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Whether you’re making home repairs, planning a bucket-list trip, or consolidating debt, getting a $4,000 personal loan can be a flexible solution. As long as you meet the lender’s criteria, the process of applying for a loan is generally straightforward. However, before you apply, it’s a good idea to understand how personal loans work, where to find one, and what they offer.

Read on to learn about the pros and cons of a personal loan for $4,000 and the qualifications you’ll need to meet to get one.

How to Get a $4,000 Personal Loan

Knowing how to apply for a $4,000 personal loan can make the process a lot easier. Here are some steps to help you get the loan that’s right for you.

Check Your Credit

When you apply for a personal loan, lenders will check your creditworthiness, so you’ll want to review your credit report first. You can get a free copy from the three main consumer credit bureaus — Equifax®, Experian®, and TransUnion® — at AnnualCreditReport.com®.

After you receive your credit reports, read them over closely and report any inaccuracies. Errors could impact your loan terms and chance of getting approved.

Shop Around

Interest rates and terms vary by lender, so shop around and compare your options. Many lenders will let you prequalify first, which gives you a sneak peek at potential interest rates, terms, and fees before you submit your final application. Comparing at least a few different offers can help you find the one that suits your needs and budget.

Apply for the Loan

Once you’ve selected the loan you want, it’s time to apply. Once you send in your application, the lender will do a hard credit check to see how creditworthy you are. You may also be asked to provide certain documents, including:

•   Identification

•   Proof of income

•   Proof of residence

After your application and required documents are in, the waiting game begins. Some lenders may swiftly approve your application and get you the funds in a lump sum — minus any origination fees — in a few hours or days. But if you have a more complicated loan application, you could be waiting a week or more for a decision.

Pros of a $4,000 Personal Loan

There are several benefits to taking out a personal loan. These include:

•   Flexibility. You can use the funds for just about any purpose.

•   Lower interest rates. Personal loan interest rates are often lower than credit card rates.

•   Bad credit eligibility. You may still qualify for a $4,000 loan even with bad credit.

•   Fast approval. Certain lenders offer fast approval, with funds available to you in a matter of hours or days.

Cons of a $4,000 Personal Loan

While personal loans have plenty of selling points, they also come with some drawbacks. Here are ones to keep in mind:

•   High fees. Personal loans can come with fees, such as origination fees ranging from 1% to 8% of the total loan amount.

•   Prepayment penalties. Some lenders charge penalties if you pay off your loan early.

•   Increased debt: A personal loan can add to your debt load, especially if you spend the funds on big-ticket items instead of consolidating high-interest debt.

•   Negative credit impact: When you apply for a personal loan, the lender will perform a hard inquiry. This can cause your credit score to drop slightly, though the dip is temporary.

Recommended: Fee or No Fee? How to Figure Out Which Loan Option Is Right for You

Can You Get a $4,000 Personal Loan With Bad Credit?

As we mentioned, even if you have poor credit or no credit history at all, you might still be able to qualify for a $4,000 loan. If your FICO® Score is lower than 580, it’s considered poor and you’re generally seen as a high-risk borrower.

While there’s no set credit score you need for a personal loan, many lenders prefer that borrowers have a credit score above 580. You can still qualify if you have a lower score, but the terms may not be as favorable. You could be offered loans with higher interest rates and additional fees. And you may be required to put up collateral, such as a car or your home, in order to secure the loan.

How to Compare $4,000 Personal Loans

Personal loans are offered through online lenders, traditional banks, and credit unions. Just like you shop around for the best deal on a big purchase, it’s smart to compare lenders’ rates and terms before you apply.

Here are a few things you’ll want to consider as you review your options.

Fees and Penalties

Some $4,000 personal loans come with fees, while others don’t. Lenders also have different ways of applying these fees. For example, some lenders may include fees in the loan amount, increasing your total debt. Others deduct fees from the loan proceeds, reducing the amount you receive. Be sure to crunch the numbers because they can increase your borrowing costs.

Prequalification

When you apply for a loan, the lender often looks at your credit to help determine the rates and terms you qualify for. This requires a hard inquiry, which can temporarily lower your credit score by up to 10 points. If you prequalify with multiple lenders, you can compare different offers without harming your credit. You might also want to use a personal loan calculator to get a better idea of what your monthly loan payments may be.

Flexibility

What if you face financial difficulties and struggle to pay back the loan? Or if you miss a payment and incur a late fee? Some lenders offer financial protection programs for borrowers, which can give you peace of mind when choosing a $4,000 personal loan.

