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Can You Get A Student Loan with Bad Credit?

Getting most types of loans requires borrowers to prove their creditworthiness. To do this, many lenders review an applicant’s credit history and credit score.

Students who may have little or no credit, or even bad credit may be wondering, can you get a student loan with bad credit? It is possible to borrow a student loan with bad credit. Federal student loans, with the exception of Direct PLUS loans, do not require a credit check.

Private loans, on the other hand, generally do review a borrower’s credit history to inform their lending decisions.

Read on for some more information on the different types of student loans, information on how credit scores are used in a lender’s decision making process, and how to get a student loan with bad credit.

Getting a Federal Student Loan

As mentioned, when applying for most federal student loans, the status of your credit is not usually a factor. One exception is if you are in default on an existing federal loan, that may hinder your ability to qualify for more federal funding.

In order to take out federal student loans, you first need to fill out the Free Application for Federal Student Aid (FAFSA®). If you are a dependent student, you will also need your parents to fill out their portion of the FAFSA.

Are you a Dependent Student?

Not sure if you’re a dependent student or not? You very likely are if you are under the age of 24, even if you are financially independent and even if your parents don’t claim you as a dependent on their tax forms any more.

If you’re under the age of 24, there are a few ways you wouldn’t be considered a dependent student including if you were legally emancipated, are an orphan, are married, are an armed services veteran, or currently serving active duty, or if you have legal dependents other than a spouse.

Subsidized and Unsubsidized Student Loans

The FAFSA is used to determine your financial aid award, including both Direct Unsubsidized or Subsidized Loans.

Subsidized Federal Loans take financial need into account and the federal government will pay the interest that accrues on these types of loans while the borrower is attending college. So, the principal amount that is initially borrowed will remain the same until after graduation.

Unsubsidized Federal Loans don’t take credit history or your financial need into account, and you are responsible for paying any interest that accrues — including while you’re in school and during times of deferment or forbearance.

Another type of federal loan is called the PLUS Loan, and it’s available to parents of students if they want to help fund their children’s college education. It’s also available for graduate/professional students. According to the Department of Education, all Direct PLUS Loan applicants go through a credit check, because a qualification of the loan is that the borrower can’t have an “adverse credit history.”

Recommended: Comparing Subsidized vs. Unsubsidized Student Loans

Getting Private Student Loans

If you find that sources of funding like federal student loans, scholarships, grants, or earnings from work-study will not be enough to fund your education, then private student loans may be another option to consider. Note that private student loans do not come with the same borrower protections afforded to federal loans (such as federal forgiveness programs or income-driven repayments or deferment options) and are usually only considered after all other options have been reviewed.

When it comes to private student loans, you may be asking yourself, can I get a student loan with bad credit? Private lenders are more likely to rely on credit scores and credit history when determining their lending decisions.

So if, for example, you currently have a lower credit score, or not enough credit history, you may want to consider applying with a cosigner who has solid credit history, which can help strengthen the loan application. And, if you haven’t really established your own credit history yet, a private lender will also likely want a cosigner for at least two reasons:

•   There is scant record to demonstrate how responsibly you would pay back a loan

•   About 15% of your FICO® Score is based on the length of your credit history (and 90% of lenders use FICO Score when making lending decisions)

Development of Credit Scores

Credit scores were first developed by the three major credit bureaus and the Fair Isaac Corporation (FICO) in the late 1980s and have now been widely adopted by the financial industry. Before the development of such scores, lenders needed to slog through credit reports that were sometimes pages long, and then make lending decisions that, at least in part, were based on these reports. Under that system, it was easier for the biases of lenders to play a role in lending decisions.

With credit scores, information is quickly summarized, and lenders can establish objective requirements about what type of credit is needed before a cosigner is required and/or a loan can be approved.

How Credit Scores Are Used

When applying for a loan, as mentioned previously, about 90% of lenders refer to your FICO Scores as a sort of risk “litmus test.”

Now, let’s say you apply for a private student loan. The lenders will review your application, including your credit score, and they can approve it, deny it, or offer you something different from what you requested.

Lenders will likely look at your credit score, as well as factors like how many loans you currently have, your payment history, and the amount of time in which you’ve responsibly used credit.

Recommended: Can You Get a Student Loan With No Credit History?

Building Credit Scores

Thirty percent of your FICO Score is based upon how much money you owe. This means that reducing your debt may help build creditworthiness. These tips may also help those who are interested in paying off debt on the way to potentially strengthening their credit scores:

•   Make monthly payments on-time.

•   Prioritize paying off credit card balance monthly.

•   Consider reducing the interest rate on debt by consolidating credit card debt into a personal loan.

•   Snowball down the debt. With this method, if you have debt spread across multiple credit cards, you’d start by paying off the account with the smallest balance while making minimum payments on the rest. Then move to the next smallest bill, paying as much as you can on that one until it’s paid off, and so forth.

