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How much cash back are people actually getting from their credit cards? Who charges the most money to their card, boomers or Gen Z? Does having a credit card mean you’re more likely to have good credit compared to someone who doesn’t?

These questions, and many more, are what we set out to answer in our study on cash-back credit card users*.

We surveyed a total of 1,205 people—802 who use cash-back credit cards to pay for most expenses and 403 who primarily use a debit card, cash, or money app (such as Venmo). By analyzing and comparing the two groups, we were able to learn more about how preferred payment methods can affect spending and budgeting habits.

Read on for the 18 most interesting findings from our research.

Notes: Percentages are rounded to the nearest whole number, so some data sets may not add up to 100%.

*We focused on cash-back rewards because they are the most popular type of credit card perk.

    1. $50 was the median amount people made in cash-back rewards in a month.

Our study found that $50 was the median amount people earned in cash-back rewards in a month.

But certain age groups may be more savvy about racking up their rewards than others.

The median cash-back amount by generation was:

•  Boomers: $20

•  Gen X: $40

•  Millennials: $50

•  Gen Z: $59.50

Because boomers are likely to have higher earnings and more savings than the other age groups, they may be less concerned about maxing out their cash-back rewards. And Gen Z respondents, who may have smaller salaries and bank accounts, might have learned to be savvy with their cash-back rewards card out of financial necessity.

    2. Three-quarters of cash-back credit card users save up their rewards over time.

75% of all cash-back credit card users prefer to save their rewards versus cashing them out every month.

Respondents may have long-term goals in mind for their cash-back credit card. By accruing the cash they can use it for a larger purchase.

    3. A majority of cash-back credit card users have “Very Good” or “Excellent” credit.

Our study found that a majority (58%) of cash-back credit card users have “very good” or “excellent” credit (meaning a score of 740 or above).

In fact, people who use a cash-back credit card are more than twice as likely to have “excellent” credit (a score of 800-850) compared to those who used a debit card, cash, or money-transfer app to make most of their purchases (23% vs. 9%).

Debit, cash, and money app users were five times more likely to have “poor” credit (a score of 579 or below) than cash-back rewards cardholders (15% vs. 3%).

Breaking down the data by age we discovered:

•  71% of boomers who use cash-back credit cards have “very good” or “excellent” credit.

•  55% of Gen Xers who use cash-back credit cards have “very good” or “excellent” credit.

•  53% of millennials who use cash-back credit cards have “very good” or “excellent” credit.

•  48% of Gen Zers who use cash-back credit cards have “very good” or “excellent” credit.

Older credit card users may have better credit because they’ve had more time to build their credit history.

    4. The amount of money spent by cash-back credit card users in a month was 67% greater than the amount spent by debit, cash, and money app users.

The difference is significant: Our study found that the money cash-back credit card users spent in a month was 67% more than the amount of money that debit, cash, and money app users spent.

The median spending amount for:

•  Cash-back credit card users was $1,000.

•  Debit card, cash, and money app users was $600.

Cash-back credit cardholders may feel incentivized to spend money since they know they’ll earn rewards on their purchases. Credit cards also allow for greater financial flexibility compared to debit cards.

Consider this: If the group who primarily uses a debit card, cash, or money app were to use a 2% cash-back credit card, they could potentially earn an extra $144 in a year (2% x $600/month x12 months = $144). If they were to use a 3% cash-back credit card, they would potentially pocket over $200 in a year, just in rewards (3% x $600/month x 12 months = $216).

    5. Gen Zers are the most conservative credit card spenders compared to other age groups.

Surprisingly, Gen Zers are the most frugal credit card spenders compared to all other age groups.

The median spending amount for Gen Z cash-back credit card holders was half that of Gen Xers and millennials.

Cash-back cards spending by generation:

•  Boomers: $700

•  Gen X: $1,000

•  Millennials: $1,000

•  Gen Z: $500

Gen Xers and millennials spent the most ($1,000), which could be because these groups are more likely to have growing families and more expenses. Gen Zers spent $500; contributing factors could be lower credit limits, financial support from their parents, and fewer financial obligations.

    6. More than half of respondents use their card to pay for mortgage, rent, and/or utilities.

More than half of people who regularly use a cash-back credit card (57%) used it to pay for their mortgage, rent, and/or utilities in March 2022. With living expenses on the rise, and the potential to earn considerable points, it makes sense that people would put these bills on their cash-back card.

