SoFi

Sadly, there’s no avoiding paying taxes to the IRS — whether that’s once a year or multiple times for those who are self-employed. However, what you do have agency over is how you pay. One of the few ways you can pay taxes is with a credit card.

Whether you want to pay the IRS with a credit card so that you can earn rewards or have a bit of financial breathing room, it’s important to be aware of the implications of using such a payment method. Read on to learn more about how to pay taxes with a credit card.

Can You Pay Federal Taxes With a Credit Card?

Yes, you can. More specifically, you can pay your federal taxes with a credit card (and in some cases, you may even be able to pay your state taxes with one as well). The IRS offers different third-party payment processors that accept credit card payments for taxes.

Keep in mind that if you pay the IRS with a credit card, this type of transaction isn’t free, given how credit cards work. Whichever third-party payment service provider you choose, you’ll be charged additional processing fees for the convenience of using your credit card to pay taxes. For example, all of the third-party options charge a percentage of the amount you’ll be paying in taxes, but there’s also a minimum flat fee you’ll owe.

In addition, there may be limitations on how many times you can use your credit card for IRS payments. For instance, if you wanted to pay your personal income taxes, you can only do so twice per year for the current tax year due. However, if you worked out a monthly payment plan with the IRS, you can pay with a credit card up to two times per month.

What to Know Before Paying Taxes With a Credit Card

Before pulling out your credit card to pay your taxes, it’s important to know what your goals are. Here are some common reasons taxpayers choose to pay their taxes with a credit card:

•   You may earn rewards points, cash back, or miles. Many consumers love to earn perks offered by their credit card issuers and see it as a major benefit of what a credit card is. Even with the additional fees associated with paying taxes with a credit card, you may feel like the rewards offset what you’ll pay. In other words, if the value of the rewards is much higher than the service fees, it might be worth using your card. As an example, let’s say you’ll be able to earn 4,000 rewards points from your tax payment, which equates to $100 toward a flight or hotel room. If you owe $3,000 in federal taxes and the third-party payment service charges a 1.96% fee, you’re effectively paying $58.80 in fees to earn $100 in rewards. Whether that’s worth it is up to you.

•   It’s possible to earn a major rewards bonus. If you signed up for a new rewards credit card and need to meet a minimum spending threshold to earn a huge bonus, it might be worth considering paying your taxes with that credit card. For instance, if you signed up for a credit card offering 50,000 bonus miles — an equivalent to $1,000 worth of travel — paying a $4,000 tax bill with a payment service charge of 1.96% equates to $78.40 in fees. Assuming that meets your minimum spending threshold, the value you receive is pretty high. Just make sure you can make more than your credit card minimum payment, and ideally your full balance, to avoid interest accruing.

•   You’ll gain the ability to spread out your payment. Paying taxes with a credit card might be worth considering if you’re looking for a low-cost way to spread out your tax payments. If you have excellent credit, you may qualify for a credit card offering a 0% introductory annual percentage rate (APR), meaning you’ll have time until the offer runs out to pay off your taxes interest-free. Sure, you’re paying card processing service fees, but that could be worth it to spread out your payments. However, many credit card companies have terms and conditions that stipulate how you can remain in good standing for the introductory offer for the APR on a credit card — make sure you’re following them, or you could end up paying a high amount in interest.

What Is the Fee for Paying Taxes With a Credit Card?

As mentioned, the amount of the fee you’ll owe for paying taxes with a credit card will vary depending on which payment processor you use. Here’s a look at how much each processor’s fees run:

Payment Processor	Fee Rate	Minimum Fee
payUSAtax	1.85%	$2.69
Pay1040	1.87%	$2.50
ACI Payments, Inc.	1.98%	$2.50

Pros and Cons of Paying Taxes With a Credit Card

There are advantages and disadvantages to paying the IRS with a credit card. Here’s an overview of the pros and cons, which we’ll cover in more detail below:

Pros of Paying Taxes With a Credit Card	Cons of Paying Taxes With a Credit Card
Earn cash back and credit card rewards	Third-party payment processors charge fees
Meet spending thresholds for bonus rewards earnings	Rewards earnings may not offset fees paid
Use a convenient form of payment	Potentially pay high credit card interest rates if you carry a balance or the introductory APR period ends before your balance is paid off
Spread out payments interest-free if using a card with 0% introductory APR	IRS payment plan interest rates may be lower than what’s offered by credit cards

Pros of Paying Taxes With a Credit Card

There are the major upsides of paying the IRS with a credit card, including:

•   You can earn cash back and credit card rewards. By putting the amount of your tax bill on your credit card, you might earn some credit card rewards. Just make sure your rewards earnings will offset any fees you’ll pay (though rest assured, taxable credit card rewards usually aren’t a thing, except in certain cases).

•   It can help you meet spending thresholds to earn bonus rewards. Often, credit cards that offer bonuses require you to spend a certain amount within a specified period of time in order to earn them. If you’re struggling to reach that threshold, paying your taxes with your credit card could help, allowing you to snag those bonus rewards.