The Takeaway

A $4,000 personal loan can be a quick way to get money for almost any need. You can get these loans from banks, credit unions, and online lenders. Requirements vary by lender, and each might offer different interest rates and terms. However, having a good credit score typically gets you a better rate.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

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

FAQ

How much would monthly payments be on a $4,000 loan?

The amount you’d pay each month for a $4,000 loan depends on the interest rate and loan term. For example, if you had a three-year loan at 12.00% APR, your monthly payment would be around $133. However, with a two-year term at the same rate, the monthly payment would be closer to $188.

What is the interest rate on a $4,000 loan?

According to data from Forbes Advisor, personal loan interest rates can vary widely, though they’re typically between 7.00% and 36.00%. Rates for a three-year loan are generally between 12.00% and 15.00%. But keep in mind that the rate you qualify for depends on your credit score and loan terms.

What credit score do you need for a $4,000 loan?

In order to qualify for a $4,000 personal loan, most lenders typically prefer a credit score above 580. However, borrowers with lower scores may also qualify for a loan depending on the lender’s criteria.

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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.

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.

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.

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It’s entirely possible to find, when looking at your credit card statement, that you don’t owe any money this month. In fact, you have a negative balance on your credit card. You may assume there is a glitch in the system, but there are several reasons this can happen.

Read on to learn what a negative balance means on a credit card, how it can occur, and what to do if you see a minus figure on your statement.

What Is a Negative Balance on a Credit Card?

A negative credit card balance is when the credit card issuer owes the cardholder money instead of the cardholder owing money to the credit company. If you have a negative balance on a credit card, your outstanding balance is below zero.

How Does a Negative Balance Happen?

A negative balance on a credit card usually occurs for one of several reasons, which include:

You Overpaid Your Credit Card Bill

The first reason you may have a negative credit card balance is that you may have overpaid. For example, say you entered a specific payment amount that exceeded the amount due. Or, perhaps if you used autopay to cover your credit card minimum payment but made a manual payment simultaneously, you could end up having a negative balance on a credit card.

You Returned Something You Bought With the Credit Card

If you return an item and the amount of the refund exceeds your current credit card balance, it could result in a credit card negative balance. For example, perhaps you bought a $50 frying pan from your local home supply store. If you paid off your credit card and then decided to return the frying pan, your credit issuer will refund the $50. This refund will now make your new balance -$50, meaning you have a credit card with a negative balance.

You Cashed Out Too Many Rewards

Some credit cards let you redeem your rewards in the form of a statement credit. If you redeem your rewards and also pay off your revolving balance in full, for instance, you could end up with a negative credit card balance.

You Had a Charge Removed from Your Statement

Here’s another example of a scenario that could leave you with a negative balance on a credit card: Say you reported a fraudulent charge on your credit card. If you decide to repay the entire amount that’s due without accounting for the fraudulent charge, you could have a negative balance once the charge is reimbursed to your account.

Also, if you had a fee canceled or removed from your account, this could happen as well. This could also happen in the case of a credit card chargeback.

How to Get Your Money Back From a Negative Balance

If you see a negative credit card balance, it’s not something you necessarily need to worry about. However, if it’s bothering you, there are actions you can take to bring your balance out of the negative.

Here are your options if your credit card balance is negative:

Leave the Balance Alone and Decide Later

If you discover a negative balance on your credit card, you don’t need to take immediate action. Instead, you can just let it be and decide how to move forward at a later time. Because you’re owed money from the credit card issuer, you won’t need to worry about credit card interest accruing.

Use Your Credit Card for Additional Purchases

One of the easiest ways to resolve a negative balance is to make other purchases. Given how credit cards work, spending money on your card can help your balance get back to zero.

For example, if you have a -$100 balance and then make a $100 purchase, your credit card balance will even back out. Then, you don’t have to do anything until you receive another bill, nor will you have to worry about the APR on your credit card yet.

Get Your Money Back as a Credit Balance Refund

If your negative balance is an amount that’s more than you’re comfortable with or you need the money for other expenses, you can request a refund from the company. To comply with the Truth and Lending Act, credit issuers must refund negative credit card balances that exceed $1 within seven business days of receiving a written request from the cardholder.

You can expect the refund to come in the form of a check, money order, or direct deposit to your bank account. In some cases, you might be able to get a cash refund if the card issuer has physical locations.

Is a Negative Balance a Bad Thing?

A negative credit card balance isn’t a bad thing. However, if you need the funds for other bills, it’s wise to request a refund immediately.

And if you’re concerned, a credit card negative balance could impact your credit score, don’t fret — it won’t. Credit scoring models generally treat negative credit card balances as the equivalent of a $0 balance. In fact, if you have a negative balance, it likely means you’ve been staying on top of paying your balance off each month and are in good standing.