•   Limit the amount of spending done with a credit card.

Once your credit gets stronger, you may want to consider refinancing any existing student loans you have. With student loan refinancing, you take out a new loan to replace the old loan, ideally with a lower interest rate and better terms.

If you currently have student loans, and you’re wondering if refinancing might be a good option for you, using a student loan refinance calculator can help you determine how much you might save.

Should you refinance your student loans? If you can get better rates and terms with a stronger credit score, it may be worth it. However, it’s important to note that refinancing federal student loans makes them ineligible for federal programs and protections. If you don’t need to use those programs, you may want to explore refinancing.

Recommended: Student Loan Refinancing Guide

The Takeaway

Credit scores and credit history can play a big role in a lender’s decisions. They are used to determine a borrower’s creditworthiness and can influence if an applicant is approved for a loan and the types of terms and rates they qualify for.

Can you get a student loan with bad credit? Aside from Direct PLUS Loans, federal student loans do not require a credit check. However, private student loans usually do require a credit check. As mentioned above, because private student loans lack the borrower protections afforded to federal student loans (like income-driven repayment plans), they are generally borrowed only after the student has exhausted all other options.

If you have student loans and you’re thinking about refinancing them to get a more competitive interest rate, consider SoFi. There are no fees and you can check your rates in just minutes.

Prequalify for student loan refinancing today with SoFi.

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

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.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see Equal Housing Lender.


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Is It Possible to Delay Credit Card Payments?

Credit card debt can pile up quickly for people who can’t make their credit card payments. If you find yourself in that situation, you may wonder if it’s possible to delay credit card payments.

The good news is, depending on your financial situation, you may have options.

Credit Card Relief Options

Some credit card companies may still provide financial relief programs to their customers in response to financial hardships related to the pandemic. The cardholder can get information about these programs by asking the credit card company about their offerings or visit their website for details on each program.

Although programs may vary by company, here are some of the relief programs that credit card companies may offer.

💡 Quick Tip: A low-interest personal loan can consolidate your debts, lower your monthly payments, and help you get out of debt sooner.

Decreasing or Deferring Payments

Many credit card companies allow cardholders to reduce or delay credit card payments for a specific amount of time by offering emergency forbearance. Once the forbearance period ends, cardholders will need to make up any skipped or postponed payments.

While the credit card company may not require cardholders to make up payments right away, they will need to begin to make at least the minimum monthly payment. Depending on the new credit card balance, the minimum payment required may have changed.

Refunding or Waiving Late Payment Fees

Usually, when a cardholder misses a credit card payment, they are charged a late fee. Due to the pandemic, card companies may refund or waive late fees if the customer requests so due to financial hardship.

Lowering the Interest Rate

Some credit card companies may reduce the credit card interest rate on an account during the pandemic. However, this rate may increase after the specified term ends.

Establishing Payment Plans

Some credit card companies help cardholders repay their credit card balance by offering payment plan options. Cardholders may be able to secure a better repayment plan that works for their current financial situation.

Keep in mind that all of these options may vary by creditor.

Consequences of Missing a Credit Card Payment

Increase to the Credit Card Balance

Making a late payment may increase a credit card holder’s balance in several ways. First, credit card companies can charge a late fee of up to $30, even for the first occurrence. If a cardholder misses a payment after that, the late fee could increase to $41. It’s important to note that this fee may not exceed the minimum balance due.

Another way the credit card company may increase the balance is to increase the account’s interest rate. For example, if the cardholder hasn’t made a payment for 60 days, the credit card company may increase the APR to a penalty APR.

Increasing the interest rate can also increase the revolving balance on the credit card. However, not all creditors may charge penalty interest.

Credit Scores May Be Impacted

Since payment history and account standing are some of the factors used to determine a cardholder’s credit score, making late payments may negatively impact it. But the amount of time a cardholder’s credit is affected can vary depending on the situation.

In general, creditors send the payment information to credit bureaus. They use codes to identify the standing of the accounts. But since there is no code for a payment that is 29 days late, they may use a credit code to show the card is current. After the payment passes the 30-day threshold, however, the creditor may use the late code instead.

Using the late code is considered a delinquent payment to the credit bureaus.

It’s important to note that different creditors may use different codes at different times. So it’s hard to determine when a credit score may be affected by a late payment.

While missing a payment may not impact a score initially, it may appear on a cardholder’s score and stay there for several years if it happens regularly. Of course, this depends on the situation and the other factors credit bureaus use to figure the credit score.

The Balanced Could Be Charged Off

Another consequence of making a late payment is that the creditor may not allow the cardholder to use it for other purchases until the card is in good standing.

Additionally, if the payment is 180 days late, the creditor may close the account and charge off the balance. If a creditor charges off the balance, it means that the creditor permanently closes the account and writes it off as a loss. However, the cardholder will still owe the outstanding balance remaining on the account.