There are some gender and age differences. We discovered that 65% of men used their cash-back card to pay for mortgage, rent, and/or utilities, compared to 47% of women. Millennials and Gen Zers were the age groups most likely to put these expenses on their credit card, and Boomers were the least likely.

Percentage of cash-back credit card users who paid for mortgage, rent, and/or utilities with their card:

•  Boomers: 41%

•  Gen X: 49%

•  Millennials: 64%

•  Gen Z: 62%

    7. More than one in 10 respondents spent over $500 on gas in March alone.

According to our study, 12% of cash-back credit card users spent over $500 on gas in the month of March. That means the amount of money these respondents spent on gas was more than the average monthly car payment for a used vehicle ($488).

Method of payment didn’t affect how much respondents spent on gas overall. We found that 10% of debit card, cash, and money app users spent over $500 on gas. The big difference: These consumers were not able to earn cash back on their petrol purchases the way cash-back credit card users were.

    8. Debit card, cash, and money app users may have a harder time saving compared to credit card users.

Over the course of a month, we found that:

•  33% of debit card, cash, and money app users were not able to put any money into savings.

•  15% of cash-back credit card users were not able to put anything into savings.

This means debit card, cash, and money app users are more than twice as likely to be unable to contribute to their savings compared to cash-back credit card users.

Looking at respondents who put at least $100 into savings in a month, we discovered that 72% of cash-back credit card users were able to do so, compared to 52% of debit card, cash, and money app users.

    9. Millennials may be the best savers of all the age groups.

Based on the results of our survey, millennials were the star savers. The median amount they put into savings monthly was $300.

Gen X and Gen Z save $250 and $287 monthly, respectively.

Boomers had the lowest median monthly savings amount at $100. One possible reason: Since they likely have some savings built up, they may not need to contribute as much to their nest egg as the younger generations.

    10. People in relationships were able to save three times as much as single people.

Being in a relationship may lead to fiscal stability. According to our survey, respondents who were married or living with a partner were able to save three times as much as those who were single, widowed, or divorced.

The monthly median savings amount for people who are:

•  Married or living with a partner was $300.

•  Single, widowed, or divorced was $100.

Those who are married or living with a partner had a median monthly spending amount of $1,000—meaning they save $0.30 for every $1 they spend. Those who are single, widowed, or divorced had a monthly median spending amount of $800, so they save about $0.13 for every $1 they spend.

    11. Men are twice as likely to spoil their pets compared to women.

Dogs really are man’s best friend: Men are more than twice as likely as women to spend a significant sum on their pets.

Overall, 9% of all cash-back credit card users spent over $500 on their pet in a month.

Breaking down the numbers, we found that:

•  12% of men spent over $500 on their pets in a month.

•  6% of women spent over $500 on their pets in a month.

Money can’t buy love, but it can buy toys and treats.

    12. More than one in 10 people spent over $500 on restaurants in a month.

Our survey found that 14% of cash-back credit card users spent over $500 on restaurants and bars. More specifically, 17% of men spent over $500 in a month versus 10% of women.

Millennials are most likely to spend a lot of money on restaurants and bars. This age group had nine times the percentage of respondents who spent over $500 compared to boomers.

Respondents who spent over $500 on restaurants in a month by generation:

•  Boomers – 2%

•  Gen X – 12%

•  Millennials – 18%

•  Gen Z – 13%

Debit card, cash, and money app users were not far behind—12% of these consumers spent over $500 on restaurants in a month. If they used a rotating rewards card that offered 5% back on dining instead, they would potentially earn $25 in rewards in a month, or $300 a year!

    13. Gen Z spent the most on clothes and shoes.

According to our survey, 20% of Gen Zers spent over $500 in a month on outfits and shoes.

To put it into perspective, here’s the percentage of cash-back credit card users in different age groups who spent over $500 on clothing and shoes in a month:

•  Boomers: 4%

•  Gen X: 10%

•  Millennials:18%

•  Gen Z: 20%

Boomers are the most frugal when it comes to new clothes. More than one-third spent $0 on clothing and shoes in a month.

Percentage of cash-back credit card users who spent nothing on clothing and shoes in a month:

•  Boomers: 35%

•  Gen X: 22%

•  Millennials: 16%

•  Gen Z: 11%

    14. Gas was the most regretted purchase for all respondents, regardless of payment method.

When asked what purchase respondents regretted most, gas rose to the top, regardless of payment method.