Also, keep in mind that although a negative balance may temporarily allow you to spend beyond your credit card limit due to the addition of the negative funds, it won’t actually increase your limit.

Recommended: How Many Credit Cards Should I Have?

The Takeaway

While a credit card negative balance isn’t a bad thing, it’s always wise to keep tabs on your credit card activity. Not only should you monitor what you owe, but you should identify credits or refunds you’re entitled to and factor those in when paying your balance each month. If your balance does end up in the negative, there are steps you can take to bring it back to zero, but you’re also fine to just leave it alone — unless, of course, you need the funds for other things.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

Will a negative credit card balance affect my credit?

No, a negative credit card balance will not affect your credit score. This is because credit bureaus consider negative balances as equivalent to a $0 balance.

Can I close my account with a negative balance?

Yes, you can close an account with a negative balance. In most cases, your card issuer will process a refund automatically. If they don’t, you can request one when closing the account.

What do you do with a negative balance on a closed credit card account?

Usually a credit issuer will refund your negative balance before completely closing the account. However, if the credit card is canceled and you lose access to your credit card login, you’ll need to contact your credit issuer to process a refund.

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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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It can take between mere minutes and 30 days to be approved for a credit card, and then up to two weeks for it to arrive in the mail. If you want to shorten the timeline and get access to credit ASAP, there are moves that can help you out.

Read on for tips on expediting the process and best practices for using your new card once you get it.

How Long Does It Take to Get a Credit Card Approval?

Usually, many creditors have an instant approval process if you apply for a credit card online. If you meet the issuer’s approval criteria, you may qualify right away. However, if your requirements are on the borderline, the creditor may have someone review your application by hand, which can take a week or so to complete. This is also the case if you submit your application over the phone or through the mail.

Additionally, even if you meet the requirements, approval could take longer due to security protections. If your credit is frozen, for example, a creditor won’t be able to gather all of your credit information. Therefore, you’ll have to remove the freeze before moving forward with the approval process.

Recommended: Why Credit Cards Get Declined: Reasons and Solutions

How Long Does It Take to Receive Your Card?

Once approved, it can take anywhere between five business days and two calendar weeks to receive your credit card in the mail. Some creditors may allow you to speed up the process free of charge. Others may charge a fee to do so.

If your card is lost or stolen en route or once it arrives, it may take anywhere from three to 14 business days for a new one to get sent out. Like with a new credit card, your creditor might be willing to expedite the process for free or if you pay a service fee.

Meanwhile, what if you’re in the situation of having a credit card that’s nearing its credit card expiration date? You can expect to get a replacement card anywhere from one to two months before it expires. If you haven’t received a new card and your card is about to expire, you should contact your credit issuer.

Recommended: How to Get a Credit Card for the First Time

Getting Your Credit Card Faster

If you’re not satisfied with the standard timeframe for how long it takes for a credit card to arrive, there are ways you can expedite the process.

Preapproval

Creditors often send preapproved credit card offers to consumers who meet their approval criteria. If you don’t receive a preapproval offer in the mail, you also can typically apply online through the creditor’s website. You’ll need to answer a few questions and provide some personal information, and then the creditor will offer preapproval if you qualify.

Credit card companies run soft credit inquiries to determine your qualification status, which will not impact your credit. Preapproval isn’t the final approval, but it still can indicate that you have a good chance of getting approved.

If you choose to move forward after preapproval, you must submit a formal application. At this point, the credit card company will do a hard inquiry, which can temporarily impact your credit.

Instant Approval

Similar to a preapproval, credit card issuers offer instant approvals. With an instance approval, the creditor will run a preliminary check on your credit to see if you meet their approval requirements. If you have a higher credit score, it’s more likely you will qualify instantly.

Credit card companies usually look at your creditworthiness (your history of on-time payments, credit cards usage, etc.), your income, and whether you’re old enough to get a credit card. You’ll be instantly approved for a card if you meet the approval requirements.

Expedited Shipping

Another solution if you’re wondering how fast you can get a credit card is to request expedited shipping. While some companies offer expedited shipping free of charge, others may charge a fee to get your card faster. Again, check with the credit card company to make sure you understand their rules and guidelines around expedited shipping.

Applying for an Instant Use Card

Some credit card companies and retailers offer instant use credit cards. This means that you may apply and be able to use your credit card immediately after approval. You don’t need the credit card in hand to do so.

For example, if you apply for a retail credit card in the store, they may let you use it right there and then. Or, if you apply for an Apple card, you can typically add it to a digital wallet like Google Pay or Apple Wallet for instant use.

