid credit history is helpful. If you ever want to take out a mortgage or finance a car, a good credit score might help you secure better terms and lower interest rates—while a poor one can keep you locked out of those financial products entirely.

Credit cards can be a relatively easy way to build good credit: When you pay in full and on time, that behavior is reported to the credit bureaus and often reflects well on your report.

However, since credit card companies will likely run a hard credit check on you when you’re applying for a card, opening a new credit card may temporarily lower your credit score.

Of course, if you max out your cards and rack up a ton of revolving debt, that can reflect badly on your score; your total debt load is another important, heavily weighted factor in the total credit score calculation.

Credit Cards Can be Used to Earn Valuable Rewards

Many credit cards come packed with rewards that may really add up, whether they’re airline miles or a cash-back percentage of each item you purchase.

That said, if you end up making sky-high interest payments on a large revolving balance, that might eclipse the value of any reward your card offers.

Credit Cards are Sometimes a Useful Tool in Paying for Certain Goods and Services

Ever try to book a hotel room or rent a car without a credit card? If so, you already know that plastic can unlock a whole host of possibilities—even in a world where “cash is king.”

While relying too much on credit cards or charging more than you can actually afford to pay off each billing cycle may be a recipe for disaster, it can also be helpful to have the power of plastic at your disposal.

Some Things to Look for When Opening a New Credit Card

There are many different types of credit cards to consider if you’re in the market, and which will work best for you depends on your specific set of goals and circumstances.

Type of Credit Card

For instance, if you’re trying to repair shoddy or short credit history, a secured card can go a long way, though opening one may require you to spend money upfront as a security deposit.

On the other hand, if you already have great credit and are looking to maximize your card’s value, you could choose a travel reward or cash-back card to help you rack up points, pennies, or miles.

But no matter what kind of card catches your fancy, there are a few key aspects worth keeping an eye on before submitting your application.

Credit Card Fees

A good first step is to check if the card carries an annual fee—that’s a once-yearly cost required to pay for the privilege of simply holding the card. In some cases, the rewards and benefits you can earn may outweigh this fee, but there are many cards that don’t carry an annual fee, so you may want to skip the expense entirely.

Your credit card may also carry other types of fees: for balance transfers, foreign transactions, or late payments. (Of course, you won’t have to worry about this last one, since you’re going to figure out when your credit card is due and pay on time every month… right?)

Credit Card Interest Rates

Last but certainly not least is the card’s interest rate. This will be expressed as an APR, or annual percentage rate, and will probably be listed as a range (say, 14.24% to 25.24%).

If you’re approved, the exact rate you’ll pay will likely depend on your credit score and history; as well as other factors. Often, the better your score, the lower your interest rate.

Some credit cards may offer a promotional 0% interest rate, which means for a given length of time your revolving balance will not accrue interest. However, after the promotional period is up, the regular interest rate will kick in, so you ideally want to be able to pay off whatever balance you’re carrying before that happens.

That’s because credit card interest rates tend to be higher relative to other kinds of loans and financial products. For example, unsecured personal loans typically have lower interest rates than credit cards; as of this writing, the average consumer credit card sits at more than 17% APR. Unsecured personal loans, in contrast, are averaging around 10% to 12% APR for well-qualified borrowers.

That’s one reason why it’s so easy to get into a lot of credit card debt quickly—and why credit card debt is one of the toughest types of debt to pay off. When you’re constantly struggling just to keep up with interest payments, it can be difficult to chip away at the principal—especially when you’re also using the card for everyday purchases.

If you’re already in credit card debt, you can use this credit card interest calculator to see an estimate on how much you could end up paying in total interest over the course of your repayment.

In some cases, it may be a smarter financial move to take out a personal loan to pay off a credit card fully. Depending upon the term length you choose, you may end up saving money if the interest rate you’re offered is lower than the one offered by the credit card.

Determining When Your Credit Card Payment Is Due

Now that you’ve got that credit card in your wallet, how do you find your credit card due date? Unlike other sorts of bills, credit cards aren’t always due on a regular date like the first of the month. The exact due date will vary depending on your credit card billing cycle, and may fall on a seemingly-random date.

To find your credit card due date, you can check your billing statement. The due date, along with the minimum payment due, will likely appear close to the top of your written statement.

You can also find due date and payment information in your online account, if you’ve created one; these digital portals also often make it simple to make online payments.