•   It’s a convenient form of payment. Anyone who has paid with a credit card knows it’s easy. You don’t have to fill in various bank account numbers like you otherwise would if you opt to cover your tax bill with a credit card.

•   You can spread out payments — and interest-free, if you have a 0% APR card. If you’re tight on cash or simply want to spread out your tax payment, a credit card can enable you to do so. Even better, if you have a card that offers 0% APR, you’ll avoid paying any interest while you space out your payments.

Cons of Paying Taxes With a Credit Card

It’s not all upsides when it comes to paying taxes with a credit card. Make sure to consider these drawbacks as well:

•   You’ll pay third-party processing fees. Perhaps the biggest drawback of paying the IRS with a credit card is you’ll pay fees. The exact amount you pay in fees will vary depending on which third-party payment processor you use, but they can range from 1.85% up to 1.98%. If your tax bill is $1,000, for example, you could pay up to $19.80 in fees.

•   The rewards you earn might not offset the fees. If your rewards rate is close to the amount in fees, those two will effectively cancel each other out. In other words, you’ll pretty much break even if you pay roughly the same amount in fees as you earn in credit card rewards, which might not make using a credit card worthwhile.

•   You could end up paying interest at a steep rate. If you aren’t able to pay off your balance in full by the statement due date, or if for some reason you don’t pay off your full balance by the time your 0% APR intro offer ends, interest charges will start racking up. Plus, credit card interest rates tend to be pretty high compared to other types of loans.

•   There might be lower interest rate payment plans available. If you’re hoping to spread out your payments, using a credit card might not be your most cost-efficient option. The IRS offers a payment plan for those who qualify, and the interest rate can be lower than the APR on a credit card.

Recommended: What is a Charge Card?

How Do You Pay Taxes With a Credit Card?

If you’ve decided you want to use your credit card for tax payments, here’s how you do it.

1. Decide Which Credit Card to Use

Consider your reasons for using a credit card — is it to earn rewards, meet a minimum spending threshold, or spread out your payments interest-free? Whatever it is, make sure to choose a card that meets your goals. If you want to open a credit card, then you’ll want to make sure you receive the card in time to pay the IRS before the tax filing deadline.

Recommended: When Are Credit Card Payments Due?

2. Determine the Amount You Want to Pay

Whatever the amount is, ensure it’s well within your credit card limit. You can spread your payments over multiple credit cards, but keep in mind the transaction limits that the IRS imposes for certain payments.

3. Choose a Third-Party Payment Processor

The IRS website currently lists three approved payment service providers that you can use. Compare which one offers the best features and lowest fees for your situation.

4. Make Your Payment

Once you’ve selected which payment service provider you want to go with, head to their website and follow the instructions. You may be asked to provide information such as the credit card expiration date and CVV number on a credit card. Double check that you’re making the right type of payment and that all the information you’ve entered is accurate before pressing submit.

Other Ways to Cover Your Tax Bill

If you’re not convinced the costs involved in credit card payment are worth it, there are other ways that you can pay your taxes.

Direct Pay With Bank Account

While this option won’t allow you to earn rewards or spread out your payments, you’ll also steer clear of paying any fees or potentially owing interest. To make a tax payment directly from your bank account, you’ll simply need to select this option and provide the requested banking information, such as your bank account and routing numbers.

Recommended: How to Avoid Interest On a Credit Card

IRS Payment Plan

If you’re hoping to be able to pay off your balance over time, you can apply for a payment plan with the IRS. You may qualify for a short-term payment plan if you owe less than $100,000 in combined tax, penalties or interest, or you could get a long-term payment plan if you owe $50,000 or less in combined tax, penalties, and interest and have filed all required returns.

Note that this option may involve fees and interest though. The costs involved will depend on which type of plan you’re approved for.

Recommended: Tips for Using a Credit Card Responsibly

Looking for a New Credit Card?

Indeed, you can pay taxes with a credit card. Paying taxes using a rewards credit card is a great way to earn perks, helping you maximize your spending. However, there are downsides to consider as well, such as the third-party processing fees and the potential to run into high credit card interest if you don’t have a good APR for a credit card.

If you do want to pay taxes with a credit card, it’s important to find the right card to do so. With the SoFi Credit Card, for example, cardholders can earn generous cash-back rewards on all eligible purchases. You can then redeem rewards for cash, investments, or eligible SoFi loan payments, or as a statement credit.

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.¹

Take advantage of this offer by applying for a SoFi credit card today.

FAQ

What does it cost to pay taxes with a credit card?

Third-party payment processors charge a service fee to pay your taxes with a credit card. In many cases, it’s typically a percentage of your payment amount, with a minimum flat fee charged.

Does paying taxes with your credit card earn you rewards?

