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Consumer debt refers to any money you borrow for personal, family, or household purposes. It includes credit card debt, student loans, auto loans, mortgages, personal loans, and payday loans.

White “debt” can have negative connotations, having consumer debt isn’t necessarily a bad thing. Borrowing money allows you to achieve your goals, such as buying a house or going to college. However, consumer debt can become a burden if you borrow too much or for the wrong reasons.

Unfortunately, many Americans are currently saddled with high levels of debt. According to a recent credit and loan review by Experian, the average person in the U.S. had a total consumer debt balance of $101,915 in 2022. This number includes mortgages, credit card balances, auto loans, personal loans, and student loans.

If you’re curious about consumer debt or worried that you may have too much, read on. What follows is an in-depth look at the different types of consumer debt, including how each can help — or hurt — your finances, plus how to pay off high levels of consumer debt.

What Is Consumer Debt?

Consumer debt, as its name implies, is debt held by consumers, meaning private individuals as opposed to governments or businesses. It includes debts you may already have or might seek in the future — credit cards, student loans, auto loans, personal loans, and mortgages. It doesn’t include business loans or lines of credit or business credit cards.

Consumer debt products are offered by banks, credit unions, online lenders, and the federal government. They generally fall into two major categories: revolving debt and non-revolving debt.

With revolving debt, you repay your debt monthly (credit cards are a prime example). With non-revolving debt, you receive a loan in one lump sum and then repay it in fixed payments over a defined term. Non-revolving credit typically includes auto loans, student loans, mortgages, and personal loans.

Consumer debt can also be broken down into secured vs unsecured debt. Secured debt is debt backed by an asset (such as a home or car) used as collateral. If the loan isn’t paid back, the lender has the option to seize the asset. Unsecured debt, on the other hand, does not require collateral. The lender simply relies on the borrower’s ability to repay the loan.

The Different Types of Consumer Debt

Consumer debts vary widely in terms of how they work, their terms, and their impact on your financial well-being. Here a closer look at some of the most common types of consumer debt.

Mortgage Debt

Mortgage debt is the most common (as well as the largest) type of debt in the U.S. This type of consumer loan is used to purchase a home and the home is used as collateral.

Mortgages are installment loans, which means you pay them back in a set number of payments (installments) over the term of the loan, typically 15 or 30 years. Mortgage interest rates are usually lower than other types of consumer loans, and the interest may be tax deductible if you itemize your taxes.

If you make your payments on time, a mortgage can have a positive impact on your credit profile, since it shows you are a responsible borrower. If you stop making payments on a mortgage, however, it can negatively impact your credit. Plus, the lender can begin the foreclosure process, which typically includes seizing the property and selling it to recoup its losses.

Student Loan Debt

Student loans are unsecured installment debt used to pay for education expenses, such as tuition and room and board. They are offered by federal or private lenders and issued in one lump-sum payment. The borrower is then responsible for making repayments in regular amounts, typically after they graduate or are no longer in school.

Student loans are often one of the first debts consumers take on and can be an important way to build a positive credit history, provided you make on-time payments. Interest rates vary by lender. If you get a student loan from the U.S. Department of Education, the interest rate is set by the federal government and will remain fixed over the life of the loan.

Depending on your income, interest paid on student loans may be tax-deductible up to certain limits.

Auto Loan Debt

Auto loans are secured installment loans used to purchase a vehicle. These loans can have varying terms and interest rates, and the vehicle serves as collateral for the loan. You can get an auto loan through a bank or through a lender connected with a car dealership.

Unlike a house, a car depreciates in value over time. As a result, you, ideally, only want to take out financing for a vehicle if you can get a low interest rate. Some car companies offer low- or no-interest financing deals for individuals with good credit.

You get the proceeds of an auto loan in one lump sum then repay that amount, plus any interest, in a set number of payments (typically made monthly) over an agreed-upon period of time, often three to six years. If you stop making payments, the lender can repossess your car and sell it to get back its money.

Like other types of consumer loans, making on-time payments on your auto loan can help you build a positive credit history.

Personal Loans

Personal loans are consumer loans that individuals can use for a wide variety of purposes, such as debt consolidation, home improvements, or emergency expenses. You can get a personal loan with an online lender, bank, or credit union. They typically have fixed interest rates and set repayment terms, often two to seven years.