In some cases, creditors will attempt to recover this debt by using their collections department. In other cases, they may sell the debt to a third-party collection agency that will try to get payments from the cardholder.

Creditors have some flexibility when it comes to working with their customers. For customers who have had financial setbacks such as losing a job, creditors may help them get back on track under FDIC regulations. Usually, this type of flexibility is available for consumers who show a willingness and ability to repay their debt.

💡 Quick Tip: With lower fixed interest rates on loans of $5K to $100K, a SoFi personal loan for credit card debt can substantially decrease your monthly bills.

Alternative Options

For consumers who find themselves struggling to make their credit card payments and don’t have creditor relief programs available, there are a few other options to consider that may reduce the financial burden of making credit card payments on time.

Balance Transfer Credit Cards

A balance transfer credit card is a credit card that offers a lower interest rate or even a 0% introductory interest rate. This could allow a consumer to transfer a high-interest credit card debt to a card with lower interest — and potentially pay off the debt faster. Usually, balance transfer credit cards have introductory periods that last anywhere between six and 21 months.

Using this method can potentially be a money-saver if the consumer no longer uses the high-interest rate credit card and continues to pay down the transferred debt at the lower interest rate.

In general, consumers need a solid credit history to qualify for a balance transfer credit card. If approved, consumers can use the new credit card to pay down high-interest debt. Therefore, this can be a solution for credit card debt repayment, as long as the cardholder can pay off the debt before the introductory period ends.

However, if the balance isn’t repaid before the introductory period ends, the interest rate typically jumps up. At this point, the balance will begin to accrue interest charges, and the balance will grow.

Home Equity Loans

With fixed-rate home equity loans, some homeowners may qualify for a lower interest rate using their home as collateral rather than using an unsecured loan (a loan that’s not backed by collateral). Like other types of home equity lines of credit, the terms and interest rate a borrower might qualify for is based on a variety of financial factors.

It’s important to note that borrowing against a home doesn’t come without risks, such as leaving the homeowners vulnerable to foreclosure if they don’t pay back the loan.

Credit Card Consolidation

For borrowers who may not want to use their home as collateral but are struggling to pay down debt, debt consolidation with a personal loan may be a better fit for their situation. Essentially, borrowers use a personal loan with better terms and a lower interest rate to pay off credit card debt.

Using a personal loan to consolidate credit card debt can make monthly payments more manageable and potentially lower payments. Although a credit card debt consolidation loan won’t magically make debt disappear, paying off the balance might make a difference in a person’s overall financial outlook.

However, note that some lenders may charge origination fees, which can add to the total balance you’ll have to repay. You may also have to pay other charges, such as late fees or prepayment penalties, so make sure you understand any fees or penalties before signing the loan agreement.

The Takeaway

Staying on top of credit card payments can be difficult during times of financial hardship. Fortunately, you might have options when it comes to delaying credit card payments. Some credit card companies offer pandemic-related debt relief programs to qualifying customers. Or, you could choose to explore alternative options for getting out of debt for good. One solution to help accelerate debt repayment is a credit card consolidation loan, which may be worth looking into if you’ve been making on-time payments on more than one credit card and meet the lender’s income and credit score criteria.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2023 winner for Best Online Personal Loan overall.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see Equal Housing Lender.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.


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Can I Use a Credit Card in Another Country?

Can You Use Your Credit Card Internationally?

The short answer to the question, “Can I use a credit card in another country?” is yes, you can. The longer answer? Take precautions to ensure you don’t get hit with high foreign transaction fees. You also want to avoid having your card declined because the issuer didn’t know you were traveling and thinks it’s a fraudulent charge.

We’ll review those scenarios and more as we share smart strategies to use your credit card internationally without any hitches or way high fees. Let’s look into:

•  Whether you can use your credit card abroad

•  How to safely use a credit card overseas

•  The cost of using a credit card when traveling

•  The pros and cons on using plastic when in another country

•  Alternatives to using a credit card when abroad.

Here’s what you need to know.

Can You Use Your Credit Card Abroad?

Whether you’re planning a quick weekend trip to Cabo or going to college abroad, using your credit card can be a super convenient way to pay for day-to-day expenses. It’s also more secure than carrying cash. After all, if you lose paper money, it’s gone… but if you lose your credit card, you can just call the issuer and let them know.

That said, you probably don’t want to rely solely on a single credit card as your only source of funds. Credit cards can be lost or stolen. Additionally, not all vendors will necessarily accept credit cards, and some may not accept the specific type you have. Generally speaking, Visa and MasterCard are more widely accepted than Discover or American Express. Worth noting, though: Both of these latter credit card companies are working hard to increase their overseas presence.