Paying taxes can earn you rewards, depending on the type of credit card you use. Many rewards credit cards offer cash back, miles, or travel points on qualifying purchases. Before doing so, it might be helpful to determine whether the value of the rewards earned will outweigh the fees you’ll pay.

Is it better to pay taxes with a credit card or debit card?

Both methods of paying your taxes can be a great choice, depending on your financial situation. If you’re not interested in earning rewards or spreading out your payments and have the cash on hand, you can pay with a debit card. Some may prefer to pay with a credit card because they feel it’s a more secure way to make payments.

Are credit cards the cheapest way to pay your tax bill?

No. Paying your taxes with a credit card will add an additional fee onto your tax bill, plus you could end up paying interest if you don’t pay off your full statement balance by the due date. Other options, such as direct pay with your bank account don’t involve paying fees or interest.

Can you pay state taxes with a credit card?

It depends. Some states do facilitate tax payments with a credit card. To find out if yours does, check your state’s tax website for more information.

Can you pay property taxes with a credit card?

Once again, it depends which state you live in. Many counties and cities will allow you to pay property taxes with a credit card, though not all do. Reach out to your local tax collector’s office to see which payment options are accepted.

---

Photo credit: iStock/Moyo Studio

¹Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.


¹See Rewards Details at SoFi.com/card/rewards.


SoFi cardholders earn 2% unlimited cash back rewards when redeemed to save, invest, a statement credit, or pay down eligible SoFi debt.


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.


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.


New and existing Checking and Savings members who have not previously enrolled in direct deposit with SoFi are eligible to earn a cash bonus when they set up direct deposits of at least $1,000 over a consecutive 25-day period. Cash bonus will be based on the total amount of direct deposit. The Program will be available through 12/31/23. Full terms at sofi.com/banking. SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC.

SoFi members with direct deposit can earn up to 4.00% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 1.20% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 3/17/2023. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet

Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details, please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.


SOCC0123010

Read more

While revolving credit provides borrowers with flexibility, too much revolving debt can be crippling. With interest rates on the rise, the most vulnerable credit card holders can use some help.

Let’s look at ways of dealing with mounting revolving debt. But first, here’s a primer on revolving credit vs. installment credit.

A Closer Look at Revolving Debt

There are two main categories of debt: revolving and installment. Revolving credit lets you borrow money up to an approved limit, pay it back, and borrow again as needed. The two most common revolving accounts are credit cards and a home equity line of credit.

HELOCs are offered to qualified homeowners who have sufficient equity in their homes. Most have a draw period of 10 years, followed by a repayment period. A less common type of revolving credit is a personal line of credit, usually obtained by an existing customer of a lending institution.

Then there are credit cards, which became part of the American fabric in the 1950s, starting with the cardboard Diners Club card.

You can choose to make credit card minimum payments, pay off the entire balance each month, or pay some amount in between. If you don’t pay off the full balance when it’s due, your balance will accrue interest.

For example, let’s say you have a $10,000 balance on a credit card at 17% interest. If you pay $250 a month, it will take five years to pay off the balance — and you’ll ultimately pay $4,862 in interest. (Ouch.) You can use a credit card interest calculator to see how much interest you’ll pay on any balance.

If you continue to charge more to that credit card while making only minimum monthly payments, it’ll take even longer to pay off the balance.

That’s one of the quiet dangers of revolving debt: If you haven’t reached your limit, you can continue to borrow while you owe money, which adds to your debt and to the amount of interest accruing on it.

Recommended: Credit Card Rules to Live By

What Is Installment Debt?

Installment credit comes in the form of a loan that you pay back in installments every month until the loan is paid off. The loan amount is determined when you’re approved. Think mortgages, auto loans, personal loans, and student loans.

An installment loan may have a fixed or variable interest rate.

Secured and Unsecured Debt

Now is a good time to touch on secured vs. unsecured debt (and why credit card debt is especially pernicious). Mortgages, HELOCs, home equity loans, and auto loans are secured by collateral: the home or car. If you stop making payments, the lender can take the asset.

An unsecured loan does not require the borrower to pledge any collateral. Most personal loans are unsecured. The vast majority of credit cards are unsecured. Student loans are unsecured, and personal lines of credit are usually unsecured.

That means lenders have no asset to seize if the borrower stops paying on unsecured debt. Because of the higher risk to lenders, unsecured credit typically has a higher interest rate than secured credit.

Which leads us to the common credit card trap: The average annual percentage rate (APR) for credit cards accruing interest was 20.40% in late 2022 … and rising. The APR on a credit card includes interest and fees.

Perhaps you can see how “revolvers” — borrowers who carry a balance month to month — can easily get caught in a trap. The average household of credit card revolvers owes nearly $7,500, according to recent data. Some owe much more.

On the flip side, “transactors” use cards for convenience and to gain credit card rewards. They pay off their balances each month.

Recommended: Personal Loan vs Personal Line of Credit

How Revolving Debt Can Affect Your Credit

Both installment and revolving debt influence your score on the credit rating scale, which typically ranges from 300 to 850.

