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You probably are well aware that you can swipe or tap your credit card almost anywhere you shop, and you likely also know that many retailers offer their own store credit cards. These store credit cards can give additional perks and benefits specific to their store.

Store credit cards come in two different forms — open-loop and closed-loop. An open-loop store credit card will typically have the logo of a payment network on it (such as Visa or Mastercard), and it can be used anywhere those networks are accepted.

A closed-loop store credit card, on the other hand, can generally only be used at the store that issued it. While there may be added benefits and rewards with a closed-loop store credit card, that may be offset by the limited places where you can use it. Still, it can make sense to have a store credit card, especially if you frequently shop at a particular retailer.

Here’s a closer look at how store cards compare to major credit cards, what their pros and cons are, and how store cards can impact credit.

What Is a Store Card?

A store credit card or retail credit card is a card issued by a store or retailer. There are two main types of store cards — open-loop and closed-loop store credit cards.

•  An open-loop store credit card is likely a Visa or Mastercard that simply is co-branded with the retailer’s name and logo, but good to use anywhere those networks are accepted.

•  A closed-loop store card, also called a private label credit card, can only be used at the retailer that issues the card.

How Store Cards Works

Open-loop store credit cards are typically Mastercard or Visa credit cards, and they can be used anywhere those payment networks are accepted. While it may be marketed or branded with the retailer’s logo and name, an open-loop store card works the same way any other credit card works.

On the other hand, a closed-loop store card is only accepted at the store that issued the card. If you try to use a closed-loop store credit card at any other place, it will be declined.

With either kind of card, you’ll get a statement each month with the charges you’ve made. You’ll be charged interest on any outstanding balance, just like with a general-purpose credit card.

Recommended: Charge Card vs. Credit Card

Pros and Cons of Store Cards

One pro of store credit cards is that they often give perks and rewards that are specific to that particular store. If you frequently shop at a particular retailer, it can be lucrative to get their store credit card. You may also be able to get a signup bonus for applying and being approved for the card.

On the other hand, a store credit card can be limiting, especially if it is a closed-loop credit card that you can’t use anywhere else. Many store credit cards also come with higher-than-average interest rates, so it can be wise to pay off your balance in full each month so you can avoid paying any extra.

Store Card vs Credit Card Compared

While there are some important differences between store cards and general-purpose credit cards, they also share some similarities.

Similarities

•  You get a monthly statement with a list of all of your purchases.

•  You’ll be charged interest on any outstanding balance.

•  Payment history and balance information typically reported to the major credit bureaus.

•  Open-loop store credit cards and general-purpose credit cards can both be used anywhere the payment network (Visa, Mastercard) is accepted.

Differences

There are also some key differences between store cards and credit cards that you’ll want to be aware of:

•  A closed-loop store card can only be used by the issuing retailer.

•  You may pay a higher interest rate for a store card.

•  The rewards you get will likely only be usable at the retailer.

Here is how these features stack up in chart form:

	Store Card	Credit Card
Where they can be used	A closed-loop store card can only be used at the retailer who issues it	Anywhere the payment network (e.g. Visa or Mastercard) is accepted
Interest rate	Varies, but often higher than general-purpose credit cards	Varies depending on the card
Rewards	Usually limited to discounts or benefits at one particular store	May have more flexible credit card rewards or cash back.

Recommended: How Many Credit Cards Should You Have?

Is It Easier to Get Store Cards?

How easy it will be to get any kind of credit card depends on the specific card and your own financial situation. However, it is generally believed that on average it is easier to get a store credit card than it is to get many other major credit cards.

In fact, at some stores, you may even be able to get approved in the middle of your transaction as you check out.

Can Store Cards Impact Credit?

Yes, store cards can impact your credit, either positively or negatively, depending on how you use them. That’s true of all credit cards and is part of how they work.

Just like any credit card, your store card information is also reported to the major credit bureaus (Equifax, Experian, and TransUnion). That means that if you use your store card responsibly, you can help build your credit, while if you fall behind on payments and/or carry a balance, it might have a negative impact on your credit.

Which Is Right for You: Store Card or Credit Card?