Here are a few other notable answers we received for most regrettable purchase:

•  A puppy my son said he would take care of and didn’t

•  A plane ticket and then forgetting what day the flight was

•  A ticket to a bad movie

•  I got scammed trying to buy an NFT

•  Crypto futures

•  A book shelf that fell apart two days after I put it together

•  A $1,000 pair of shoes

•  The wrong kind of ice cream

•  A gym membership I didn’t use

    15. Groceries and food purchases bring people the most joy.

When we asked cash-back credit card users what purchase brought them the most joy, we expected answers like vacations or special clothing. Instead, food and groceries were the most common responses.

We also discovered that people were happiest with purchases that involved a family member or pet, as illustrated by these responses:

•  Birthday present for my mom

•  Dinner with the wife for date night

•  My dog getting her tooth/mouth fixed as she wasn’t in pain any longer

•  A new bike for my daughter

•  Dog’s birthday gifts

•  My wedding dress

•  Gifts for my grandchildren

•  Catnip and wet food

•  Lunch for my dad on his birthday

•  A video game that me and my daughter play

•  Taking care of my dog at the emergency vet because her life was saved

•  Anniversary vacation with my wife

•  My heart surgery

    16. Men are more than twice as likely to spend over $500 on entertainment compared to women.

In one month, 15% of men who use cash-back credit cards spent over $500 on entertainment* compared to just 6% of women.

Of those men:

•  21% used a rotating-reward cash-back credit card.

•  11% used a flat-rate cash-back credit card.

That means men who have a rotating rewards cash-back card are almost twice as likely to spend over $500 on entertainment compared to men who use a flat-rate cash-back credit card.

*”Entertainment” was defined as “sports, concerts, etc.”

    17. Millennials were the biggest travelers, but Gen Z isn’t far behind.

Traveling can be an amazing experience, and being able to do so now is a sign that life is returning to normal. So who is going places? Looking at travel expenditures by age group, we found millennials to be the biggest travelers, with Gen Z right behind them.

Percentage of cash-back card users who spent over $500 on travel in a month:

•  Boomers: 5%

•  Gen X: 15%

•  Millennials: 21%

•  Gen Z: 18%

These numbers may speak to a greater travel trend, which predicts that Gen Z will overtake millennials in travel spending this year. According to Travel Pulse, 72% of Gen Zers are planning to splurge on a vacation in 2022, while 68% or millennials plan to do the same.

    18. Men are more likely to spend a lot of money on home decor compared to women.

In our study, we found that 16% of all men who have cash-back credit cards spent over $500 on home-related expenses (furniture, decor, repairs), compared to 10% of women.

Of these men, 13% were single, divorced, or widowed, and 16% were married. Looking at the women who spent over $500 using their cash-back rewards card, 10% were married and lived with their partner, and 9% were single, divorced, or widowed.

The Takeaway

Our survey found that payment method, gender, and age can all affect a person’s spending and savings. For instance, men tend to spend more on their pets and home furnishings than women. Gen Zers accrue the most credit card rewards; boomers the least. And the majority of cash-back credit card users have “very good” or “excellent” credit scores.

In addition, cash-back credit card users are more likely to be able to put money into savings compared to people who use a debit card, cash, or money app to pay for most of their purchases. Perhaps the money they get in rewards goes into their nest egg.

Curious what a cash-back credit card could do for you? The SoFi Credit Card offers 3% unlimited cash-back rewards when redeemed to save, invest, or pay down eligible SoFi debt. (You’ll need to set up direct deposit for a SoFi Checking and Savings account, otherwise you’ll earn 2%.) Cardholders earn 1% cash-back rewards when redeemed for a statement credit.¹

Earn up to 3% cash back rewards on everyday purchases with the SoFi Credit Card.

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

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The credit limit on a credit card is the maximum amount you can spend before needing to repay it. You can request a credit limit increase, but credit card issuers sometimes automatically increase the credit limit of those who have improved their credit scores or who have shown to manage credit well. But is a higher spending limit a good thing? It may not be for everyone’s financial situation. Here’s how to know if your credit card spending limit is too high.

How Does My Credit Card Spending Limit Work?

Credit cards are a form of revolving debt, which means that there is an upper spending limit, but the credit can be repaid and used again. It revolves between being available to use, being unavailable because it’s being used, and being available to use again after it’s been repaid.

A credit card issuer typically bases the credit limit on factors such as the applicant’s credit score, income, credit history, debt-to-income ratio, and others. However, every credit card company is different in what it considers and how much emphasis it places on each component.