Your credit utilization ratio is a big factor. It’s the amount of revolving credit you’re using divided by the total amount of revolving credit you have available, expressed as a percentage.

Most lenders like to see a credit utilization rate of 30% or lower, which indicates that you live within your means and use credit cards responsibly.

The most important element of a FICO® Score is payment history. It accounts for 35% of your credit score, so even one late payment — a payment overdue by at least 30 days — will damage a credit score.

And unfortunately, late payments stay on a credit report for seven years.

Getting Out of Revolving Debt

Ideally, we’d all avoid interest on credit cards by paying off the balance each month. But if you do carry a balance, you have plenty of company. More than half of Americans carry a balance on active credit card accounts, recent data from the American Bankers Association shows.

If your revolving credit card debt has become unbridled, there are ways to try to corral it.

Debt Consolidation

Consolidating high-interest credit card balances into a lower-rate personal loan will typically save you money. Most personal loans come with a fixed rate, which results in predictable payments, and just one a month.

Installment loans do not affect credit utilization. So using a personal loan to pay off higher-interest revolving debt will lower your credit utilization ratio (a good thing) as long as you keep those credit card accounts open. Yes, closing a credit card can hurt your credit score.

Homeowners using a home equity loan or HELOC to consolidate high-interest credit card debt can substantially lower their monthly payments. However, their home will be on the line, and closing costs may come into play.

Another method, cash-out refinancing, is a good move only when a homeowner can get a better mortgage rate and plans to stay in the home beyond the break-even point on closing costs.

Balance Transfer

A balance transfer card is another way to deal with high-interest debt. Most balance transfer credit cards temporarily offer a lower interest rate or a 0% rate. But they may charge a balance transfer fee of 3% to 5%, and they require vigilance.

Make one late payment on the new card and you’ll usually forfeit the promotional APR and have to pay a sky-high penalty APR. You’ll need to keep track of the day when the promotional rate expires so any balance is not subject to the high rate.

Balance transfer credit cards are simply another form of revolving debt and can restart that cycle. If you find that you’re creating new debt, you might want to learn to spend wisely while still budgeting.

Debt Settlement

A debt settlement company may be able to reduce a pile of unsecured debt. There are many drawbacks to this route, though.

You will usually stop paying creditors, so mounting interest and late fees will cause your balances to balloon. Instead, you’ll make payments to an escrow account held by the debt settlement company. Funding it could take three or four years.

Your credit scores will be damaged, there is no guarantee of a successful outcome, it can be very expensive, and if a portion of your debt is forgiven, it probably will be considered taxable income.

This and bankruptcy options are considered last resorts. If you do go with a debt settlement company, know that those affiliated with the American Fair Credit Council agree to abide by a code of conduct.

Credit Counseling

A credit counseling service might be able to help. The Federal Trade Commission advises looking for a nonprofit program, but it adds that “nonprofit” does not guarantee that services are free, affordable, or even legitimate.

Look into credit counseling organizations affiliated with the National Foundation for Credit Counseling, National Association of Certified Credit Counselors, or Financial Counseling Association of America.

The Department of Justice keeps a list of approved credit counseling agencies. Also check with state and local consumer agencies.

A credit card hardship program addresses temporary setbacks. Not all card companies have one.

Budget Strategies

The fastest ways to pay off debt call for creating a budget to plan how much you will spend and save each month.

With the avalanche method, for example, you pay off your accounts in the order of highest interest rate to lowest. The 50/30/20 budget works for some people: Those are the percentages of net pay allotted toward needs, wants, and savings.

A free app that tracks your spending and offers financial insights could be of great help.

The Takeaway

Revolving credit offers flexibility but can devolve into runaway revolving debt. Credit card debt is especially pernicious, thanks to high interest rates charged to revolving balances. Debt consolidation, one approach to tame mounting revolving debt and the stress that comes with it, aims to lower your monthly payments.

Do you have high-interest credit card balances? You may be able to transfer that debt to a SoFi credit card consolidation loan.

A lower-interest loan will result in a lower monthly payment — and just one payment to keep track of each month. The personal loan is funded fast, has a fixed rate, and comes with no fees required.

Get a rate quote in just 60 seconds.

---

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.

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.

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.

This article is not intended to be legal advice. Please consult an attorney for advice.

SOPL0123001

Read more

It is possible to use your utility bill payment history to help build credit. However, utility bills, like your gas, water, and power bills, aren’t automatically reported to the credit bureau agencies. To get them reported — and thus to have your utility bills affect your credit score — you’ll typically need to work through a third-party company that reports your utility bill payments so they show up on your credit report.

If you’re interested in making this happen, we’ll walk you through how to leverage paying utilities to build credit, and also explore other options to help establish your credit score.

How Do Utility Bill Payments Appear on My Credit Report?