Personal loans are typically unsecured, meaning you don’t need to provide any collateral. Instead, lenders look at factors like credit score, debt-to-income ratio, and cash flow when assessing a borrower’s application.

Once approved for a personal loan, you receive a lump sum (which can be anywhere form $1,000 to $50,000 or more) and start paying it back, plus interest, in fixed monthly payments over the loan’s term. On-time loan payments can help build your credit, but missed payments can damage it.

Recommended: Typical Personal Loan Requirements Needed for Approval

Credit Card Debt

Credit card debt arises from using credit cards to make purchases or cover expenses. This type of debt is revolving, meaning you don’t have to pay it off at the end of the loan term (usually the end of the month). If you carry a balance from month to month, you pay interest on the outstanding amount.

Credit card debt is an unsecured loan, since it isn’t tied to a physical asset the lender can repossess to cover the debt if you don’t pay your bills. Interest rates vary depending on the card, your credit scores, and your history with the lender, but currently average around 24%.

To remain in good standing, you’re required to make a minimum payment on your balance each month. However, only paying the minimum allows interest to accrue, which can make the debt increasingly harder to pay off. As a result, credit card debt is often the most problematic type of debt for consumers.

A long history of making on-time payments can have a positive impact on your credit profile, while missing and late payments (and using a large amount of your available credit line) can have a negative impact on your credit.

Payday Loans

Payday loans are a type of short-term credit offered to consumers looking to get access to cash fast. Generally, these loans are for relatively small amounts of money ($500 or less) and must be repaid in a single payment on your next payday, hence the name. Payday loans are typically available through storefront payday lenders or online.

Although these fast-cash offers can be tempting, the high cost associated with them make them a last resort. A typical two-week payday loan will charge $15 for every $100 you borrow, which is the equivalent of a whopping 400% annual percentage rate (APR).

Generally, payday loans are not reported to the three major consumer credit bureaus, so they are unlikely to impact your credit scores.

Pros and Cons of Consumer Debt

There are both benefits and drawbacks to consumer debt. Here’s a look at how they stack up.

Pros of Consumer Debt

•   Access to immediate funds Consumer debt allows individuals to make large purchases (like a home or car) or cover expenses (like a college education) when they do not have the necessary cash on hand.

•   Building credit history Responsible borrowing and timely repayments can help establish and improve an individual’s credit history and credit score.

•   Emergency financial support Consumer debt, such as a personal loan, can provide a safety net in unexpected situations when someone needs funds immediately.

Cons of Consumer Debt

•   High interest rates Many forms of consumer debt, such as credit card debt or payday loans, carry high interest rates, making them costly in the long run.

•   Risk of overborrowing Without careful financial planning, consumer debt can lead to excessive borrowing, making it difficult to manage monthly payments and potentially causing financial stress.

•   Negative impact on financial goals Excessive consumer debt can hinder individuals from achieving long-term financial goals, such as saving for retirement or buying a home.

Getting Out of Consumer Debt

To get out from under unhealthy levels of consumer debt, consider the following steps:

•   Assess your debts You might start by making a list of all your debts, noting balances, interest rates, and minimum monthly payments. This will allow you to see where you stand and make a plan for debt repayment.

•   Create a budget Next, you’ll want to assess your average monthly income and expenses to determine how much you can allocate towards debt repayment each month. At the same time, you may want to look for ways to cut back on nonessential spending; any funds you free up can go towards extra payments.

•   Prioritize repayment If you have multiple high-interest debts, you may want to focus on paying off the highest-interest debt first, while making minimum payments on other debts. Or, you might focus on repaying the debt with the smallest balance, making minimum payments on all your debts. Once that is paid off, you move on the next-highest balance.

•   Explore debt consolidation options Consider consolidating multiple debts into a single loan to simplify repayment and, ideally, save money. One way to do this is through a debt consolidation loan, a personal loan that may come with lower interest rates than your existing debts.

•   Negotiate with creditors Another option is to reach out to your creditors to see if you can negotiate lower interest rates, extended payment terms, or possible debt settlement options.

•   Seek professional help if needed If you are struggling with debt, you may want to consult a nonprofit credit counseling service. Credit counselors help you go over your debts to devise a plan for repayment, and they can also help you with budgeting and other personal finance basics.