You’ll also want to be aware that many credit cards come with foreign transaction fees that can stack up quickly, even if they appear small. For instance, a 3% foreign transaction fee means that if you put $500 on your credit card during your trip, you’ll spend an additional $15 just for the privilege of using the card. Using a credit card responsibly means being aware of these charges and deciding when and if they are worth it.

Finally, keep in mind that you’ll want to call your card issuer ahead of time to put a travel advisory on the card. That way, they won’t automatically flag a transaction thousands of miles away from home as fraudulent — which could lead to an inconvenient and frustrating declined transaction.

Is It Safe to Use Your Credit Card Abroad?

As long as you’re making purchases from reputable vendors, it is safe to use your credit card abroad. Determining who’s a reputable vendor and who isn’t can be challenging when traveling, and credit card scams can be rampant wherever you go. And it’s always possible, whether you’re traveling or at home, to have your credit card information stolen and used fraudulently. (For example, some criminals steal private information by installing credit-card skimmers on self-service gas pumps.)

How to protect yourself? The best way to ensure your credit card is still secure is to regularly check your transactions and ensure they’re all legitimate. If you see one you don’t recognize, immediately contact your credit card issuer so they can remove the charge and issue you a new card.

Of course, while traveling internationally, it may be difficult to have that new card delivered to you in time to be useful. This is why it’s so important to have some backup funding with you, including some local currency and an additional credit card.

What Are the Costs of Using a Credit Card Overseas?

Using a credit card overseas can get expensive awfully quickly. You may run into hidden costs depending on how you use the credit card. Here are a few to look out for:

•  Regular foreign transaction fees These charges are levied by credit card companies simply for your conducting a transaction with a foreign vendor.

•  Cash withdrawal fees In some cases, you may be able to use your credit card to access cash money from an ATM. Doing so may incur additional ATM fees on top of the foreign transaction fee. You may even be hit by a third fee from the ATM provider.

•  Dynamic currency conversion This is a service that some card issuers offer, which allows you to see what the cost will be in your home currency. Although this can make you feel more secure when it comes to knowing how much something really costs, you may pay for the privilege of seeing that information ahead of time. If you can, choose to have the price listed in the local currency. If you really need to know what that translates to in US dollars (or whatever your home currency is), look it up on your phone. There are plenty of sites and apps that will do the math for you.

•  Interest As with any credit card purchase, if you let a revolving balance rack up on your card, you could be subject to expensive interest charges. The best practice is to pay off your card in full, each and every month.

The good news: It’s totally possible to avoid foreign transaction fees by opting for a card that simply doesn’t charge them. You can also skip dynamic currency conversion and decide not to use the card to withdraw cash from an ATM. These moves will help whittle down your fees.

Recommended: What Is Revolving Debt?

Using Credit Cards to Withdraw Cash Overseas

As mentioned above, using credit cards to withdraw cash overseas is possible, but it might not be the smartest option. Along with any foreign transaction fees, you could also be charged cash withdrawal fees, ATM fees, and more.

That said, it is a good idea to have some local currency with you for your journey. So if you aren’t going to use your credit card to withdraw it, what are your options? While ordering foreign currency will almost certainly come at some cost, there are ways to lower the associated fees and save as much as possible.

For example, you may be able to order foreign currency from your regular domestic bank, which could come with fewer charges than withdrawing from an overseas ATM using a credit card. You may also see currency exchange services available at the airport, but these can be pricey in their own right.

Another good option: Withdraw money from a foreign ATM — but using the right kind of card. Some banks offer debit or prepaid cards with no foreign transaction fees, and may even throw in ATM fee reimbursement so you truly don’t have to worry about any additional fees. Of course, you’ll have to put in the effort ahead of time to ensure your bank offers a product like this or even to open a new bank account for this purpose.

Get up to $250 towards your holiday shopping.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $250 cash bonus. Plus, get up to 4.60% APY on your cash!1

Is It Better to Pay and Withdraw Money in Local Currency?

As mentioned above, one of the costliest parts of overseas travel is dynamic currency conversion — the service that lets you choose to pay in your own currency at a point-of-sale transaction. Dynamic currency conversion comes at an additional cost, and that’s not counting any other foreign transaction fees you might be hit with.

All of which is to say: If you can, paying in local currency is almost always the better option. (And, of course, with cash, you won’t face any additional charges other than what you already paid to acquire the currency.)

Pros and Cons of Using a Credit Card Overseas

As with any financial decision, using a credit card overseas has both pros and cons to consider. Here are a few to mull over.

Pros of using a credit card overseas:

•  More secure than cash, which can be easily lost

•  Easy to use and less bulky than carrying around bills and coins

•  Some cards offer special travel perks, such as the ability to earn miles as a reward, which can make travel easier and cheaper

Now, let’s look at the other side: the cons of using a credit card when you travel outside the U.S.