Utility bill payments typically do not automatically appear on your consumer credit report. That’s because they’re not considered credit accounts. When you pay for utilities, you are paying for a service, rather than opening and maintaining a line of credit, or borrowing money that you then repay over time.

However, utility bill payments can appear on your credit report if you work with a third-party service that does the reporting on your behalf. These services typically charge a small monthly fee, but there are companies that offer this free of charge. If you’re paying utility bills on time, then getting that information reported to the credit bureaus could help to build credit.

Recommended: What is a Charge Card?

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

How Do Utility Bill Payments Affect Your Credit Score?

While utility bill payments don’t appear on your credit report, they still can ding your credit score if you fall behind on payments, and the balance you owe becomes delinquent and goes to collections. Under the Fair Credit Reporting Act, debt can linger on your credit report for up to seven years. Because your payment history makes up a lion’s share of your credit score, a debt that enters collections and then remains on your report can have a significant impact on your credit score.

On the flipside, utility bills also have the potential to build credit. As mentioned, this could occur if you sign up to have your utility payments reported to the three major credit bureau agencies, and you consistently make your payments on time. To ensure this happens, you might consider setting up automatic bill payments.

Utility bills could also help build your credit score if you opt to pay bills with a credit card. Staying on top of your credit card payments is a key determinant of your credit score though, so just make sure to pay off your statement balance on time and in full when it becomes due. That way, you’ll avoid late payment consequences and also dodge paying interest on the utility bill payments charged to your card.

Recommended: When Are Credit Card Payments Due?

Can Late Utility Bill Payments Affect Credit?

Late utility bill payments can hurt your credit if you miss enough payments for your account to enter “delinquent” status, after which it would get sent to collections or get handled as a charge-off. If this happens, that information can stay on your credit report for up to seven years.

Similarly, if you sign up for a credit reporting service but then are late on making payments, that late payment activity could negatively impact your score. Often services will not report late payments for utility bills too.

Still, given the potential consequences of late payments, organizing your bills is a good idea to help ensure you pay on time and don’t lose track of due dates.

Recommended: How to Avoid Interest On a Credit Card

What Other Bills Help You Build Credit?

Your payment of the following bills will generally show up on your credit report and as such will have an impact on your credit score:

•   Car payments

•   Credit card payments

•   Student loan payments

•   Mortgage payments

Similarly to your utility bills, some bills have the potential to impact your credit, but don’t automatically show up on your credit report. However, you may be able to sign up for a credit reporting service or pay them using your credit card to have them help build your score. These types of bills include your rent payments, insurance payments, and bills for services like internet and cable.

Other Ways to Build Credit

Beyond your utility bills, there are other ways you can establish credit. This includes:

•   Opening a traditional credit card and then using it responsibly.

•   Taking out an auto loan to pay for your next car.

•   Getting a secured card, which is easier to qualify for than a traditional credit card because it requires a deposit.

•   Taking out a personal loan and then staying on top of payments.

•   Becoming an authorized user on the credit card account of someone with a solid credit history and responsible credit usage.

•   Getting your timely rent payments reported to the credit bureaus.

•   Taking out a credit-builder loan, which gives you the funds once you pay it off.

Recommended: Tips for Using a Credit Card Responsibly

The Takeaway

While paying utilities doesn’t automatically establish credit, it can help your score if you work with a third-party service to have your payment activity reported. There are other ways you can build credit from scratch as well, such as taking out a personal loan or opening a credit card account, and then handling payments responsibly.

If you’re looking for a credit card, the SoFi Credit Card offers an array of perks. Cardholders can earn cash-back rewards on all eligible purchases. Plus, you’ll get rewarded for responsible usage, as SoFi will lower your APR after you make 12 on-time payments of at least the minimum amount due.

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.¹

Take advantage of this offer by applying for a SoFi credit card today.

FAQ

What is the impact of paying your utility bills early on your credit score?

Historically, utility bills are not reported to the credit bureaus and in turn, don’t impact your credit score. However, if you work with a third-party service, you could have your utility bills reported. In this instance, paying your utility bills on-time could help build your score.

Are utility bill payments reported to a credit reporting service?

Utility bill payments can be reported to a credit reporting service if you sign up for an account and opt in to have your utility bills reported. You might need to pay a monthly fee for this service though.

---

Photo credit: iStock/tommaso79

¹Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

¹See Rewards Details at SoFi.com/card/rewards.

SoFi cardholders earn 2% unlimited cash back rewards when redeemed to save, invest, a statement credit, or pay down eligible SoFi debt.

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.

The SoFi Credit Card is issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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 .

SOCC1222001

Read more

It’s a chicken-and-egg scenario: You want to build credit, but most lenders won’t approve you for an account to help you build your score without a solid credit history. The good news is there are financial products available for those who are building their credit from scratch — a secured credit card being one of them.

Wondering how long does it take to build credit with a secured credit card? It depends on your situation. But if you’re worried about how fast a secured credit can build credit, we have some tips for how to get the most out of a secured card.