You can usually use instant credit cards for your online shopping transactions. However, some co-branded cards may have restrictions on where you can make purchases. Otherwise, these cards are similar to what a credit card is typically.

What to Do If the Card Does Not Arrive Within the Expected Timeframe

If you never received your credit card, call your credit card company right away. You may be able to go to a bank branch to resolve the issue if you applied for a credit card through your local bank.

Credit card companies may allow you to request a temporary credit card until your permanent credit card arrives.

Using Your New Credit Card

Now that you have your new credit card in hand, it’s smart to make sure you know the best practices for using it and fully understand how credit cards work. While using it irresponsibly could impact your credit score and overall financial situation, responsible credit use can help you boost your credit score and leverage perks.

Here are some tips for getting the most out of your credit card:

•   Make timely payments. Your payment history is one factor that credit bureaus use to determine your credit score. Making late payments may ding your credit and cost you a late payment fee. Setting up automatic payments is one of the easiest ways to ensure you make timely monthly payments and avoid penalties.

•   Keep your balance low. Another factor that credit bureaus use to calculate your credit score is your credit utilization ratio. This is the percentage of your credit available you’re using at any given time. Aim to keep your credit utilization ratio below 30% (ideally at or under 10%) to avoid any impacts to your credit score.

•   Pay more than the minimum monthly payment. Only making the minimum monthly payment on your credit card may cause you to carry a balance into the next month, in which case you’ll incur interest. If you continue this cycle, it can make it hard to repay your total outstanding balance due to interest adding up. This is why it’s important to pay off your balance in full when you can.

•   Only use your card when it’s within your budget. Using your credit card for purchases like gas and groceries can help you build credit (as long as you can pay it off). However, using it for large items or impulse buys may lead you to rack up a lot of debt, which could be hard to dig out of. When using your card, make sure it’s within your budget to pay off your purchases.

The Takeaway

Getting a credit card can be a great way to build credit and earn rewards on purchases. Approval can take minutes or up to 30 days, and it can take anywhere from five to 14 days to receive your card. If you need to make a large purchase immediately, you may be able to request expedited shipping when you’re approved for a credit card, so you receive it sooner. You might alternatively apply for an instant use credit card, which could enable you to make charges to the credit card right away.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

How many days does it typically take to get a credit card?

The application and approval process can take minutes or up to a month: It can take anywhere from five business days to two calendar weeks to receive your card. If you apply through the mail or over the phone, it can take longer for your card to arrive.

Can I use my credit card before it arrives?

If you get approved for an instant use card, you can usually use it immediately. However, some restrictions may apply depending on the card you choose.

What is the earliest I can get a credit card?

Some companies offer expedited shipping, which can help you get your credit card within two business days. Keep in mind that you may have to pay a fee for expedited shipping depending on the card issuer.

Why was my credit card delayed?

If you’re on the borderline for meeting approval requirements, such as for income or credit score, it can take longer to receive a decision on your credit card application and thus to receive the card. It can also take longer to get your credit card if you mailed in your application as opposed to filling it out online.

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Photo credit: iStock/everydayplus

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.


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.

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Credit card fraud added up to $246 million last year, rising 12% from the prior year. As scammers come up with new ways to get sensitive credit card information and prey upon consumers, it can be a smart move to acquaint yourself with tactics they commonly use, from phishing scams to credit card reader scams to threats of arrest.

Read on to learn about 10 of the most popular techniques and find out what to do if you do end up getting scammed.

What Are Credit Card Scams?

A credit card scam is when an unauthorized individual uses your credit card to make fraudulent purchases or steal money from the account. While some credit card scams will take your credit card information right out from under you, others use strategies to entice you to hand over your information.

Given what a credit card is and how easy they are to use, it can be easy for a scammer to rack up debt under the cardholder’s name.

Common Scams and How to Avoid Them

Becoming familiar with the top credit card scams can increase your awareness and help you better protect your identity from fraud. Here are some of the most common credit card scams to look out for. (As you’ll see, some can involve debit cards as well.)

1. Overcharge Scams

With an overcharge scam, you’ll receive an email, call, or text stating that a retailer or merchant overcharged your card. The scammer will request your personal information to complete a refund for the overcharge. They will then use this information to gain access to your credit card.

Here’s how these scams can work:

•   Usually, the scammer identifies a product or service that you already use, so it may not seem as suspicious when they request this information. But, the fraudster may also use a standard service that many people use, such as Netflix or Spotify, so that it won’t raise red flags.

•   While it’s always good to scrutinize your incoming calls, it’s especially important to do so when you receive a call from an unidentified number, though scammers are getting more sophisticated at spoofing phone numbers and making it seem as if they are calling from legitimate businesses.