Deciding whether a store card or regular credit card is right for you will depend on your own specific shopping habits and overall financial situation. If you frequently shop at a particular store or retailer, you may be able to take advantage of rewards, discounts, or other benefits that come with the store’s credit card.

However, general-purpose credit cards may offer better or more flexible rewards, in addition to having more flexibility in where you can use them.

The Takeaway

Store credit cards come in two different varieties — open-loop and closed-loop cards. An open-loop store card is one that may be branded or marketed as a store credit card, but can be used anywhere the card’s payment network (e.g. Visa or Mastercard) is accepted. A closed-loop store card can only be used at the store or retailer that issues it. While there can be good reasons to get a store credit card, you might be better off with a more flexible credit card that gives cash back or other flexible rewards.

If you’re in the market for a general-purpose credit card that gives outstanding cash-back rewards, you should consider the SoFi Credit Card. With the SoFi Credit Card, you can earn cash back with every eligible purchase, which you can then use for travel or to invest, save, or pay down eligible SoFi debt. You can also add an authorized user to your SoFi credit card as a possible way to earn additional rewards.

Shop smarter with the SoFi Credit Card.

FAQ

Which is better: a credit card or store card?

There isn’t a single right answer as to whether a credit card or a store card is better. Instead, it will depend on your own specific situation. If you are a frequent shopper at a particular store or retailer, it may make sense to open its store credit card and get those rewards. However, if you’re not especially loyal to certain stores, you might prefer to get a general-purpose credit card and earn rewards that way.

Does a store card count as a credit card?

A store credit card can be considered a credit card since you can carry a balance and get charged interest. But keep in mind that only open-loop store credit cards can be used more widely like other major credit cards.

What are the disadvantages of a store card?

While it can make sense to apply for a store card, depending on your financial situation and shopping habits, store cards may come with some disadvantages. Many store credit cards have interest rates that are higher than average, so it can be best to pay off your balance in full each month to avoid those steep charges. Additionally, closed-loop store cards can only be used at the retailer that issues them, which makes them less flexible.

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Photo credit: iStock/RgStudio

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.

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

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Adding your spouse to a credit card could indirectly affect your credit, for better or for worse.

First, though, consider that many married people choose to combine their finances — using a joint bank account and treating all income as shared. Others keep some or all of their money separate.

But regardless of whether or not you choose to combine your finances, both partners will still have their own separate credit scores. Credit cards in the name of one spouse will not directly affect the credit of the other spouse.

If you add your spouse as an authorized user to a credit card in your name, it won’t affect your credit directly. However, how your spouse chooses to use their card can possibly impact your credit. If they don’t use the card responsibly and it impacts your ability to pay the monthly bill, your credit may suffer as a result.

Take a closer look at how adding your spouse to a credit card can affect credit.

Can Adding Your Spouse as a Co-borrower Affect Your Credit Score?

Adding your spouse as a co-borrower will not have an impact on your credit score directly. Simply having a spouse (or anyone) as a co-borrower or authorized user won’t affect your credit score. However, how your spouse uses the card may impact your credit. If they use the credit card responsibly then it may help your credit.

But if they spend more than you can afford to pay, your credit may be negatively affected.

Can Cosigning Affect Your Credit Score?

Cosigning on a loan, credit card, or other debt account can impact your credit score. Applying for a new credit account, even as a cosigner, will show up on your credit report. Having a new account on your credit may have a small impact just for opening the account.

Additionally, how you and your spouse use the new account will also affect your credit score, as your balance and payment history will be reported to both of your credit reports. For instance, a new account could raise your total credit limit, but if you don’t carry a balance, then your credit utilization would look smaller, which can be a positive.

If however, you use that credit you are granted and your credit utilization percentage goes up or you make late payments, then it could have a negative effect. For these reasons, the answer to “If I add my spouse to my credit card, will it help their credit?” is “Maybe.”

Recommended: Joint Accounts vs. Separate Accounts in Marriage

7 Ways You Can Help Your Spouse Build Credit

If you have good credit but your spouse does not, here are a few ways that you might consider helping them build credit:

1. Authorized User

If you already have good credit but your spouse does not, one thing that you can do is add them as an authorized user on a credit card. Having them on an account that you already have in good standing can help them to build their credit. Just make sure that they use their card responsibly or it can negatively impact both of your credit scores.