Recommended: Secured Credit Card vs. Unsecured Credit Card

What Is a Secured Credit Card?

A secured credit card is one that requires the cardholder to put down a deposit (basically, collateral) in order to open an account. The deposit typically acts as the credit limit. For example, if you make a $500 deposit when opening a secured credit card, the issuer grants you a $500 credit limit.

These types of credit cards are usually meant for those with no or limited credit history who need to build their credit history. Since these types of borrowers appear more risky — there’s no or limited evidence of their behavior as borrowers — secured credit cards reduce the risk for the lender.

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

How Do Secured Credit Cards Work?

Secured credit cards require the cardholder to “secure” their debt by putting down a refundable deposit. The credit card issuer will use this amount as the credit limit. The card holder can then use the card as they would a more traditional credit card, which may be more in line with their idea of what a credit card is.

Cardholders can make purchases (and take out cash advances, depending on the terms of the card) up to the credit limit. Some secured credit cards even offer rewards, such as cash back or points toward travel.

At the end of each statement period, the issuer will send a credit card statement detailing all applicable transactions, the minimum amount due, and the payment due date. Your payment activity is typically reported to the credit bureaus — late payments could negatively impact your score.

Depending on your card issuer’s terms, you may be able to upgrade to an unsecured credit card (where you don’t need to put down a deposit) and get your deposit refunded if you can consistently make on-time payments for a predetermined amount of time.

Recommended: When Are Credit Card Payments Due?

Building Credit From Scratch With a Secured Credit Card

When it comes to building credit from scratch with a secured credit card, you can typically do so in the following ways:

•   Establishing payment history: Getting a secured credit card means the issuer will report your payment activity to the credit bureaus, in addition to letting them know you opened an account. Since your payment history is one of the most important factors that determine your credit score, making on-time payments helps to establish that you’re a responsible borrower.

•   Maintaining a low credit utilization ratio: Your credit utilization is the percentage of the overall credit limit available to you on your revolving accounts (like a secured credit card) that you’re using. This is another major factor that’s used to calculate your credit score. A general rule of thumb is keeping your credit utilization at 30% or less. Meaning, if your credit limit is $400, don’t carry a balance of more than $120 on your card. A high credit utilization may signal to lenders that you’re not as responsible with debt, which could hurt your score.

Recommended: Tips for Using a Credit Card Responsibly

Pros and Cons of Building Credit Using a Secured Credit Card

Trying to decide if a secured credit card is the right route to build credit? Here are the pros and cons to consider:

Pros	Cons
•   Typically easier approval than other types of credit cards •   Deposit is refundable •   May be able to upgrade to an unsecured card after evidence of responsible borrower behavior •   May offer rewards	•   Can carry high interest rates •   Can’t use deposit amount for as long as you have the card open •   May have to pay an annual fee •   Credit limits are usually lower

Recommended: What is the Average Credit Card Limit?

Tips for Getting the Most Out of a Secured Credit Card

Using a secured credit card can be a great solution to establishing credit. While it’s hard to tell how fast a secured card will build credit, you can get the most out of using one by taking these suggestions into consideration.

Make On-Time Payments

Consistently paying your credit card bill on time will help you to establish a positive credit history. Late payments tend to come with late fees and penalties like additional interest, on top of negative remarks on your credit report.

Pay Your Balance in Full

While you’re only required to make the minimum payment, paying off your balance in full could lower your credit utilization ratio. Further, doing so will help you avoid paying interest on purchases.

Recommended: How to Avoid Interest On a Credit Card

Watch Your Credit Utilization

You can technically spend up to your credit limit, but doing so could negatively impact your score. Instead, keep track of your balance and aim to keep it as low as you can — ideally at 30% off your overall credit limit or less.

Keep in mind that the credit limit for secured credit cards is usually low. To avoid a high credit utilization ratio, you might consider using the card for smaller purchases like subscription services or your daily latte. That way, you’re less at risk of nearing your credit limit.

Monitor Your Credit

Checking your credit report can help you to determine whether your payment activity is being correctly reported to the credit bureaus. This is essential as you’re building your credit from scratch. If there are any errors, it’s best to get those fixed as soon as possible.

Request an Upgrade

A secured credit card can be one of the first steps to accessing other types of credit. It’s helpful to think of the next steps — like upgrading to an unsecured credit card — as you continue to use your current card. Doing so will usually require making on-time payments consistently, and asking your card issuer how getting an upgrade works. While some automatically do it, others may require you to formally submit a request.

Alternative Ways to Build Credit

If you feel like a secured credit card isn’t for you, here are some alternatives to consider to help you build credit:

•   Get your rent, cell phone, and/or utilities payments reported to the credit bureaus. There are many services available if your landlord doesn’t offer this as an option.

•   Become an authorized user on someone else’s credit card.

•   Take out a credit builder loan, where you can borrow a small amount for the purposes of establishing credit.

•   Get a cosigner on a personal loan so you can more easily qualify, and then handle repayment responsibly.