There may be multiple types of credit limits on the same credit card, e.g., a daily spending limit or cash advance limit.

Why Your Credit Card Issuer Increased Your Spending Limit

Your spending limit isn’t set in stone, though. Even if you haven’t specifically requested a credit limit increase, your credit card issuer may automatically increase the credit limit on your card.

There are various reasons this might happen.

•   Your credit has improved, resulting in a higher credit score.

•   Your income has increased.

•   The credit card issuer wants to retain you as a customer by offering a higher credit limit.

By increasing your credit card spending limit, the credit card issuer may have hopes that you’ll carry a balance on your card.

One stream of revenue for them is interest charges and fees. If you carry a balance, rather than paying your balance in full each month, you’ll be charged interest on the outstanding amount. And if you fail to make at least the minimum payment due or pay the bill late, you’ll likely be charged a late fee.

Both interest charges and fees are then added to the balance due on the next statement, and themselves incur interest. Essentially, you’ll be paying interest on interest.

Pros of a High Credit Card Spending Limit

For some people, and for their financial needs or goals, there may be practical reasons for having a high credit card spending limit.

•   It can be helpful in an emergency situation. Even if you’ve accumulated an emergency fund or rainy day fund, there might be instances when you need more than that. For instance, if your refrigerator suddenly stops working, you’ll probably want to replace it sooner rather than later. Large appliances can cost several thousand dollars to purchase and have installed.

•   Having a high credit limit while using a small percentage of it can lower your credit utilization rate. Your credit utilization rate is the relationship between your spending limit and your balance at any given time. If your limit is $10,000, and your balance is $1,500, your credit utilization is 15%. Generally, the lower your credit utilization rate, the better.

•   If you have a rewards credit card, having a higher spending limit on it could mean reaping greater rewards, whether that’s cash back, miles, or another type of reward. Being financially able to pay the account balance in full each month is key to making the most of this strategy.

Cons of a High Credit Card Spending Limit

As attractive as the benefits might sound, there can be drawbacks to having a high credit card spending limit.

•   You might be tempted to spend because you can, even if you can’t pay your credit card balance in full at the end of the billing period. This will result in purchase interest charges being added to the unpaid balance, and interest will accrue on this new, larger balance. It can become a debt cycle for some people.

•   Having a high credit limit and using a large percentage of it can increase your credit utilization rate. This rate is one of the most important factors in the calculation of your credit score — it accounts for 30% of your FICO® Score, and is considered “extremely influential” to your VantageScore®. It’s generally recommended to keep your credit utilization rate to 30% or less.

•   Requesting an increase in your credit card spending limit could cause your credit score to decrease slightly. The credit card issuer might do a hard credit inquiry into your credit report, which can mean a ding of a few points to your credit score, depending on your overall credit. It’s usually a temporary drop, but if you’re planning to apply for a loan or other type of credit, it could make a difference in the interest rate you’re offered.

What Happens if You Go Over Your Spending Limit

The Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act) put consumer protections against unfair credit card practices into place. One of the stipulations in this Act is that credit card issuers cannot charge an over-the-limit fee unless the card holder opts into an agreement for charges above the credit limit to be paid.

If you choose not to opt in to this agreement, any charges you try to make that exceed your credit card spending limit will be denied.

If you do opt in, the excess charges will be paid, but the credit card issuer may charge a fee for covering the overage amount. Generally, the first-time fee can be up to $25. If you exceed your spending limit a second time within six months, you could be charged up to $35. The fee can’t be larger than the amount you went over your credit limit by, though. So, if you charge a purchase that’s $100, but you only have $90 of available credit, the over-limit fee would be $10.

Before you opt in to an agreement like this, the credit card issuer must tell you what potential fees there might be. They must also provide you with confirmation that you opted in.

If you opted in to an over-the-limit agreement, but no longer want it, you can opt out at any time by contacting your credit card issuer’s customer service department.

Recommended: Maxed-Out Credit Card: Consequences and Steps to Bounce Back

Taking Control of Credit Card Debt

A higher spending limit can be a good thing if it’s used responsibly. Looking for a credit card that has more favorable rewards or offers perks that your current credit cards don’t have could be a good option for managing your debt.

The SoFi Credit Card may be one to explore. Its cash-back rewards could go toward debt payments, helping you pay down your debt. SoFi cardholders earn 2% unlimited cash back rewards when redeemed to save, invest, or pay down eligible SoFi debt. Cardholders earn 1% cash back rewards when redeemed for a statement credit.