If you don’t have access to either a paper or digital billing statement, you can call the customer service number on the back of your card and ask a representative when your payment is due. Most cards also allow you to make payments over the phone, either through an automated system or with a live customer service agent.

How to Pay Your Credit Card on Time—and Why it’s Important

To pay your card on time, you’ll pay at least the minimum amount listed by the credit card payment due date. Generally, the cutoff time is 5 p.m. on the day the payment is due, but you may want to reach out to the issuer directly to get exact details.

That said, it may be a better idea to avoid cutting it so close, if you can help it. You can make your credit card payments before the due date typically both online and by phone, and doing so can help ensure the payment has time to post to your account before the cutoff.

Paying your credit card on time will help you avoid paying late fees, for one thing—which, when added to interest payments, can make your credit card debt spiral.

But on-time payments can also help bolster your credit history since they’re reported to the major credit bureaus, and your payment history—including timeliness—accounts for around 35% of your FICO® Score. And there’s one more compelling reason to make payments before the deadline.

The Grace Period

It’s helpful to understand that practically all credit cards offer a grace period: the time between your statement closing date and the due date, in which the purchases you’ve made during that billing cycle do not accrue interest.

By law, if offered the grace period must be at least 21 days, which means you get a three-week window to pay your card off in full without being responsible for any finance charges. (This may not be true in the case of balance transfers or cash advances, and interest may accrue immediately.)

But it’s possible to use a credit card on a regular basis without paying interest. All you have to do is pay it off on time and in full each and every month.

Paying Your Credit Cards on Time

Even if you only have one or two credit cards, chances are you have a lot on your plate on any given month.
Between making rent, shelling out your car payment, and actually keeping the job that lets you pay for all this stuff, keeping tabs on your credit card due dates may feel like just another task in a long list of chores. (It’s true: Adulting is hard.)

No matter how you decide to stay on top of your credit card due dates and manage your finances overall, paying your cards in full and on time can help you keep your debt total low, avoid paying interest, and possibly bolster your credit score.

That way, you are more likely to take advantage of all the benefits credit card use offers without dealing with any of the financial fallout.

If you are looking to get your credit card debt in control, think about learning more about credit card consolidation loans with SoFi. Using a personal loan to consolidate your credit card debt might help your financial position and possibly lower your interest rate.

Learn more about personal loans with SoFi.


Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
website
.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Business Oversight under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.

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Negotiating a Credit Card Debt Settlement

There is a sinking feeling in your gut that comes with credit card debt. And that’s especially true when you have credit card debt that is starting to feel unmanageable. Let’s be honest: No one loves to be carrying a credit card balance. But to look at your statement each month and know you don’t have a way to pay it off can feel pretty devastating.

While negotiating a credit card settlement might not sound like a fun solution, sometimes it’s the right course of action. Does that sound daunting? Don’t worry, we’re going to walk you through what it means, and discuss ways you can get out from under your credit card debt.

Before we dive in, it’s important for you to know that this is an incredibly complex topic. We’re going to try to break it down the best we can, but please understand that this info is general in nature and does not take into account your specific objectives, financial situation, and needs; it should not be considered advice.

SoFi isn’t a credit repair company, and always recommends that you speak to a financial professional about your unique situation.

The Difference Between Secured and Unsecured Debt

First, let’s talk about the type of debt a credit card typically is. When a credit card company issues a credit card, it’s taking a big chance on getting its money back, plus interest. It’s more than likely that the credit card you have is considered “unsecured.”

All that means is that it isn’t connected to any of your assets that a credit card company can seize in the event that you default on your payments. Essentially, the credit card company is taking your word for it that you are going to come through with the monthly payments.

In contrast to an unsecured credit card is a mortgage loan, which is almost always secured. Put simply, unlike defaulting on a credit card, if you default on your mortgage, your lender can seize your house and put it up for sale or auction.

The hope is to recover some of that mortgage money, if not all of it. There’s no such recourse for unsecured debt, but that doesn’t mean defaulting is without consequences.

Credit Card Debt Negotiation Steps

Starting the process of negotiating credit card debt usually happens when you have multiple late or skipped payments—not just one. This may begin with an email or phone call to the credit card’s customer service department, or an old-school letter sent by snail mail.

You may wind up having to go through a number of customer service reps and managers before a deal is finally struck, but taking the initiative and being proactive are solid first steps.