•   If you answer, the caller may tell you that you must take immediate action to get a refund, or that it’s your last chance to do so. The urgency should be an immediate sign something is amiss; that’s a common scam warning sign.

•   Also, if you do get a call from, say, Netflix saying your account is suspended, it can be wise to hang up and contact the business directly to see if there’s an issue with your account.

•   If you receive a suspicious email, compare the email to past emails from the merchant or retailer. Scammers are often good at disguising a false email address, so look carefully for differences in the sender’s address. They may add “pay” or “support” to make the address look legitimate.

•   You may also find subtle or major misspellings and incorrect grammar in the email.

The best way to avoid this potential credit card scam is to either hang up the call or exit the email. Again, if the call says it’s from your credit card issuer, you can call them directly to see if this request was legitimate or a scam. You can find your creditor’s number on the back of your credit card or credit card statement.

2. Interest Rate Scams

One of the most common credit card scams that occurs over the phone is a fraudster calling to tell you that they can reduce your credit card interest rate and potentially save you significant money on interest payments. They will typically state that their company has a relationship with your credit card company; therefore, they can negotiate reduced interest payments.

However, to entice you to act now, they’ll say the offer is only available for a limited time. Then, the scammer will request your credit card information, such as your account number and CVV number on a credit card, for the alleged service.

Legitimate debt relief companies seldomly cold call consumers to get their business. Also, they cannot charge a fee upfront until they reduce your interest rate or settle a portion of your debt. Therefore, this kind of call should set off alarm bells.

If you want to reduce your interest rate, contact your credit company directly. As the cardholder, you have a better chance of reducing your rate than a third-party company with no relationship with the creditor. If you do receive this call, simply ignore it like you would other credit card scams.

3. Gas Station Credit Card Scams

Scammers can use credit card skimmers to lift your credit card information at gas stations. They do so by attaching an external device to the credit card machine at a pump. When you swipe your card, the device can save your information instantly.

So, before you swipe your card, check to see if the credit card reader you’re using at the pump looks the same as all the other ones. If it doesn’t, that can be a tipoff. You also can tug at the reader to see if it easily detaches. Since skimmers are temporary, they’re usually only attached with double-sided tape, making them easy to remove. Don’t insert your card if you can remove the skimmer with little effort. Instead, go to another gas station to get your gas.

Make sure to inform authorities about the skimmers so they can handle it accordingly.

4. Prepaid Credit Card Scams

Prepaid credit cards, also known as prepaid debit cards, allow you to load money onto them and make purchases. When prepaid credit card funds are depleted, you can no longer use them (unlike credit cards, there is no credit card limit for prepaid cards). You can usually purchase prepaid credit cards at retail stores or online.

Scammers use prepaid credit cards in many different ways to take your money. For example, a scammer may call and say you won the lottery. However, to get your winnings, you must pay the taxes. They may tell you that you can do so by loading a prepaid credit card with a certain amount of funds and sending the card number to the caller. After this is done, they promise to send you your winnings — but, in this case, the scammer may take the card money and never be seen again.

If someone is requesting a prepaid credit card, that’s a red flag. It’s best not to proceed with this transaction as it may be a prepaid credit card scam.

5. Hotel Front-Desk Credit Card Scams

This scam takes place in a hotel room, where the scammer will call up stating they are a hotel employee. They will inform you that there is an issue with your credit card, and you must verify your credit card information. Usually, these calls take place early in the morning or late at night so that you will be thrown off guard.

If this happens to you, it’s best to handle the matter in person. You can hang up and then visit the front desk to ensure your credit information isn’t exposed to the wrong person.

6. Arrest Phone Call Scams

The objective of this scam is to convince you to give out your personal credit card information to pay off a debt, fine, penalty, or ticket. While arrest scams may seem unrealistic, the scammer relies on scare tactics to try to get the target to hand over their credit card information. They may target seniors with this scam.

Some points to know:

•   Usually, the scammer claims they are from a federal agency like the IRS, FBI, or other government agency that suggests there’s a connection to law enforcement.

•   Then, they threaten that if this bill, fee, or ticket goes unpaid, you will be arrested, or other legal action will be taken immediately.

•   It’s doubtful that actual law enforcement or federal agencies would request sensitive information during a phone call, especially an abrupt one.

•   Another sign that this is a scam is that the call may sound like a robot or like it’s pre-recorded.

•   The caller may also have a sense of urgency, claiming authorities are on their way to arrest you.

•   Even if you do owe outstanding fees, have a ticket, or were a part of some similar activity recently, authorities or federal agencies wouldn’t request payment information over the phone in this manner.