The Takeaway

Consumer debt is debt you take on for personal, rather than business, reasons. But all consumer debt is not created equal. Some debts, such as mortgages or student loans, can be characterized as “good” debts, since they can benefit your long-term financial health. Other debts, like high-interest credit card debt or payday loans, on the other hand, can be considered “bad debts,” since they can put your financial health at risk.

If you’re having trouble paying off your consumer debts, you may want to consider debt consolidation. With a low fixed interest rate on loan amounts from $5K to $100K, a SoFi personal loan for debt consolidation could substantially lower how much you pay each month. Checking your rate won’t affect your credit score, and it takes just one minute.

See if a personal loan from SoFi is right for you.

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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 SoFi.com/legal. Equal Housing Lender.

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 .

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.

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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Missing a credit card payment can happen to anyone. But a credit card late payment may also come with certain consequences, such as late fees, interest accrued on the credit card balance, and potential negative impacts to your credit score. The longer you go without paying your bill, the more consequences you may experience.

Here’s a look at what happens if you miss a credit card payment and solutions to help prevent this from happening in the first place.

When Is a Credit Card Payment Considered Late?

As soon as you fail to pay your credit card bill by the due date, it’s considered past due. Your credit card company may send you notices about it in the form of calls, emails, letters, or texts. You could also face some financial consequences for being late.

What Happens if You Make a Late Credit Card Payment?

The Credit Card Balance Could Increase

Even if you didn’t use the card to make new purchases during a particular billing cycle, making a late payment could still potentially increase your balance in a few different ways.

With even the first missed due date, the credit card company can charge a late fee of up to $30. If you miss another payment within the next six billing cycles, the late fee can go up to $41.

The silver lining here is that the late fee can’t be more than the minimum amount due on the account. So, for instance, if your minimum payment is $25, your late fee won’t exceed $25.

There’s also a chance the creditor could increase your interest rate if your payment is late by a certain number of days. Increasing your interest rate will also increase your total credit card balance because that new, higher rate (generally referred to as a “penalty APR”) will apply to the entire unpaid balance.

Not all credit card companies have penalty APRs for late payments, so check with your credit card company to verify.

Recommended: What Is APR on a Credit Card?

Your Credit Score Might Be Affected

Your credit score includes information about your credit history, such as your payment history and the standing of your accounts, so a late payment could have a negative impact.

Generally, creditors send information to credit bureaus using different codes to indicate if a payment is current or late. Since there is no credit code for payments that are one to 29 days late, they may use a “current” code.

Once the payment is more than 30 days late, however, creditors generally use the “late” code to denote that the payment is delinquent. But different creditors will send different codes at different times so there’s no way to know for sure when you will see the late payment reflected in your credit report.

Creditors may not report a late payment to credit bureaus until a full billing cycle has gone by with no repayment (typically 30 days). So, for example, if your payment’s due date was the 11th and you paid on the 13th, there’s a chance your credit won’t take a hit.

Although every situation is different, a late payment might end up staying on your credit report for several years. And because credit history is just one factor used to determine your credit score, it’s hard to predict exactly how a late payment will impact your overall score.

The Balance Could Be Charged Off

Another consequence of not paying your credit card bill is that the credit card company may not allow you to continue to use your card for other purchases until your account is in good standing.

What’s more, if your payment is 180 days past due, the credit card company can close your account and charge off the balance. “Charging off” means the credit card company will permanently close the account and write it off as a loss, but the debtor still owes the balance remaining.

Sometimes, credit card companies will attempt to recover what’s owed through their own collection department, but charged-off debts are sometimes sold to third-party collection agencies, which then attempt to get payment from the debtor.

Credit card companies do have leeway to work with their customers. Under FDIC regulations governing retail credit, the creditor can help customers who have had financial setbacks — like job loss or the death of a family member — get back on track.

This leniency is typically shown to people who are willing and able to repay their outstanding debt, and the FDIC encourages creditors to proceed with this step with a structured repayment plan and to monitor the progress of the plan.

How to Resolve a Credit Card Late Payment

Make a Payment Right Away

If the payment just slipped your mind, don’t panic. Paying the credit card balance in full immediately helps avoid accruing interest charges and potentially saves your credit score from dropping. Alternatively, you might want to ask your credit card company about arranging a payment plan to minimize the damage.