It also may show them that you are handling the situation honestly and doing what you need to do, however unpleasant it is to admit that you are falling behind on your payments. Some additional tips for negotiating include:

•   Understanding the exact amount of money you owe on your account before starting negotiations
•   Research the different options available (we go more in depth into these options below)
•   When you are ready to start negotiating, call your credit card company and ask for the debt settlement department
•   Make sure to get the agreed upon terms in writing
•   Types of Credit Card Debt Settlements
•   Lump Sum Settlement

Types of Credit Card Debt Settlements

Lump Sum Settlement

This type of agreement is perhaps the most obvious option, and it means paying cash, and instantly getting out of credit card debt. It’s pretty straightforward and typically quick. This option lets you pay an agreed upon amount, and then get forgiveness for the rest of the debt you owe.

However, there is no guarantee as to what lump sum the credit card company might go for. It really depends on their policies, but being open and upfront about your situation and your willingness to work with them could help your cause.

Workout Agreement

This type of debt settlement can involve multiple different options. You may be able negotiate a lower interest rate or waive interest for a certain period of time. Additionally, you can talk to your credit card issuer about reducing your minimum payment or waiving late fees.

Hardship Agreement

This is also sometimes known as a forbearance program, this type of agreement could be a good option to negotiate if your financial issues are temporary. For example, if you were to lose your job you can call your issuer to see if they offer any hardship agreements.

Through a hardship program there are a few different options that are usually offered. Some include: lowering interest rate, removing late fees, reducing minimum payment, or even skipping a few payments.

Why a Credit Card Settlement May Not Be Your Best Option

Watching your credit card balance grow each month is scary. It’s unfortunate, but you may feel the need to reach out to your credit card company for a credit card settlement. Depending on your circumstances, it may be the only way to stop the hemorrhaging.

If you do reach out about a credit card settlement, your credit card privileges may get cut off. That means, of course, that you can’t use the credit card for any purchases or services, possibly even that same day. Your account may be frozen until a settlement agreement is reached between you and the credit card company. Nothing personal, of course. It’s just business.

It’s also almost certain that if you negotiate a credit card settlement, your credit score may lower. This is because your debt obligations are reported to the credit bureaus on a monthly basis—and if you aren’t making your payments in full, this will be noted by the credit bureaus.

When you negotiate a credit card settlement, you may be able to avoid bankruptcy and give the credit card company a chance to recoup some of its losses. This could stand in your favor going forward when it comes to rebuilding your credit and getting solvent again. But, again, there are no guarantees—and much depends on your financial habits and needs going forward.

It’s a process that certainly doesn’t tickle, but if you can get past the pain, you may be able to open up a second chance for yourself and your future by taking some proactive steps.

Solutions Beyond Credit Card Debt Settlements

Personal Loan

Consolidating all of your high-interest credit cards into one low-interest unsecured personal loan with a fixed monthly payment can help you get on a path to pay off the credit card debt you’re carrying.

SoFi personal loans, for example, are completely free of fees (no origination fees, no prepayment fees, and no late fees) and offer a variety of fixed terms, allowing qualified borrowers to pick the one that works best for them—at an interest rate that, ideally, is preferable to a high-interest rate credit card.

However, it’s important to know that getting a personal loan still means managing monthly debt payments. It requires the borrower to diligently pay off the loan without missing payments on a set schedule, with a firm end date.
A personal loan is known as closed-end credit for this reason, as opposed to a credit card, which is considered open-end credit, because it allows you to continue to charge debt (up to the credit limit) on a rolling basis, with no payoff date to work towards.

Transferring Balances

Essentially, a balance transfer is paying one credit card off with another. Most credit cards won’t let you use another card to make your payments, especially if it’s from the same lender. If your credit is in good shape, you can apply for a balance transfer credit card to pay down debt without high interest charges.

Many balance transfer credit cards offer an introductory 0% APR, but keep in mind that a sweet deal like that usually only lasts about six to 18 months . After that introductory rate expires, the interest rate can jump back to a scary level—and other terms, conditions, and balance transfer fees may also apply.

A SoFi personal loan can help simplify your credit card debt. It comes with a set loan term and fixed interest rate, so there are no surprise interest rate increases. And there are no prepayment penalties or origination fees.

Learn more about how using a SoFi personal loan to consolidate high-interest credit card debt could help you meet your goals.


SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Business Oversight under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
website
.

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