•   Consider retailer, gas, or student credit cards, which are generally easier to qualify for.

•   Take out a secured loan, like an auto loan.

The Takeaway

Using a secured credit card to build credit can take time. Exactly how long it takes to build credit with a secured credit card will depend on your financial behavior. Your best course of action is to continue to show your issuer that you’re a responsible user and monitor your credit regularly to see where you stand.

If you’re responsible with your secured credit card, you can someday upgrade to an unsecured credit card, like the SoFi Credit Card. These cards tend to offer higher credit limits and more generous perks. With the SoFi credit card, for instance, cardholders can earn generous cash-back rewards on all eligible purchases.

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.¹

Take advantage of this offer by applying for a SoFi credit card today.

FAQ

How do the credit bureaus see unsecured vs secured credit cards?

The credit bureaus see both types of credit cards as a type of credit account. As such, there is virtually no difference in how your activity gets reported.

How often should I use my secured credit card to build credit?

It’s generally a good idea to use your secured card regularly so that more activity gets reported to the credit bureaus. To keep your credit card utilization low, however, consider using the card for smaller purchases.

What are the best ways to use a secured credit card to build my credit?

In most cases, the best ways to use a secured credit card are to make consistent on-time payments, attempt to pay off the balance in full each month (or at the very least, make the minimum payment required), and keep an eye on your credit usage.

---

Photo credit: iStock/PeopleImages

¹Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

¹See Rewards Details at SoFi.com/card/rewards.

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.

The SoFi Credit Card is issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SOCC1222004

Read more

They say that diamonds are a girl’s best friend, but did you know that you can also build credit with jewelry purchases? If you make your jewelry purchase using a payment plan or with a jewelry store credit card, then buying that watch, engagement ring, or diamond bracelet could help you build your credit score from scratch.

We’ll go through how to build credit by buying jewelry, including what options there are for buying jewelry on credit and what to consider before using a jewelry store credit card.

Recommended: When Are Credit Card Payments Due?

Options for Buying Jewelry on Credit

By purchasing jewelry on credit, it’s possible to build your credit score. Here are a couple of ways that you can do so.

Jewelry Store Financing

Most major jewelry stores offer payment plans, where you pay for your jewelry purchase in installments. You might be able to take advantage of a promotional offer, which could offer interest-free financing for six to 12 months.

While an installment plan can help you build credit, you could end up paying interest on your purchase even with a promotional offer. If you’re late on payments or don’t pay off your balance in time, expect to pay significantly more. Further, to qualify for financing through a retailer, you’ll need stellar credit, which is a tall order if you’re building credit from scratch.

Alternatively, some retailers might allow you to finance your purchase with a buy now, pay later (BNPL) plan. A type of installment plan, a BNPL plan requires you to make an initial payment upfront, then divides the remaining balance into equal installments. You’ll then get billed to your credit card until you’ve paid off the amount owed in full.

As an example of how this works, let’s say you’re planning to propose and agree to engagement ring financing under a BNPL plan. Many plans offer a “pay-in-four” model, where your purchase is divided into four installments, each of which is due every two weeks. If the engagement ring costs $5,500 — which is the average engagement ring cost — you would pay $1,375 initially, then $1,375 every two weeks over the course of six weeks. The pay-in-four setup means you likely wouldn’t owe interest, though longer term plans may charge an annual percentage rate (APR).

Recommended: What is a Charge Card?

Jewelry Store Credit Cards

If you’re building credit from scratch or have credit that’s poor or fair, then a retailer credit card from a jewelry store might be a solid route to take. Many jewelry store credit cards only require fair credit in order to open an account.

You can also try getting a credit card from a department store that sells jewelry. Typically, retailer credit cards are easier to get approved for when you have less-than-great credit. However, note that they also typically come with higher interest, low credit limits, and some constraints, such as only being able to use the card with the retailer.

Recommended: How to Avoid Interest On a Credit Card

Does Buying Jewelry Help Build Credit?

As mentioned, building credit with jewelry purchases is possible if you tap into a financing option that reports your payment activity to the major credit bureaus. Options that do so include financing through a jewelry store, using a jewelry or retailer credit card, or signing up for a buy now, pay later (BNPL) plan.

Of course, for any of those options to help you with establishing credit, you’ll need to stay on top of making your payments on time and in full. Also make sure you’re adhering to other responsible credit behaviors, such as avoiding maxing out your credit limit if you opt for a jewelry store credit card.

Recommended: Tips for Using a Credit Card Responsibly

How Jewelry Store Credit Cards Can Impact Your Credit Score

When you use a jewelry store credit card, your payments are reported to the credit bureaus. If you’re using your card responsibly and making payments on time, that activity can help to build your credit score. On the flipside, if you fall behind on payments or miss a due date, your credit score could suffer.