Negotiate Fees

Even though your credit score may not drop because of one missed payment, you may incur late fees or a penalty interest rate (or, more accurately, a penalty APR as mentioned above), which will likely increase your total balance.

However, sometimes credit card companies are willing to work with customers to waive those fees. Calling your credit card company to request a waiver of late fees could be a first step, especially if your account is up to date and you’re not a repeat offender.

If your credit card company seems unwilling to change your rate back to the original amount, you might consider asking if they will do so once you show responsible payment history.

Automate Your Credit Card Payments

To help prevent any late payments in the future, you may want to consider setting up autopay to cover the minimum payment on your credit cards.

This way, if a payment slips your mind, you shouldn’t face any late payment consequences. Setting your bill to be automatically paid in full a few days before the payment is due can ensure you pay your balance in time.

If you would prefer not to sign up for autopay, many credit card companies have an option to sign up for notifications that remind you when your payments are due.

Getting Out of Credit Card Debt

To avoid late credit card payments once and for all, you may want to consider solutions for getting out of credit card debt entirely. Strategies depend on your unique financial situation, of course, but here are some you might want to explore.

Budget to Get Out of Debt

Creating a budget can help you better manage your money so you know what you have coming in and going out. You can use either a simple spreadsheet or a spending tracker app to simplify your efforts.

Once you have a handle on how much extra money you can put toward your debt, you may want to select a debt repayment strategy, such as the snowball method or avalanche method.

With the snowball method, the focus is on paying off the smallest debt balance first and then moving on to the second smallest debt balance, and so on, while still making minimum payments on all debt. This type of method is meant to give a psychological boost.

The avalanche method tackles the debt with the highest interest rate. Since you’re starting with the most expensive debt, this strategy can be a big money saver in the long run.

Open a Balance Transfer Credit Card

If your credit is in good standing, opening a balance transfer credit card could be a solution. Usually, these types of credit cards come with low or 0% APRs for a certain period.

Some companies may offer up to 21 months of interest-free payments during the promotional period. But it’s important to note that while the introductory period might be interest-free, you may still have to pay a balance transfer fee between 2% and 5%.

Ideally, you would pay your credit card balance in full by the time the introductory period is over, which would allow you to avoid interest payments on the debt.

Keep in mind, however, many balance transfer credit cards have restrictions. For example, if you make a late payment, you may lose your introductory rate.

Another limitation may be that your introductory APR only applies to the transferred balance and all other transactions may have a higher rate.

Before taking out another line of credit, understand that it can impact your total credit score. Credit scores are calculated using several factors, including credit history and new credit, both of which could be affected when opening a new account.

Consolidate Debt with a Personal Loan

Another option may be to combine separate payments into one credit card consolidation loan, hopefully for a reduced interest rate. While a loan doesn’t erase your debt, it can help you focus on one monthly payment, which might enable you to pay down your debt faster.

As you compare rates, it’s important to understand how a new loan could pay off in the long run. If your monthly payment is lower because the loan term is longer, for example, it might not be a good strategy, because it means you may be making more interest payments and therefore paying more over the life of the loan. You can use an online personal loan calculator to get an idea of how much interest you could save by using a personal loan to pay off debt.

Recommended: 11 Types of Personal Loans & Their Differences

The Takeaway

Late credit card payments can happen to anyone, but unfortunately, they may come with consequences, like late fees, interest, or a temporary hit to your credit score. And the longer your bill goes unpaid, the more consequences you may experience. Fortunately, there are ways to resolve a late payment, starting with making a payment as soon as you realize one is overdue. If you incurred penalty fees, you can ask your credit card company for a one-time waiver and look into setting up automatic payments to ensure your future bills are paid on time.

Looking into ways to pay down your debt? Budgeting is one solution, as it helps you keep tabs on where your money is going. If combining multiple bills into one fixed monthly payment, at a potentially reduced interest rate, is part of your strategy, then a credit card consolidation loan may be an option to consider. (Debt management is a common use for a personal loan.)