•  Can come with costly foreign transaction fees, some of which may be hidden

•  Not all overseas vendors accept credit cards (or all types of credit cards)

•  Could be declined if you don’t put a travel advisory on your card

For those who like an at-a-glance approach to seeing the benefits and downsides, take a look at this chart summarizing both sides of charging purchases with a credit card when on foreign soil:



More secure than cashMay trigger costly foreign transaction
Easy to use and less bulky to carryNot all overseas vendors accept credit cards
May offer special travel perks, like earning travel miles

Could be declined if you don’t add a travel advisory to your account

Alternatives to Using Credit Cards

If you decide you don’t want to use credit cards overseas, you can always rely on cash. Ideally, though, you’ll also want to carry a debit card connected to your checking account that allows you to access more cash in case you overrun your original budget or need money in an emergency.

You may also be able to pay for certain goods and services using an online P2P payment system like PayPal or Venmo, or purchase gift cards for specific vendors ahead of time.

Although they’re slightly outdated, traveler’s checks are still available, though relatively rare compared to their heyday. They offer another relatively secure way to pay for goods and services overseas.

Tips for When You Travel With a Credit Card

For the best success when traveling with a credit card, follow these tips:

•  Choose a card that’s widely accepted worldwide.

•  Shop around for a card that doesn’t assess foreign transaction fees.

•  Call your card issuer ahead of time to tell them you’ll be traveling. This will help you avoid having a transaction declined while you’re abroad.

•  It’s a good idea to travel with some backup funds, whether that means cash, a foreign-transaction-fee-free debit card, or another credit card.

The Takeaway

Whether you’re studying abroad or just enjoying a foreign getaway, it’s possible to use a credit card in another country. Yet, if you’re not careful, you may run into costly foreign transaction fees that can stack up fast. It’s a good idea to do your homework ahead of time to avoid any billing-statement sticker shock or regret. With a little planning, you can enjoy your travels without the cloud of growing credit-card debt hanging over your head.

Looking for a bank that doesn’t charge foreign transaction fees? SoFi has you covered, wherever you are. Sign up with direct deposit, and you’ll get both Checking and Savings accounts with one easy application. Better yet, you can earn a competitive APY.

Better banking is here with up to 4.60% APY on SoFi Checking and Savings.


How do I pay internationally with a credit card?

The same way you do at home: You might swipe, dip, or tap the card at the point of sale. Use a card that doesn’t charge foreign transaction fees to minimize charges as you travel.

Is it better to use a debit or credit card abroad?

Whichever option offers lower — ideally, zero — foreign transaction fees is the best bet. Keep in mind that withdrawing money from an ATM using a credit card can be a very expensive option for acquiring foreign currency.

Can I withdraw money from my credit card abroad?

You can, but that doesn’t necessarily mean you should. Many credit cards charge foreign transaction fees as well as cash withdrawal fees that can really add up. Look for a bank account that offers a no-foreign-transaction-fee debit card, or order foreign currency ahead of time from your local bank.

Photo credit: iStock/martin-dm

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

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SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at

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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.


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What Is a Secured Credit Card & How Does It Work?

A “secured” credit card is one that requires a security deposit — typically several hundred dollars — that is used as collateral in case the cardholder fails to make payments. If you have a brief credit history or dinged credit, a secured credit card can be a good tool for building credit.

Why care about your credit health? Because creditworthiness can come into play when applying for loans, jobs, apartments, and other situations that require a credit check. If you can’t get a regular “unsecured” credit card, a secured credit card may be a good option.

What Is a Secured Credit Card?

A secured credit card is a credit card that requires a refundable security deposit, which counts as collateral until the account is closed.

The security deposit decreases the risk for the credit card issuer, and allows people with damaged or limited credit to build a history of on-time payments. If your credit score is 600 or so (fair), you may be able to get a decent secured credit card.

Most secured cards require a minimum deposit of $200 or $300, and that amount is usually equal to your credit limit. If your deposit is on the low end, you’ll want to be careful how you use the card. Credit scoring models typically penalize utilization over 30%, so if your credit limit is $300, you may want to keep your balance under $90. A higher deposit will provide breathing room. A deposit of, say, $1,000 boosts the 30% threshold to $300.

Finally, a heads-up if your credit is bad: Unsecured cards targeting people with bad credit are notorious for high fees and confusing terms. And issuers of these cards usually don’t have good cards to upgrade to.

How Does a Secured Credit Card Work?

Here’s how a secured credit card works: You put down your security deposit, and then you get the same amount to spend as a line of credit.

If you want to increase your limit, you’ll have to contribute more to your security deposit. Secured credit card issuers don’t want to be left in the dust if you decide not to pay — or cannot pay — your balance. If that were to happen, they would just take your security deposit.

This type of card may be suitable for people who’ve gone through bankruptcy or are just starting out and have a limited credit history. Typically, a secured card is a better option than a high-interest unsecured credit card that’s targeted to people with a low credit score. That’s because a high-interest card, while enticing, can take years to pay off and end up damaging your financial reputation even further. A secured credit card poses a much lower risk.