2. Secured Credit Card

If you don’t want to or can’t add them as an authorized user to one of your accounts, another option might be to have them apply for a secured credit card. With a secured credit card, you put down an initial deposit that serves as your credit line. As you make payments to your account, your available credit increases.

Depending on the card, you may be able to change from a secured card to a traditional or unsecured card after building your credit history.

3. Joint Credit Account

Like a joint bank account, a joint credit account is one where two people are both listed as owners of the account and are jointly responsible for usage. With a joint credit account, usage, balance and payment history will show up on both borrowers’ credit reports.

However, it’s worth noting that many major credit card issuers no longer allow joint credit card accounts. If you find one that does, then this could be an option to help build credit.

Recommended: How to Build Credit Over Time

4. Apply for a Small Loan

Another option to help build credit may be to apply for a small loan together. Getting a personal loan in both of your names may help build credit. One of the things many lenders look for in a credit report is a reliable history of on-time and regular payments. Taking out a small personal loan (and then regularly making payments) can help build credit history.

5. Review Credit Reports Together

Another tip for establishing credit is to regularly review both of your credit reports together. Your credit report contains a history of the different loan, credit card and other debt accounts that you have had. Going through your credit report regularly is a great habit to have as you can make sure that there are no errors, inconsistencies or incorrect information on your report. If there is, you can take steps to correct it, either with the account directly or the credit bureau.

You are entitled to one free credit report per year from each of the big three credit-reporting agencies (Equifax, Experian, and TransUnion). You can access your reports at AnnualCreditReport.com .

6. Discuss Money Management

Another great financial habit to have is to regularly discuss money management. You’ll want to work together on making sound financial decisions, setting financial goals, or deciding on big-ticket purchases. When both partners are involved in the household finances, it makes it easier to stay on the same financial page.

7. Establish and Stick to a Budget

One of the best habits that you can have to improve your finances is to establish and stick to a budget. A budget is a tool that helps you not spend money on things that are not important to you, so that you still have money to spend on the things that are important to you.

At its simplest, a budget can just be a listing of the expected income and expenses for a month. Sticking to a budget can just mean making sure that your income exceeds your expenses. There are a variety of methods you might try out and see how they work for you, such as the envelope system and the 50/30/20 budget rule, among others.

The Takeaway

Even if you combine finances in your marriage or partnership, each individual will still have their own credit report and credit score. Adding your spouse to a credit card account will not directly impact your credit score. However, the manner in which they use the card can have an affect on your credit.

Work together to set up sound financial habits so that both of you use your credit responsibly. Having a good credit score is one of the biggest financial assets that you will have in life.

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

FAQ

Will adding my spouse to my credit card build our credit?

It’s important to note that even if you combine your other finances, both you and your spouse will continue to have separate credit reports and credit scores. If you have good credit but your spouse does not, you could add them as an authorized user to one of your credit card accounts. Just make sure that they use the card responsibly, or it can have a negative impact on both of your scores.

Does my spouse affect my credit score?

Regardless of whether or not you combine finances in marriage, your credit scores remain individual accounts. Your spouse will not affect your credit score, unless you have joint accounts where both of you are listed as borrowers on the account. Another way your spouse can affect your credit score is if their spending or financial habits cause you to miss payments or increase balances on your own accounts.

Will lenders look at both spouses’ credit scores?

Whether or not lenders look at both spouses’ credit scores will depend on what type of loan you’re applying for. If you apply for an individual credit card, the lender will generally only look at your credit report. However, if you apply for a joint loan (such as a home mortgage), then lenders will look at both credit reports. If one spouse has poor credit, it may not make sense to apply in both spouses’ names.

What happens if I have a good credit score, but my spouse doesn’t?

One spouse’s credit score does not directly affect the credit score of the other spouse, unless they are joint borrowers. If you have a good credit score but your spouse does not, that may mean that you will want to apply for loans or mortgages in only your name.

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Photo credit: iStock/Eva-Katalin

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.

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

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

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

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Have you ever noticed that all the credit cards in your wallet are exactly the same size?