If you are thinking about taking out a loan to consolidate your debt, a SoFi personal loan may be a good option for your unique financial situation. SoFi personal loans offer competitive, fixed rates and a variety of terms. Checking your rate won’t affect your credit score, and it takes just one minute.

See if a personal loan from SoFi is right for you.

FAQ

Can you go to jail for not paying credit card bills?

No, you can’t be arrested for not paying your credit card bills.

What happens if you never pay your credit card bill?

There are some serious potential ramifications for not paying your bills. The delinquency may be noted on your credit report, which can damage your credit score. You could even face a civil lawsuit if the debt goes unpaid.

Can my creditor garnish my wages for not paying my credit card?

Yes, if your credit card debt has been sold to a debt collector, and the collector has a court judgment, then they can garnish your bank account or wages.

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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 SoFi.com/legal. Equal Housing Lender.

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 SoFi.com/legal. Equal Housing Lender.

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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Identity theft happens when someone steals your personal information and uses it to take money out of your bank account, open credit accounts in your name, or receive benefits (such as employment, insurance or housing benefits). Identity theft can have a negative impact on your finances, as well as your credit. And it can happen to anyone, regardless of age or income.

Fortunately, there are many things you can do to protect yourself from identity theft and minimize the fallout if your personal or account information ever does get compromised. Read on to learn what steps you can take if you think your identity has been stolen or notice any fraudulent activity on any of your financial accounts.

Contacting Your Creditors

You’ll want to report any potentially fraudulent credit card activity to the creditor involved as quickly as possible. This can help stop any further fraudulent use of your card and also limit your liability for any unauthorized charges. There may be a phone number printed on the back of the card for this purpose.

You may also want to review the last few months of card statements carefully, identify any transactions you believe to be fraudulent, and write a follow-up letter to the credit card issuer with these details and copies of your statements.

There are federal protections provided to consumers in the case of credit card fraud. A consumer’s liability is limited to the lesser of $50 or the amount of the theft if the actual credit card was used fraudulently. If only the credit card number was used fraudulently, there is no consumer liability.

For debit card or ATM card fraud, the quicker you report the card loss, the less they are potentially liable for. If you report a missing debit or ATM card before any unauthorized charges are made, you’ll have zero liability. The amounts increase the longer the missing card goes unreported.

•  Maximum loss is $50 if the card is reported within two business days of the loss or theft.

•  Maximum loss is $500 if the loss or theft is reported more than two business days, but less than 60 calendar days after the account statement is sent to the account holder.

•  If the loss is reported more than 60 calendar days after the statement is sent, you can be responsible for all the money taken from your account. If money from linked accounts was also stolen, the maximum loss can be more than the account balance.

•  If the ATM or debit card number, but not the physical card, was used to make unauthorized charges, the account holder is not liable for those charges if the fraud is reported within 60 days of the account statement being sent.

Recommended: Different Types of Bank Account Fraud

Reporting Identity Fraud to the FTC

If you think your social security number or other important personal information has been stolen and used fraudulently, you’ll want to report it to the Federal Trade Commission (FTC) online at IdentityTheft.gov.

Once you create an account and file an identity theft report, you’ll receive a personalized recovery plan with tools like form letters to send to credit bureaus. The site also allows you to update your identity theft account and track your progress. If you were affected by a company-specific data breach, you can get advice from the FTC on how to protect yourself.

When you file an identity theft report, you’ll also get an FTC identity theft affidavit that you can print out and retain it for your records. You may need this affidavit if you file a police report. Banks and credit card companies may also request a copy of this FTC report.

Consider Filing a Police Report

If you believe you know who was responsible for the fraudulent activity, or can provide evidence for an investigation, you may want to file a police report. Filing a police report might also be necessary if a creditor requires the report as part of its investigation. Having a police report can also be helpful when requesting an extended fraud alert on your credit reports (more on that below).

Recommended: How Credit Card Frauds Are Investigated and Caught

Notifying Credit Bureaus

You may also want to contact one of the three credit major consumer bureaus, Experian, TransUnion, and Equifax, and ask them to place a fraud alert on your credit report. This notifies lenders that you’ve been a victim of identity theft so they can take extra measures to verify your identity when they get an application for credit in your name. Contacting just one of the credit bureaus is fine — that bureau will contact the other two automatically.