A secured credit card looks the same as a regular credit card on a credit report — so users don’t have to worry about other lenders seeing that they have this type of card. And as long as the balance is paid in full and on time every month, your credit score should start to mend.

After using the card responsibly for a certain amount of time, a secured-card holder may be able to get an unsecured card. Your secured-card company can switch a card to unsecured as well, allowing access to a higher line of credit without a deposit.

Pros and Cons of a Secured Credit Card

Like most things in life, there are positives and negatives to this kind of card.


•   Rebuild credit. Secured cards allow you to rebuild your credit history if you have limited or damaged credit. You do that by making on-time payments every month — at least the minimum payment, but preferably the full amount to avoid interest charges.

•   Lower credit line. A lower limit means you’re less likely to go over it and risk running a high balance. This is helpful for people who are still learning how to use credit responsibly.

•   Card benefits. Secured cards may offer basic benefits like fraud protection and cash back, just like you get with an unsecured card.

•   Potential to upgrade. Some secured cards allow the holder to switch to a regular unsecured card after a period of responsible use.


•  Security deposit. All secured cards by definition require the holder to provide the issuer with a cash deposit. That deposit is refunded once you switch to an unsecured card.

•  Fewer rewards. Secured cards don’t offer all the bells and whistles that an unsecured card can. For instance, you may not earn travel points, receive any discounts on goods and services, or get access to airport lounges.

•  Interest rate. As noted above, secured cards often carry higher interest rates than regular credit cards. (Of course, the interest rate won’t matter if you’re paying your bill in full each month.)

•  Requires a hard inquiry. The issuer will need to run a hard inquiry or pull on your credit report. This usually translates to a slight drop in your credit score.

Applying for a Secured Credit Card

The application process for a secured card should be relatively quick and simple, provided you prepare what you need ahead of time.

1.   Shop Around. Secured credit cards are not all the same. Look for a card with no annual fee (they’re nonrefundable) and a minimum deposit amount that meets your needs. Some cards even offer limited rewards, like cash back. Finally, make sure your payment history will be reported to the three main credit bureaus — that is how you’ll rebuild your credit.

2.   Check your credit score. It’s smart to go into the application process knowing exactly what your credit score is. There are several ways to find it without having to pay a fee. The credit bureau Experian provides consumers with their FICO Score at no charge. Your bank may also provide your credit score online for free.

3.   Collect your information and paperwork. Application requirements vary depending on the card issuer. To make sure you have all the documentation you need, gather the following:

  – Proof of identity, such as a driver’s license, passport, or other photo ID.

  – Proof of address, like a recent utility bill.

  – Bank account info. If you have a checkbook, your bank info and account number appear on your checks.

  – Citizenship or residency info.

  – Recent pay stub, W2 form, tax return, or other proof of employment and income.

  – Social Security number. You don’t have to bring your card; just make sure you know your number.

4.   Complete the application. You can do this in person if your credit card issuer has a branch near you. You may also do it over the phone with a customer service rep — just be aware you’ll need a way to provide your documentation, either in person or via upload. The easiest method is online, as long as you have access to a computer or smartphone that allows you to upload documents or images.

5.   Provide a deposit. This is usually done via online transfer from your checking or savings account.

Tips for Bettering Your Chances at Approval

If you’re nervous about getting approved, taking these extra steps can help you maximize your odds.

1.   Review your credit report. Request free reports from the three major credit agencies at, and review them carefully. If you find any errors — from outdated information to unfamiliar accounts — file a dispute to have the data corrected or removed.

2.   Pay your bills on time. Many people hit a financial rough patch at some point. The important thing is to show a recent history of on-time payments. If you can point to a year’s worth of good habits, credit card issuers will be more likely to consider you worth the risk.

3.   Maintain a steady job. Even if you don’t have a high income, job security reassures credit card companies that you have the cash flow you need to pay your bills. Your employer may be able to give you a reference letter stating how long you’ve worked for the company and your track record of reliability and good work.

4.   Become an authorized user. Got a family member or close friend with great credit? Ask them if they’ll add you as an “authorized user” on their credit card. Over time, their good habits will rub off on your credit history. And that may give you the boost you need to get approved for your own card.

Using a Secured Credit Card

Major credit card companies such as MasterCard, Visa, and Discover offer secured credit cards. This means you can use your card anywhere these brands are accepted.

Some secured credit cards offer benefits like cash back and free access to your credit score.

Many major credit cards also provide liability protection, so you won’t be responsible for fraudulent charges on your account. You may have to pay fees, such as a monthly maintenance fee, annual fee, balance inquiry fee, or an activation fee.