That’s because every credit card issued in the U.S. — and around the world — must be 3.375 inches wide by 2.125 inches high, according to requirements established decades ago by the International Organization for Standardization (ISO).

Credit card issuers can get a little creative with their logo and some other design features, but there are rules regarding credit card size, including how high, wide, and thick they can be. (And, by the way, those same rules apply to debit cards and government-issued IDs.)

Read on to learn why, when it comes to credit cards, size matters.

Why Are All Credit Cards the Same Size?

It makes sense that all credit cards should be a uniform size so they can fit conveniently in the slots of any type of wallet. But that’s just a happy byproduct of card standardization.

The dimensions were put in place so that payment-processing technology can accept any credit card, no matter where the card came from or where it’s used. This means the same cards you use to make purchases or withdraw cash in the U.S. can go with you when you take a vacation trip to Paris, France, or any of the ISO’s member nations.

All financial transaction cards must follow the ISO’s ID-1 format. It specifies the dimensions of a credit card in inches must be 3.375 wide by 2.125 high, with a thickness of 0.0299 inches, and the corners must be rounded. The sequence of the digits in your credit card number and other card features also must follow standards set by the ISO.

When Did the Size of a Credit Card Become Standardized?

Although credit cards have gone through several major changes over the past 60 or so years—especially when it comes to developing new ways to pay and protect against identity theft—they’ve actually looked pretty much the same since the late 1950s.

There were different versions of credit “cards” before that — made from clay tablets in ancient times, dog tag-style metal plates in the 1930s, and even paper and cardboard in the ‘40s and ‘50s. But when American Express and Bank of America began issuing cards in 1958, and other banks followed suit in the next few years after that, credit cards quickly evolved to the size and shape they are today. Even that magnetic “swipe” stripe on the back has been around for decades: It was invented in the 1960s by an IBM engineer and became the standard worldwide by the early ’70s.

Recommended: What Is a Contactless Credit Card and How Does It Work?

What Are Credit Cards Made Of?

American Express is credited with creating the first plastic credit card, in 1959, and that’s still what most cards are made of. A card is typically created using a plastic resin known as polyvinyl chloride acetate (PVCA) that makes it bendable, durable, and water resistant.

Some credit card companies also issue metal credit cards, which are sturdier than plastic cards and usually heavier, too. (We’re only talking about a few grams here, however, so not nearly enough weight to put extra stress on a pants pocket or purse strap.)

What Is the Weight of a Credit Card?

While most plastic credit cards weigh about 5 grams, metal credit cards—which may be made from stainless steel, aluminum, titanium, or a mix of metals—may weigh in at anywhere from 10 to 18 grams.

These heavier cards are sometimes considered more prestigious, as many premium cards are made of metal. And feeling that distinctive heft in your hand can make a metal card stand out from plastic cards. But metal cards aren’t as rare as they used to be. And the way a credit card works is basically the same no matter what material it’s made from.

If you’re thinking about applying for a credit card, you may want to start by finding the card that’s the best fit for you based on its financial benefits rather than its appearance or physical weight. It can be helpful to compare the type of rewards a card offers, if it has low or no fees, the interest rate and credit limit you can qualify for, as well as other perks.

Recommended: What is the Average Credit Card Limit and How Can You Increase It?

Are There Other Design Features that Can Vary?

Although all credit cards are the same size and share other important features, if you lay out your credit cards side by side in front of you, you’ll also likely spot a few differences.

Your credit card number may be on the front of some cards and on the back of others, for example, and those numbers might be flat or slightly raised (embossed). There may or may not be a space for your signature. And the security hologram and code verification value (CVV) — features that are there to protect you from fraudsters — also may vary a bit from card to card.

The magnetic stripe and chip used for making payments are located in the same spot on every card, though. Again, this is designed to make processing transactions as universal and convenient as possible. Mastercard plans to slowly get rid of the swipe stripe on its cards, however, starting in 2024.

Recommended: Guide to Choosing a Credit Card

The Takeaway

Although there have been significant advancements over the years in how credit cards can be used, how payments are processed, and the technology that helps shield consumers from theft, the standard credit card size and shape hasn’t changed in decades. And thanks to the international standards that dictate credit card dimensions, all your cards should fit in any card reader used worldwide — and in the slots in your wallet.