Fraud alerts are free. If you have a police report or a FTC Identity Theft Report, you may be able to get a free extended fraud alert, which lasts seven years.

You can also request a freeze or lock on your credit report by contacting each credit bureau individually. Putting a freeze on a credit report blocks all access to the report, making it more difficult for a bad actor to use information fraudulently. Credit freezes are regulated by state laws, and credit bureaus are required to offer credit freezes at no charge. A credit lock also acts to protect your financial information from potential identity thieves, but is a program offered by an individual company, which may charge a monthly fee for the service. Credit locks are not regulated by state laws.

Disputing Errors Caused by Identity Theft

Whether you’ve been a victim of identity theft or not, it’s a good idea to periodically request copies of your credit report and read them carefully, checking for any errors or evidence of fraud.

Having misinformation on your reports can have a negative impact on your credit, making it harder for you to qualify for credit cards, mortgages, and personal loans with favorable terms.

Federal law allows consumers to request a credit report at no charge from each of the three credit bureaus annually. As a result of the coronavirus pandemic, however, the credit bureaus have been offering free weekly credit reports through AnnualCreditReport.com and will continue to do so until the end of 2023.

If you notice an error on a credit report, you can contact that credit bureau to file a dispute. All three major credit bureaus provide information on their websites for filing a dispute. It can take up to 30 days for the results of any investigation to be made available.

The Takeaway

There’s a lot you can do to keep your personal information and financial accounts safe, such as opting for two-factor (or multi-factor) authentication in order to access your bank and credit accounts online. If you receive a notification from a creditor of a failed login attempt, it’s a good idea to change your password.

If any of your personal or financial account information does get stolen and used fraudulently, however, there’s no reason to panic. If you report the fraudulent transaction to the appropriate financial institution quickly, you likely won’t be responsible for the charge or loss. You can also help stop any further fraud by locking or freezing your credit, filing an identity theft report with the FTC, and filing a police report.

If you’re thinking about applying for an online personal loan but are hesitant to share your information, know that SoFi takes the privacy and security of its members’ financial and personal information very seriously. We maintain industry-standard technical and physical safeguards designed to protect your information’s confidentiality and integrity. Also keep in mind that checking your personal rate won’t affect your credit.

See if an online personal loan from SoFi is right for you.

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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 SoFi.com/legal. 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.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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There’s no doubt that most Americans love their plastic.

When used responsibly, credit cards can be one way to build credit.

However, many people run into issues when it comes to paying off their credit card balance each month. Some 46% of credit card holders carry some sort of debt from month to month, according to a 2023 Bankrate survey. And as of December 2022, the typical American owed around $7,279 in credit card debt.

Although carrying the balance isn’t necessarily an issue, not paying it off every month may cause interest to accrue. That in turn could make a balance more challenging to pay off.

But by understanding the effects of carrying a balance, you can start to figure out a strategy to paying off your credit card debt.

The Effects of Carrying a Credit Card Balance

Carrying a balance on a credit card comes with some potential financial consequences. Let’s take a look at them.

Impact on Credit Score

Can your credit score take a hit when you fail to pay off a credit card balance? Possibly. Nearly one-third (30%) of your FICO score is based on how much you owe to creditors, which is often referred to as a credit utilization ratio. This ratio is the amount of revolving credit you’re currently using divided by the total amount of revolving credit available to you.

You may notice that when you carry a balance on a credit card, your credit score could dip by a few points. Often, the drop is temporary and your score may start to go up again once you pay off the balance.

Accrued Interest

If you’re carrying a credit card balance, you may also want to be mindful of accrued interest. This is the amount of interest that builds up in between payments. Most credit cards charge compounding interest, and the majority of credit cards compound interest daily. Therefore, if anything is owed after the payment due date, the balance can easily start climbing.

The amount that accrues will depend on the balance and the interest rate. You can use a credit card interest calculator to get an estimate of how much interest has added to your balance.

If the balance is paid off in full, interest won’t accrue (not until the next charge is made, at least).

Strategies to Help Reduce Credit Card Debt

Depending on how much you owe, paying off credit card debt can seem like an uphill battle. But fortunately, with planning, commitment, and tools, it can be achieved. Here are a few strategies you may want to consider.