Though you may be able to get a secured credit card with a lower interest rate than an unsecured credit card, the average rate for secured cards is still higher, at 22.48%, than the average regular credit card interest rate of 20.09%.

It’s smart to do some online comparison shopping of different credit cards to see which one has the most appealing terms. However, it’s best not to apply for too many; one hard inquiry can cause a credit score to drop 5 to 10 points. If you apply for more than one or two cards, that could have a negative effect on your credit score.

When you start using your card, paying it on time is going to impact your credit score rating. If you may not remember to pay it each month, you could set up automatic payments to ensure your bills are up to date. You can also check your credit score every month to make sure it’s trending upward.

Building Credit with a Secured Credit Card

Secured cards are a great way to build credit if you have a low credit score or a limited credit history. How they do that is not so different from how a regular credit card works.

First, you need to pay your bills on time, each and every month. Missing one payment will undo all your good work up to this point. If you don’t trust yourself to remember every single time, there’s a simple solution. Set up automated payments through your bank so that your card is paid on the same day each month. You can choose to pay the minimum, a set amount over the minimum (say, $100), or the whole balance. Hot tip: Paying off the balance each month will save you money on interest.

Second, avoid running up a high balance. In this case, a high balance just means an amount approaching your credit limit (the same amount as your security deposit). Try to keep your credit utilization — the percentage of credit that you actually use — below 30%. If your credit limit is $500, the most you should charge per month is $150 (this assumes you have no other debt). As you rack up a history of on-time payments, you can request a higher limit, though that will require a higher deposit.

Denial of a Secured Credit Card

Even though getting a secured credit card with limited or damaged credit history is possible, an applicant may still be denied. Anyone who is denied a card should receive a letter from the credit card issuer explaining why. Perhaps they didn’t fill out the application properly and all they need to do is fix it, or their credit score wasn’t high enough.

If the reason has to do with the applicant’s credit report, they can get free access to their report through and see their entire credit history. For example, the credit report may reveal that the credit utilization ratio, or the amount of debt compared with the amount of credit a person has, is too high. An applicant could start paying down debt more aggressively in order to bring down the credit utilization ratio and have a better chance of being approved for a secured credit card.

Another factor that may cause a denial is if an applicant doesn’t make enough income or can’t prove income. The credit score just may be too low as well.

The Takeaway

A “secured” credit card is one that requires a security deposit that is used as collateral in case the cardholder fails to make payments. Secured cards have more relaxed application requirements than unsecured cards, making them popular with people who have limited or damaged credit histories. Some secured cards offer the same conveniences as regular credit cards — from cash back to rental car coverage — without the risk of running up a huge bill. Most secured cards report to the major credit bureaus, allowing holders to build up a positive credit history over time.


Do secured credit cards build credit?

Many secured credit cards can help you build credit. Before you apply, check that the card issuer reports to the three main credit bureaus. Then, make sure you make on-time payments each and every month.

How does a secured credit card differ from an unsecured credit card?

A secured credit card requires a cash deposit that is equal to your credit limit. This serves as collateral in case you are unable to pay your bill. The deposit is refunded if you close the card or switch to a regular unsecured card. Secured cards typically have low credit limits, higher interest rates, and few perks or rewards.

How do I close a secured credit card?

To close your card, call the number on the back or log in into your account online. Or you may choose to cut up the card without officially closing it, so that your credit history doesn’t take a hit.

How can I change a secured credit card to an unsecured card?

If you have a record of on-time payments with your secured card issuer, ask them if they offer an unsecured upgrade. Some card issuers want to see a year or so of good credit habits before switching you to an unsecured card.

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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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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.


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10 Credit Card Rules You Should Know

If you’re like the roughly 45% of credit card holders known as “revolvers,” you probably carry at least some debt from month to month. Indeed, the average credit card balance in the U.S. is currently $5,733.

Unfortunately, many consumers are uninformed and unprepared for the responsibility of paying with plastic. Credit card issuers don’t require you to take a class before they hand you that first card — or the next one, or the next. But the consequences of getting in over your head can be troublesome.

What else should you know about credit cards? Here are some do’s and don’ts to keep in mind:

Just Because You Can Get Another Credit Card Doesn’t Mean You Should

Once you prove your creditworthiness, you’ll likely receive other credit card offers in the mail. Retail stores you shop in often ask if you’d like to apply for their card, offering things like special discounts, partnerships, and card-holder shopping days to draw you in.

But unless the rewards are high and the annual percentage rate (APR) is low, you may want to pass, especially if you’re in a store and won’t have time to focus on the terms and fees in the agreement.

Remember: When you apply for a credit card, it can create a credit inquiry on your report because of the hard pull on your credit report. Unless your credit inquiry qualifies as rate shopping, too many inquiries in a short time period could have a negative impact on your credit score.