This means you can focus on other factors when choosing which credit card or cards you want to own, including the card’s interest rate, the types of rewards offered, and other benefits and protections.

Looking for a new credit card? Consider a rewards card that makes 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. (It’s also a pretty good-looking card… if you’re into that sort of thing.)

The SoFi Credit Card: The smarter way to spend.

FAQ

What size is a credit card in centimeters?

The International Organization for Standardization (ISO) specifies that credit cards, debit cards, and gift cards must be 8.56 cm by 5.398 cm (which is 85.6 mm by 53.98 mm, or 3.375 inches by 2.125 inches). The ISO standard for credit card thickness is .076 cm (that’s .76 mm, or about .03 inches).

What is the print size on a credit card?

Print size, font, and color may vary from one credit card to the next. Some credit card issuers even allow their customers to personalize a card with their own custom or semi-custom design.

How can visually impaired consumers tell a credit card from a debit card?

Credit card issuers are increasingly moving away from using raised letters and numbers as part of their card designs. Mastercard, for instance, plans to introduce the Touch Card, which uses a distinctive notch on the side (rounded for debit, squared for credit, triangular for prepaid) to aid those who may struggle to identify the card they’re using.

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Photo credit: iStock/Sitthiphong

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.

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Most credit cards come with credit limits that determine how much you can spend at any given time. Requesting a credit line increase is something you might consider if you’d like to have more purchasing power, you want to schedule a balance transfer, or you need a cash advance.

Asking for a higher credit limit can be as simple as calling the credit card company or completing an online form. In some cases, a credit card company may grant one automatically based on an account history.

Increasing available credit can also improve credit utilization, which could raise your credit score. But asking to increase credit limits for one or more cards could potentially cost you points if it involves a hard credit inquiry.
Knowing how to increase a credit limit the right way can minimize credit score impacts.

Why Credit Limits Matter for Credit Scoring

Credit scores are a measure of your ability to manage debt responsibly. FICO® Scores, which are used by 90% of top lenders, are calculated using these five factors:

•  Payment history (35% of your score)
•  Credit utilization (30% of your score)
•  Length of credit history (15% of your score)
•  Credit mix (10% of your score)
•  New credit inquiries (10%)

Credit limits are important because they can affect the credit utilization part of your credit score. Credit utilization refers to the percentage of your available credit you’re using. For example, if you have a credit card with a $5,000 limit and a $1,000 balance, your credit utilization is 20%.

Using a lot of your available credit can be detrimental to your credit scores, while keeping balances low can improve your scores.

Generally, it’s recommended that you keep the ratio at 30% or less for the most favorable credit score impact. A higher ratio could suggest to lenders that you may be struggling to manage spending and debt.

Does Requesting a Credit Increase Hurt Your Score?

Whether a credit line increase hurts your credit score, or affects it all, depends on how the credit card company reviews your financial information. Specifically, it hinges on whether the credit card company performs a soft or hard inquiry into your credit history.

Remember, credit inquiries account for 10% of your FICO credit score. An inquiry simply means that you have authorized a creditor or biller to review your credit reports and scores. (Inquiries for credit remain on your credit report for two years, though they only affect FICO credit score calculations for 12 months.)

When requesting an increase in credit limit that involves a hard pull, you may lose a few credit score points. While the impact isn’t as significant as a late payment or a maxed-out credit card, it’s still worth noting.

If you were to ask for a credit line increase from several cards at once, multiple hard inquiries could cost you more points.

A soft inquiry, on the other hand, has no credit score impact. Checking your own credit score, prescreened credit offers, and credit screenings that are required as part of an employer’s hiring process are examples of soft pulls.

Can a Credit Line Increase Positively Impact a Credit Score?

While you may lose a few points initially if your credit card company performs a hard inquiry, asking to increase your limit could help your credit score over time.

It all goes back to credit utilization. If raising your credit limit on one or more credit cards improves your credit utilization, then you may see a positive effect on your credit score.

Say you have a card with a $10,000 limit and a $5,000 balance. That puts your credit utilization at 50%. But if you can increase the credit limit to $15,000, you instantly shrink your credit utilization to 33%.