Don’t share any personal information with the caller. Just like with other scams, the best way to address your concerns is to hang up and call the alleged agency directly to get any information straight from the source.

Charity Scams

When nonprofit organizations ask for donations, it may pull at your heartstrings. But scammers can use this strategy to swipe your credit card information right out from under you.

Scammers who use this strategy usually call you pretending to be a part of a nonprofit or other charitable organization. They will then request donations using everyday anecdotes or narratives designed to influence their targets. It’s also common for scammers to use this tactic when a natural disaster strikes or another current event requires aid.

Although it’s common for nonprofits to solicit donations over the phone, you should still be wary when receiving one of these calls. If you want to donate to the organization, jot down information from the caller, such as their phone number and the name of the charity. Then, you can look up the phone number online to determine if it’s already identified as a scam.

If it isn’t, you can visit the IRS’s Tax Exempt Organization Search and CharityNavigator.org to research the organization to determine its legitimacy.

Overall, it’s wise to avoid donating to unsolicited callers. Instead, consider visiting an organization’s actual website to determine the best way to donate.

8. Hotspot Scams

Whether you’re connecting to a public WiFi hotspot via your phone or on your computer, scammers can try to access your credit card information when you sign on. In fact, they may prompt you to enter your credit card information to access a particular hotspot. Given how credit cards work, this is very risky. This can mean the scammer gets access to your card’s credentials.

So, when attempting to access the internet in public, be wary if you’re asked to enter your credit card information. Instead, if you’re at a restaurant or retail location, ask an employee to share the establishment’s hotspot or wifi information. Check that the connection is secure. This way, you’ll know you’re not exposing yourself to credit card fraud. But remember, it’s always wise to avoid conducting financial business on public WiFi.

9. Skimming Scams

Like gas pump skimmers, scammers can also use skimmers at ATMs to obtain credit card information.

The only way to identify a skimmer is by checking the scanning device. For example, if the card reader easily detaches, it’s likely a card skimmer. In addition, you can spot other things to identify a skimmer, such as graphics that don’t align or colors on the machine that don’t match the reader. Another clue is if the keypad seems cheap or too thick.

Before entering your card into a reader, investigate for a skimmer. Familiar places skimmers hide are usually in high-traffic areas (a mall or a sports stadium, say) or tourist locations. Don’t use your credit card if you’re unsure whether a skimmer is present or have a feeling something may be off, potentially indicating a credit card reader scam.

10. Phishing Scams

Like the name suggests, a phishing scam involves fraudsters phishing for your personal information. Scammers contact their targets through the phone or over email, posing as an honest company. They then provide fraudulent links or instructions to help them access your personal credit card information.

For example:

•   The scammer may impersonate your credit card company (simply saying they are “calling from your bank and there’s a problem”) and state that your account details must be updated due to a compromised card.

•   They will request your card information (your credit card number, expiration date, and CVV code) over the phone or email to resolve this issue.

•   The scammer may request the answers to your security questions for protection purposes.

Don’t provide any of this information. Even if they suggest this is a sensitive matter and must be addressed immediately, it’s best to hang up, and call your credit card company right away.

Recommended: Common Reasons Why Credit Cards Get Declined

How to Protect Yourself From Credit Card Scams

To keep your credit card information safe, here are some steps you can take:

•   Select a credit card with 0% liability on unauthorized purchases. The Fair Credit Billing Act (FCBA) limits your financial responsibility for credit card fraud to up to $50. In other words, you will only have to pay $50 if you’re a victim of one of these credit card scams and request a credit card chargeback. However, some credit card companies offer 0% liability as a perk, which means you aren’t responsible for any fraud.

•   Keep tabs on your credit card activity. Regularly looking at your credit card activity and checking your credit card balance can help you spot any suspicious activity. If you do notice anything, contact your credit card company right away.

•   Request transaction alerts. Usually, credit card companies let you sign up for transaction alerts, such as for balance transfers, large purchases, and international purchases. Using alerts is a great way to monitor your card activity.

•   Ensure your information is secure. When making purchases online, over the phone, or in person, ensure your information is secure. For example, only use sites with “https” in the URL when shopping online. Also, avoid using public WiFi where your personal information may be in jeopardy.

What To Do If You’re a Victim of Credit Card Scam: Reporting Credit Card Scams

If you’re a victim of a credit card scam, follow these steps:

•   First contact your credit card company to let them know about the fraud. Per the Fair Credit Billing Act, you have 60 days after receiving your billing statement to report any fraudulent activity on your card.

•   After informing your creditor of the incident, make sure to change your password for your account.