Budget to Repay Credit Card Debt

When you’re looking to pay down credit card debt, rethinking or creating a budget can be a natural starting point. You can record this information in a spreadsheet or a spending tracker app, whichever is easier for you.

You may also want to incorporate a debt repayment strategy into your budget to accelerate the process. If you’re someone who is motivated by seeing fast results, you may want to consider the snowball method of repayment. This strategy prioritizes paying off credit cards with the smallest balances first. Once you pay down the smallest balance, you move on to the second smallest balance.

The avalanche approach, on the other hand, calls for prioritizing paying down credit card balances with the highest interest rates. Once you pay off the balance with the highest interest rate, you move on to the next highest interest rate, continuing until all debt is repaid (while making at least minimum payments on all other balances, of course).

Both debt repayment strategies have advantages and disadvantages. It’s a good idea to consider which method you’ll be most able to stick with, or use them as inspiration to create a plan that will work for you.

Open a Balance Transfer Credit Card

Another option to consider is to open a balance transfer credit card. The idea is to open a new credit card with an introductory interest rate that is significantly lower than your current credit card interest rate. This can allow you to pay off your credit card balance at a lower rate as long as you pay it off in the introductory time frame.

You can potentially pay off your balance within a shorter time while saving money on interest. It’s important to note that the low-interest rate on balance transfer credit cards is usually only offered for an introductory period, usually between six and 18 months. Once that period expires, the rates typically increase.

If you plan to repay the balance before the introductory period ends, a balance transfer credit card might be worth pursuing. Make sure to account for a balance transfer fee, which is usually 3% to 5%.

As with any other credit card application, your credit history will determine if you qualify and what rate you’ll receive. If your credit isn’t ideal, this might not be an option.

Make Extra Payments

If you don’t want to open a new credit card, you can make extra payments to reduce interest costs. Again, credit card interest is typically calculated on the account’s daily average balance. Therefore, by making one or more extra payments throughout the month, you can lower the total interest accrued by the time your bill is due.

Even if you can only put a few extra dollars toward each payment, it can help minimize the interest cost.

Use a Personal Loan

If you have high-interest credit card debt, a debt consolidation loan could be an option worth considering. Consolidating your debt into a single loan may help streamline finances and include other benefits, but it isn’t a magic cure-all. A loan will not erase your debt. However, it might help you get to a fixed monthly payment and reduced interest rates.

It’s important to compare rates and understand how a new loan could pay off in the long run. If your monthly payment is lower because the loan term is longer, for example, it might not be a good strategy, because it means you may be making more interest payments and therefore paying more over the life of the loan.

The Takeaway

Having a balance on a credit card doesn’t pose an issue, but not paying it off every month can have an impact on your finances. Interest can accrue, which in turn could make a balance more challenging to pay off. And depending on your credit utilization ratio, your credit score could temporarily hit if you carry debt from one month to the next.

If you’re looking to reduce a credit card balance, there are strategies that can help. Examples include creating a budget, making extra payments, or opening a balance transfer credit card. If you have high-interest credit card debt, a debt consolidation loan could help streamline finances into a fixed monthly payment.

If you are thinking about taking out a loan to consolidate your debt, a SoFi personal loan may be a good option for your unique financial situation. SoFi personal loans offer competitive, fixed rates and a variety of terms. Checking your rate won’t affect your credit score, and it takes just one minute.

See if a personal loan from SoFi is right for you.

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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.

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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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Swiping and tapping a credit card can certainly make life easier, from buying a cup of coffee on the go to ordering (after much research) a new couch online. But knowing the right time to pay your bill can require a bit of time and thought. Sometimes, the due date is not so clear. And you may wonder whether to pay on that date or before.

With this guide, you’ll learn how to find your due date plus the ins and outs of paying your bill. You’ll also get some smart insights and tips on managing your credit card responsibly.

When to Make a Credit Card Payment

There are many different kinds of credit cards available. Once you have one or more in your wallet, you can enjoy the ease of paying with plastic and possibly earning some credit card rewards.

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

To find your credit card due date (because paying on-time is part of using a credit card wisely), you can check your billing statement. The due date, along with the minimum payment due, will likely appear close to the top of your written statement.

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

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

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

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

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

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

But on-time payments can also help build your credit history since they’re reported to the major credit bureaus, and your payment history (including timeliness) accounts for around 35% of your FICO® score.