Payment history isn’t the only factor that will impact your credit score though. Applying for the credit card will result in a hard inquiry, which usually temporarily lowers your credit score by a bit. And you’ll want to think twice about canceling your card after making your jewelry purchase and paying it off — doing so could affect the length of your credit history, another factor that helps determine your credit score.

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

How Jewelry Stores Convince You to Finance

Retailers can earn money on interest charges from financing, and potentially get you to make a more expensive purchase than you otherwise would have if you didn’t finance. As such, they have good reason to persuade you to finance that stunning piece of jewelry you’ve had your eye on.

Here are some tactics they might employ to get you to agree to a payment plan or use a retailer credit card:

•   Zero-interest promotional offers: By offering a no-interest promotional period on a payment plan or credit card, a jewelry store may lure you in.

•   In-store promotions: You might see a poster or flier while perusing the jewelry cases. This might motivate you to make your purchase now — as opposed to treating it as an item worth saving for — and therefore agreeing to financing.

•   Several financing options: The sales representative at the store might offer a few ways for you to finance that piece of jewelry, such as an installment plan, BNPL program, or by opening a jewelry store credit card.

Before agreeing to anything, make sure to ask questions to ensure you fully understand what you’d be getting into. You might even consider leaving the store and then coming back later, to give yourself time to think about your purchase and assess the financing options.

What to Ask Before Using a Jewelry Store Credit Card

If you’re considering opening a jewelry store credit card, here are some questions to ask yourself before submitting your application:

•   Can I afford to pay it off? While using a jewelry store credit card can help you build credit and make that large purchase affordable, do some simple math before moving ahead. Determine how long it will take to pay off the balance on the card and whether those payments realistically work within your current budget.

•   What’s the APR? If you’re using a credit card to cover your jewelry purchase, you might not be in a position to pay off your full balance when the due date hits. As such, you’ll want to be aware of the credit card’s annual percentage rate (APR) to determine how much interest will add to the total cost of your jewelry purchase.

•   Is there a promotional period? If you qualify for a no-interest promotional period, it’s important to know how long it will last and when the standard interest rate will kick in. Aim to pay off your purchase before that happens to avoid paying interest.

What to Avoid When Buying Jewelry With Credit

When financing jewelry to build credit, there are a few big things to keep in mind that can help you steer clear of financial trouble.

For starters, you’ll want to avoid putting too much on your card. Doing so can drive up your credit utilization ratio, which compares how much of your overall credit you’re using and plays a role in determining your credit score. For example, if you have one credit card with a credit limit of $1,000 and you’re buying a $600 piece of jewelry, that would push your credit utilization to 60%. It’s typically recommended to keep your credit utilization ratio below 30%.

Second, you’ll want to avoid opening a credit card with a promotional offer that’s too short for you to comfortably pay off your balance before it ends. If you’re still making payments when the standard interest rate kicks in, you could end up paying a lot in interest — and making your jewelry purchase that much more expensive.

You also want to be aware of whether you’re splurging on something that you might not have bought otherwise. While investing in precious metals might seem like a good move, putting something on credit creates the illusion that you can afford it. But in reality, the purchase could end up costing you even more in the long run, thanks to the addition of interest charges.

Recommended: What is the Average Credit Card Limit?

Other Ways to Build Credit

Besides buying jewelry to build credit, here are a few other ways that you can do so:

•   Get a secured card.

•   Take out a credit-builder loan.

•   Become an authorized user on someone else’s credit card.

•   Take out a personal loan.

•   Use an auto loan to finance your next car purchase.

•   Sign up to report your rent and utilities payments to the credit bureaus.

•   Open a credit card and then use it responsibly.

The Takeaway

If you’re curious about how to build credit with jewelry, consider financing your jewelry purchase by taking out a payment plan or by opening a jewelry store credit card. Before doing so, however, know that store payment plans usually require that you have strong or excellent credit.

Rest assured, buying jewelry isn’t the only way to build credit. Another option is to open a crest card that suits your spending habits and then use it responsibly. One option to consider is the SoFi Credit Card, which rewards on-time payments by lowering your APR when you make 12 monthly on-time payments of at least the minimum due. Plus, cardholders can earn generous cash-back rewards on all eligible purchases.

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.¹

Take advantage of this offer by applying for a SoFi credit card today.

FAQ

Do you need good credit to finance jewelry?

If you’d like in-store financing for jewelry, such as an installment plan, then you typically need excellent credit. However, retail credit cards usually only require a fair credit score.

Are there jewelry stores that give credit?

Yes, major jewelry stores usually offer installment plans, and some might have a branded retail credit card that you can apply for.

Is it easy to get credit at jewelry stores?

Retail credit cards are usually easier to qualify for than other types of credit cards, even if you have fair credit. However, while they’re often easier to get approved for, they often come with higher APRs, low credit limits, and various restrictions.

---

Photo credit: iStock/pixelfit

¹Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

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.

The SoFi Credit Card is issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

¹See Rewards Details at SoFi.com/card/rewards.

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 .

SOCC1222009

Read more