•   You may also want to contact the three major credit bureaus: Equifax, Experian, and TransUnion. Request verification of your identity, and ask for a fraud alert to get linked to your report.

•   Additionally, if you’re a credit card scam victim, you can contact the Federal Trade Commission (FTC) to report the crime. You can report your incident online or over the phone at 1-877-382-4357 (FTC-HELP).

•   If you’ve discovered a fraudulent website, email or another internet scam, report it to the Internet Crime Complaint Center (IC3).

•   Unfortunately, not all scams originate in the US; if you believe you’re a victim of an international scam, report it through econsumer.gov.

All reports help consumer protection agencies pinpoint trends and prevent other consumers from falling victim to credit card scams.

The Takeaway

Unfortunately, it can be easy to become a victim of credit card scams. But, if you monitor your account, set fraud alerts, and keep your information confidential, you’ll have a better chance of avoiding getting duped. Pay attention to what kinds of protection your credit card issuer may offer, too.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

Who is liable for a credit card scam?

Under the Fair Credit Billing Act (FCBA), you’re only liable for up to $50 of credit card fraud reported within 60 days. However, if your credit card has 0% fraud liability protection, you may not be liable for any fraudulent charges.

What counts as credit card fraud?

When an unauthorized person makes a charge with your credit card or steals your credit card information, this is considered credit card fraud.

How do I report credit card fraud?

Contact your credit card issuer ASAP. Then go to the Federal Trade Commission’s website to report the incident. Law enforcement agencies will then use these reports to investigate criminal activity to prevent future fraud. Once you submit a report, you can follow up with local law enforcement, if your creditors suggest it’s wise to do so.

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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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.


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.


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.


Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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It may be tempting to just make only the minimum payment on your credit card bill and put off paying the total amount until another time. However, only making your credit card minimum payment can cost you both in interest and your credit score. Plus, it can keep you in debt longer.

To avoid this predicament, here’s what you need to know about minimum credit card payments, as well as what you can do if making the minimum payment on your credit card is a challenge.

What Is a Credit Card Minimum Payment?

A credit card minimum payment is the lowest sum that you’re required to pay each credit card billing cycle. To avoid late fees or penalties, you must pay at least this amount.

If you don’t make the minimum payment amount, you could be charged a fee or, worse, your interest rate could increase, which is why it’s critical to understand this part of how credit cards work.

Creditors determine your minimum payment by using one of three different methods, which include:

•   A flat percentage of your total outstanding balance: Your minimum payment might be 1% to 3% of your balance. Thus, your minimum credit card payment will fluctuate monthly depending on your credit card balance at the time.

•   A percentage of your balance plus fees or interest that’s applied during that billing cycle: With this method, the credit card company may make your minimum payment equal to 1% of your revolving balance and then add any fees or the annual percentage rate (APR) charged within that billing cycle.

•   A flat rate: A creditor may apply a flat rate, perhaps $25 or $35, for your minimum payment.

Keep in mind that if your revolving balance is less than the minimum payment, your creditor will typically require you to pay the total amount. Because minimum credit card payment guidelines differ from creditor to creditor, you’ll want to get familiar with your credit card payment rules — ideally before you even apply for a credit card.

How Does a Minimum Payment Affect Your Credit Score?

Not only does paying the minimum payment on your credit card increase the amount you pay in interest, but it can also impact your credit score.

One of the factors that credit bureaus use to determine your credit score is your credit utilization ratio, which is the percentage of credit you’re using versus the amount you have available. A good rule of thumb is to keep your credit utilization ratio below 30% (better still, closer to 10%) so your credit won’t be affected.

For example, let’s suppose you have $15,000 of available credit. If your revolving credit card balance is $7,500 racked up from places that accept credit card payments. That means your credit utilization ratio is 50%, which exceeds the 30% threshold. If you’re only making the minimum credit card payments, your credit utilization ratio will stay beyond an acceptable rate for a more extended amount of time. Therefore, your credit score may dip.

To avoid this scenario, it’s wise to make more than the monthly minimum payment so you keep your credit utilization low. This is especially important if you have a limit that’s below the average credit card limit, as it will be easier for your credit utilization ratio to jump.

What to Do If You Cannot Afford Your Minimum Payment

Although you want to make more than your minimum credit card payment each month, you may find yourself in a situation where you can’t afford to do so. Fortunately, there are steps you can take to ease this financial burden.

Stop Using Your Credit Card

If you’re trying to repay your credit card debt, it’s best not to add to it. This means that while you’re working to pay down your credit card balance, you should consider putting your credit card use on pause. If you continue to use your credit cards, you may feel like you’re never getting ahead. This can become a vicious debt cycle that can be challenging to break.