A Credit Card Can Be Convenient — If You Keep Your Balance In Check

The clock starts ticking whenever you make a purchase using your credit card. Many credit card companies will give you a period of interest-free grace, but if you don’t pay off the balance within the grace period, you’ll start racking up interest.

Of course, using cash instead of credit for purchases is an option, especially for purchases made in person.

Thinking Twice Before Just Paying The Minimum

It’s easy to get into the mindset that you’re on track for the month because you paid the minimum payment due on your credit card statement. But that amount is typically based on a small percentage of your balance, typically between 1% and 3%, or a fixed dollar amount.

Unless you have a 0% credit card rate, letting your balance carry over can rack up additional interest.

Checking Your Statements Every Month

A thorough monthly review of credit card statements makes it possible to find billing mistakes and be sure your purchases and returns are accurately reflected.

It’s worth reviewing your statement for any subscription services you might be making automatic payments or renewals for. You could be paying for a service or app you don’t want anymore.

Reviewing your charges can also help you determine if you’ve been the victim of identity fraud. The faster you move to report any problems , the better off you typically are. The Fair Credit Billing Act (FCBA) instructs consumers to report unauthorized charges within 60 days after the statement was mailed. So making it a habit to check your statements as they come in — or reviewing them online at least once a month — can help you be aware of any issues and report them quickly.

If you’ve made late payments or missed a payment, your interest rate may have gone up — and you could be paying a much higher rate than you thought. Keeping track of this information will give you a more complete picture of the amount you owe.

Credit card statements also include information about how long it will take to pay off the bill if you send only the minimum payment each month, as well as how much you’ll pay in interest. Think of this information like nutrition facts on food packaging — it could be an encouragement to be financially healthier.

Reporting Misplaced, Lost, or Stolen Cards

Under the FCBA , a consumer’s liability for unauthorized use of their credit card is limited to $50. However, the FCBA also says if you report the loss before your credit card is used to make unauthorized purchases, you aren’t responsible for any charges you didn’t authorize.

If your credit card account number is stolen, but not the card, the FCBA also says you won’t be liable for unauthorized use. Credit card companies are generally quick to provide customers with new account numbers, passwords, and cards.

Using a Credit Card To Get Cash

Another piece of information available on a credit card statement is the APR charged for cash advances. Most likely, the interest rate charged for cash advances is several points higher than the rate charged for purchases.

If a credit card is used at an ATM, there may also be an additional fee charged by the machine’s owner.

So unless it’s an unavoidable emergency, it’s probably much better for your wallet to stick to your debit card or go old-school and cash a check.

Using a Credit Card for Purchases Just to Get the Rewards Points

Cash back and other perks make some cards more appealing than others. But that probably shouldn’t be an excuse to use a credit card if you’re not in a solid financial position. The trade-off probably isn’t worth it if you carry a balance.

Balance Transfer Cards Can Be Appealing, But…

Again, if you have solid credit, you may be getting offers for 0% balance transfer cards. And they may potentially save you a significant amount of money, if you can realistically pay off that balance in the designated period.

If not, the interest rate will increase after the introductory 0% interest period ends. And moving the remaining amount to yet another balance transfer card could ding your credit record, as every time you apply for a credit card a hard inquiry is pulled.

Negotiating Rates and Fees

Even the most attentive person might sometimes miss a credit card due date. This oversight, however, means a late fee and interest may be added to the account balance. If this happens more than once, you might incur a higher late fee than the first one and the account’s interest rate might increase.

It may be possible, however, to negotiate credit card interest rates and fees. If you’ve only had one late payment, it’s worth a call to customer service asking for the late fee to be waived. If there have been multiple late payments and you’re faced with an increased interest rate, it might take up to six months of on-time payments before a credit card issuer is willing to consider lowering the interest rate.

Recommended: How To Lower Credit Card Debt Without Ruining Your Credit

Knowing How Much Credit Is Being Utilized

The amount of debt owed is the second largest factor that makes up a person’s credit score. It accounts for 30% of the total score, and revolving credit accounts like credit cards are important in the calculation of a credit score. Someone who is using a high percentage of their credit card limit might be seen as potentially risky by lenders. But someone who uses a lower percentage of their credit card limit may be considered to be in a favorable financial position.

Credit card companies sometimes raise the credit limit of financially responsible customers. By keeping your account balance low, it can improve the credit utilization rate used to calculate your credit score.

The Takeaway

Credit card debt can feel overwhelming quickly. If you’ve racked up more debt than you can comfortably pay off, you might consider using a personal loan to consolidate that debt. If your financial history is solid, getting approved for a personal loan interest rate that’s lower than your credit card rates could make your outstanding debt easier to deal with. Using a debt consolidation loan to consolidate multiple credit cards would also mean just one bill to pay each month instead of keeping track of multiple payments and due dates. A consolidation loan with a respected lender can be part of a smart overall money management plan.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2023 winner for Best Online Personal Loan overall.

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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.


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