The Grace Period

It’s helpful to understand that practically all credit cards offer a grace period: the time between your statement closing date and the due date in which the purchases you’ve made during that billing cycle do not accrue interest. (Not accruing interest can be a very good thing; the current average interest rate on new credit card offers hit 20.51% as of the middle of 2023.)

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

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

Recommended: Guide to Lowering Your Credit Card Interest Rate

Paying Your Credit Cards on Time

Even if you only have one or two credit cards, chances are you have a lot on your plate in any given month.

Between making rent, shelling out your car payment, and actually keeping the job that lets you pay for all this stuff, keeping tabs on your credit card due dates may feel like just another task in a long list of chores. (It’s true: Adulting is hard.)

What Happens If I Pay Late?

Life happens, and sometimes many people pay their credit card late, whether due to an oversight or lack of funds. Typically, when you miss a payment deadline on your credit card bill, here’s what can happen:

•   You may be assessed a late payment fee. These usually range from about $15 to $35 per instance.

•   Your credit card issuer could raise your interest rate to what is known as a penalty rate. In most cases, the issuer must give you 45 days notice. The penalty rate is something you are likely to want to avoid, as it can be around 27% to 30%.

•   Your late payment can be reported to the big three credit reporting bureaus and show up on your credit history. A pattern of late payments could translate into your having to pay more to borrow in the future or even being denied credit.

Can I Change My Credit Card Bill’s Due Date?

Some credit card issuers will allow you to change your statement due date. Check with your issuer to see if they offer this; be aware that there may be a cap on how many times a year you can do so.

Changing your credit card bill’s due date can be a helpful move. You might be able to shift it to better sync up with your payday or at least move the date so it’s not, say, right at the same time as when rent is due.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score?

Benefits of Paying Your Credit Card Early

Here’s another angle on paying your credit card: Instead of thinking about the damage that can be done by paying it late, look at the benefits of paying your bill early. The pros include:

•   Paying your credit card bill early may help establish and secure your credit score.

•   It helps free up your line of credit. It’s wise to keep your card’s balance at 30% of your limit at the very most. It’s a financially healthy move to make, and it could free up your available line of credit for an upcoming large purchase.

•   Paying your bill early lowers the amount of interest you will accrue. That means you owe less.

•   The sooner you pay off bills, the sooner you get out of debt, which is a desirable thing for most people.

•   By paying a bill early, you know it’s taken care of and you don’t have to worry about forgetting to send funds to your card issuer.

Tips for Managing Your Credit Card Bill

If you’re new to having a credit card or find yourself facing challenges managing your credit card usage, consider these helpful strategies:

•   Prioritize paying your bill when (or before) it’s due. That will be a positive step in your use of credit and minimize the interest and charges that can accrue.

•   Review your credit card bill every month. Not only will this help you get a handle on your spending, you can identify any incorrect charges or ones that might indicate fraudulent activity.

•   Try to pay more than just the minimum every month. Also educate yourself about what that minimum is. It’s not a helpful recommendation; it’s the lowest possible limit you can pay on the bill.

•   Work to keep your credit utilization ratio low; no more than 30% at most can be a good guideline.

•   If you are feeling as if your credit card debt is too high and/or you feel you need help eliminating it, it may be a smart financial move to take out a personal loan to pay off a credit card fully. Depending upon the term length you choose, you may end up saving money if the interest rate you’re offered is lower than the one offered by the credit card.

Or you could consult with a no- or low-cost credit counselor on solutions to your situation.

The Takeaway

Credit cards have many benefits, but it can be important to stay on top of your payments so your debt doesn’t accrue and your credit score is maintained. Understanding when your credit card payment is due, by looking at your statement or contacting your card issuer, is a smart move. It can also be wise to request your due date be moved, if possible, to better sync up with your cash-flow needs.

Looking for a new credit card? Consider a rewards card that can make your money work for you. With the SoFi Credit Card, you earn cash-back rewards on all eligible purchases. You can then use those rewards for travel or to invest, save, or pay down eligible SoFi debt.

With the SoFi Credit Card, you can earn cash-back rewards, apply them toward your balance, redeem points into stock in a SoFi Active Invest account, and more!* 

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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 .

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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