You can pause your use by putting your credit cards in a safe place where you don’t have access to them but also don’t risk them getting stolen. For example, you could put them in your family’s safe. This way, you can avoid the temptation of impulse buys.

Also, you may find it helpful to track your spending. This will allow you to see where your money is going and get a better handle on what costs might be busting your budget.

Reduce the Cost of Your Bills

Looking for ways to cut your expenses can free up extra cash to help you make your credit card minimum payments. You might start by saving on streaming services you’re not using, or consider putting a gym membership on hold until your credit card balance is repaid.

For example, if you have cable, Netflix, Amazon Prime, and Hulu, you may want to choose just one or two of these services to keep. Then, you can cancel the other subscriptions that you don’t need, saving you money and making it easier to meet your minimum payment on your credit card.

Consider Getting a Side Job to Earn Extra Income

Increasing the amount of money you have coming in also can help you accelerate your credit card debt repayment. Even bringing home an extra couple hundred dollars per month via a low-cost side hustle could help you make a significant dent in your credit card debt.

For example, if you’re handy, you could sign up for a service like TaskRabbit to help people tackle projects around their homes. Or, if you like to interact with a variety of people, you could consider driving for a ride-share service like Uber or Lyft.

Also, if you receive a financial windfall (say, extra money from a work bonus, tax refund, or a gift), you could put these funds to good use by making a larger credit card payment.

Call The Credit Card Company

In some cases, you may want to contact your credit card company if you cannot make the credit card minimum payment. You’ll want to explain why you can’t make the minimum payment and how much you can afford to pay.

Also, share with your credit card company when you can begin making regular payments again. Your credit card company would rather receive payment than no payment. So, by communicating with them, they might be willing to work with you while you repay your debt.

Explore Get-Out-Of-Debt Options

There are other options to help you get out of your credit card debt. For starters, debt consolidation is a get-out-of-debt strategy that can help you minimize your interest payments, helping you to repay your debt faster. With debt consolidation, you take out a loan with a fixed interest rate that you use to repay all of your other high-interest debts. Ideally, you want to find a financing option that can yield a lower interest rate.

How Paying Only the Credit Card Minimum Payment Costs You More

As you now know, it’s essential to make at least the credit card minimum payment. But making only the minimum payments each month can end up costing you more — even if you have a good APR for a credit card. When you carry a monthly credit card balance, the interest continues to accrue, which can keep you in a debt cycle.

To illustrate the cost of paying the minimum payment on the credit card only, let’s suppose your credit card has a 17% interest rate and you have a $3,000 revolving balance. If your credit card company has a $50 minimum payment requirement, it will take you 135 months to repay your debt. Additionally, you’ll end up paying roughly $3,743 in interest alone. This means you’ll spend a total of close to $7,000 to pay off a $3,000 bill.

Luckily, you don’t have to do all of this math yourself if you’re wondering how your credit card payments will impact the total amount you owe. Per the Credit CARD Act of 2009, credit card companies are required to put a minimum balance warning on each bill you receive to protect your interests.

Usually, credit card companies will communicate this warning with a table that provides a snapshot of the amount of time it will take to repay your balance if you only make the minimum payment. In some cases, the company may also provide a table that suggests the amount of time it will take to repay your debt if you make more than the minimum payment.

The Takeaway

If you want to avoid costly interest or a dip in your credit score, it’s wise to make more than your credit card minimum payment each month. An even better solution (if you can afford to do so) is to pay off your total credit card balance every month. This way, you can dodge high interest payments and keep your credit utilization ratio at a favorable rate.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

What are your minimum payment rights?

As part of the Credit Card Accountability Responsibility and Disclosure (CARD) Act, creditors are legally required to illustrate how long it will take you to repay your debt if you make only the minimum payment. Also, they must provide a toll-free number that cardholders can call to get assistance with credit counseling or debt management. These requirements are designed to keep credit practices fair.

Does paying minimum due affect your credit score?

Yes, making a minimum payment can affect your credit score since it impacts your credit utilization ratio, a factor used to calculate your credit score. Credit utilization ratio is the percentage of credit you’ve used versus the amount you have available. So, if you continue to carry a high balance on your credit card, your credit utilization rate may be higher than recommended, which can impact your credit score.

What happens if I don’t pay my credit card for 5 years?

After just six months if you don’t pay your credit card, the credit card company is required to charge-off the account. This means they will close your account and write it off as a loss. However, you will still be responsible for repaying the outstanding balance either to your creditor or a third-party collections company.

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About the author

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Photo credit: iStock/MStudioImages

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.


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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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