The key to making this strategy work is not adding to your debt balance. Going back to the previous example, say that you have to unexpectedly replace your HVAC system to the tune of $5,000. You decide to take advantage of your new higher credit limit to make the purchase.

Now your balance is $10,000. While you still have a $5,000 available credit cushion, you’ve increased your credit utilization to 66%. That could result in a credit score drop until you’re able to pay some of the balance down. So, while asking for a credit line increase can give you more purchasing power, that can work against you if you use it.

Four Ways to Increase a Credit Limit

There are several ways to get a credit line increase, depending on what your credit card company offers. There are different types of credit cards, and card issuers don’t always follow the same policies with regard to credit limit increases.

Before asking to increase your credit limit, get familiar with the various ways your credit card company allows you to do it. Then consider how much of a credit limit increase you’d like to ask for.

Keep in mind that whether the credit card company grants your request can depend on things like:

•  How long you’ve been a customer
•  Your account history, including payment and purchase history
•  Your income
•  Credit scores, if a hard pull is required

With that in mind, here are four ways to get a higher credit limit:

Request a Credit Line Increase Online

Your credit card company may make it easy to ask for a higher credit limit online. Log in to your account, navigate to the Request Credit Limit Increase section, and fill out the relevant details. You may need to update your income information.

If your credit card company offers this option, it’s possible to be approved for a credit line increase almost instantly. But a decision may be delayed if the credit card company wants to take time to review your account or credit history.

Update Your Income Information

Credit card companies may periodically ask you to update your income information when you log in. You may be tempted to skip over this step, but it’s worth taking a moment to do, as the credit card company may use the information to grant an automatic credit limit increase.

Again, whether you’re eligible for an automatic credit line increase can depend on the type of your card and your account history, income, and overall financial situation.

Call and Ask

If your credit card company doesn’t allow for automatic increases or credit limit increase requests online, you can always call and ask for a higher limit. You may need to tell them your income, specify how much of a credit limit increase you’d like, and provide a reason for the request.

Calling the credit card company may also be worthwhile if you’ve been denied for a credit limit increase online. You can ask the card provider to reconsider your request, but be prepared to make a strong case (e.g., significantly higher income, on-time payment history) for why it should do so.

Open a New Credit Card Account

If you’ve tried other avenues for requesting an increase in credit limit and been unsuccessful, you could always consider opening a brand-new credit card account. The upside is that you can expand your available credit if you’re approved, which could improve your credit utilization ratio.

The downside of opening a new credit card is that applying can ding your score, since it typically involves a hard inquiry. But if you’re able to keep your credit utilization low, that could help make up the difference in lost points relatively quickly.

The Takeaway

How to increase your credit limit? If you have good credit, requesting a higher credit limit may be easy. The key is knowing how to make the most of a credit limit increase to improve your credit score.

Keeping your balances as low is a step in the right direction. Paying your balance in full each month is even better, since this can help you avoid paying interest on credit cards.

Finally, spacing out credit line increase requests and opening new accounts sparingly can help keep credit scores on track.

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

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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.

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

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If you’re not a seasoned credit card user, you might have questions about credit card payments and their impact on your credit.

Used smartly, a credit card can be a great financial tool, but the key is not charging more than you can afford to pay back and making payments on time each month.

The Benefits of Using a Credit Card

A credit card is convenient if you don’t have cash on hand to make a purchase. As long as you know you can pay back what you charge, either in full or over a few months, a credit card can be a useful tool.

There may also be situations like renting a car or booking a hotel room when you are required to have a credit card to avoid a deposit. The hotel or rental company will place a hold on your card so that in the event of damage or other expenses you need to cover, the company knows you can pay them. With a debit card, you may have that same hold of several hundred dollars tying up your funds for several days.

Another benefit of credit cards is the ability to earn rewards. Many cards give you points for purchases that you can redeem for travel, cash back, or other perks, and if you pay your balance before accruing interest, it can be like the card is paying you to use it.

Potential Downsides of Using a Credit Card

On the other hand, credit cards can cause issues if you don’t exercise good behavior in terms of your credit card payments. Each month, you are charged interest on your purchases. The interest is calculated by dividing your card’s annual percentage rate by 365 to get the daily rate, and then multiplying your current balance by the daily rate.

That may only amount to a few extra dollars a month, but if you don’t pay your balance in full for several months, that amount can snowball, and what you initially charged can easily cost you a lot more.

Another thing to be aware of is the fact that credit card companies charge fees in addition to interest. Some charge an annual fee (usually for cards with rewards programs).

Cash advances come with a fee and a higher interest rate than for purchases.

There are also late credit card payment fees to watch out for. Not only will you be charged a fee if you don’t pay the minimum due by the payment due date, but it may appear on your credit report as a negative mark. This may hurt your credit scores and your ability to take out other financing later.

How Credit Cards Impact Your Credit Scores

While a late payment can negatively affect your credit scores, credit card payments made on time can actually help your credit scores.

Each time you make a payment on time, it is reported to credit bureaus like Experian, Equifax, and TransUnion. Over time, on-time payments may factor into the algorithms the credit bureaus use to determine your credit scores, and may raise your number a few points.

Each bureau has its own formula for how scores are determined, and not every credit card company reports to each bureau, so there’s no easy way to know how your payments directly affect your score. But in general, paying on time is behavior that will benefit you over time.

Understanding Credit Utilization

Another factor that goes into your credit scores is credit utilization. This is a calculation of how much credit you have available to access compared with how much you are actually using.

Let’s say you have three credit cards and a total available credit of $15,000. You have a balance of $2,000 across all of them. By dividing the balance by the total credit available, you get 0.133, or 13% credit utilization.

When applying for new credit cards or loans, lenders will look at your credit utilization. If it’s too high—most look for a rate of under 30%—you may not be approved for the card or loan. That’s why it’s important to stay on top of how much of your total credit you’re using and pay down your debt so you don’t have a high credit utilization rate.

How to Build Your Credit With a Credit Card

Once you understand how credit card payments work, you may use credit cards to build your credit, even if you have low scores to begin with. These habits may help you build your credit and improve your credit scores over time.

1. Pay Your Bill on Time Each Month

We’ve covered the importance of making your credit card payments on time. For some people, it can be helpful to put the credit card due date on a calendar (leaving a few days for the payment to get to the company and be processed) to ensure they don’t have late payments.

Many people find autopay, used wisely, a great tool.

If you’ve just received your first credit card, find out how to make credit card payments long before your first one is due, as you might need to set up your bank account information to send an electronic payment, and you want to allow time for that process to be finalized before the due date.

2. Pay More Than the Minimum

If you only charge what you can afford, you should be able to pay off your balance each month, but there may come a time when you have an emergency that requires a larger charge you can’t pay off all at once.

In that case, you may be tempted to pay the minimum amount due, but realize that in doing so, you will pay more in the long run, as those interest charges will snowball. Even if you pay just $5 a month more than the minimum due, you can cut down on interest and pay off your balance faster.

This will also reduce your credit utilization rate and may improve your credit scores.

3. Review Your Credit Report Regularly

Working on your credit involves more than just making credit card payments on time. Access your credit report from Equifax, Experian, and TransUnion (it’s free to do so once a year) and review it for accuracy. Make sure the payments you’ve made are reported as on-time, and look at your list of trade accounts to make sure there are no errors.

For example, maybe you closed a credit card six months ago, but it still appears on your credit report. This is a discrepancy that you can report to the bureau (each bureau’s website has information on how to report a discrepancy). Check again after you report it (allowing for time to process your request) to ensure it has been removed.

Regularly reviewing your credit report will also alert you to any fraudulent activity that might occur. It’s rare, but identity theft does happen, and you’ll want to know if someone is using your identity to open credit cards or take out loans.

4. Only Charge What You Can Afford

Credit cards can be tempting. Without discipline, you might feel like taking a shopping spree, ignoring the financial consequences.

As mentioned as a credit card tip, only charge what you can afford to pay back in a reasonable time frame. A credit card isn’t meant to be free money, and overspending with one can cost you much more than you initially spent.

The Takeaway

Using credit cards responsibly and making credit card payments on time (and in full, when you can) can set you on the path to financial success. The key is to be aware of your spending and your credit utilization so you can help your credit scores grow over time.

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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.

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.

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

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