If you’re struggling with credit card debt and a higher credit card spending limit is not an option for your financial situation or comfort level, another possible option could be to consolidate high-interest credit card debt with a personal loan.

With a credit card consolidation loan, all your balances are merged into one new loan with just one monthly payment and one interest rate instead of several. This new interest rate could end up being lower than the rates on your current individual credit cards, which could lower your monthly debt payment. Also, a personal loan is installment debt, which means there will be a payment end date. Credit cards are revolving debt with no firm end date.

The Takeaway

A higher credit card spending limit may or may not be a positive thing, depending on your financial situation. You may have requested a credit limit increase or your credit card issuer may have automatically increased your spending limit because of factors such as an improved credit score or increased income, among others. But if the amount of credit you’ve been approved for results in poor financial decision making or increased debt, your credit card spending limit may be too high.

Multiple high-interest credit cards could be consolidated into one new personal loan. A SoFi Personal Loan is a fixed-rate loan with interest rates that may be lower than the rates on your current credit cards.

Transferring multiple balances to a credit card that has more favorable rewards or offers perks that your current credit cards don’t have could be another option for managing your debt.

The SoFi Credit Card may be one to explore. Its cash-back rewards could go toward debt payments, helping you pay down your debt. SoFi cardholders earn 2% unlimited cash back rewards when redeemed to save, invest, or pay down eligible SoFi debt. Cardholders earn 1% cash back rewards when redeemed for a statement credit.¹

Learn more about the SoFi Credit Card

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¹See Rewards Details at SoFi.com/card/rewards.
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The SoFi Credit Card is issued by The Bank of Missouri (TBOM) (“Issuer”) 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.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
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SoFi cardholders earn 2% unlimited cash back rewards when redeemed to save, invest, or pay down eligible SoFi debt. Cardholders earn 1% cash back rewards when redeemed for a statement credit.¹

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At some point, there may come a time when you need to ask the question: Does filing for unemployment affect your credit score? The answer is no, fortunately.

Losing your job can be like a kick in the stomach — it can deflate you, and leave you scrambling to figure out what to do next. That last thing that many people need, in addition to firing up a job search, is a hit to their credit score, too. If you do lose your job, many financial professionals will tell you that the first thing you should do, if you qualify, is to file for unemployment so that you still have some income as you revise your resume and start interviewing.

The good news, again, is that you don’t need to worry about a potential ding to your credit, though. More information below!

Recommended: What Credit Score is Needed to Buy a Car

Why Your Credit Score Matters

Your credit score is, in a sense, your financial reputation. It can give lenders or creditors a quick and easy summary of your creditworthiness — or, how likely it is you are to pay back a loan on time and in full. Everyone has a credit report, and you can think of your credit score as a truncated version, or sort of like a Cliff Notes, to your credit score.

So, why does your credit score matter, then? Because it’s used by lenders to gauge how risky you are as a borrower. It’s used to measure not only whether a lender would be willing to give you a loan, but how much they’d charge you for the privilege; or, what the effective interest rate would be for borrowing.

When it comes to some of life’s bigger purchases, such as a car or a home, that can be very important. A couple of percentage points can mean that a borrower ends up paying tens, or even hundreds of thousands of dollars more in interest over the years. As such, when a lender sizes up your credit application and takes a look at your credit score, the higher, the better.

As for what factors affect your credit score? It’s a mixture of things: Your payment history, total debt balances, credit utilization, credit history (how long you’ve had accounts), credit mix, and inquiries from lenders.

Recommended: Should I Sell My House Now or Wait

Unemployment Won’t Appear on Your Credit Report

Again — you may be concerned that if you lose your job, filing for unemployment may affect your credit score. And, again, there’s no cause for concern. Not only will filing for unemployment not affect your credit score, it also won’t appear on your credit report. Your credit report contains information relating to your past borrowing activity, not your employment status.

So, unless there’s been a change in your credit history — say, you apply for a new line of credit, or close an old credit card — your credit report won’t change. That said, your credit report may contain information relating to past employers, but the only thing that should have an effect on your credit score will be items relating to financial accounts.

That may become an issue if, say, you were issued a company credit card at a previous job. But for most people, your employment status, or past employers, aren’t likely to have an impact on your credit report or credit score.

Remember: Your credit score is a snapshot of your financial reputation, not your employment status!

How Unemployment Can Affect Credit Scores Indirectly

With all of that in mind, your employment status — or filing for unemployment — may have an effect on your credit score in an indirect way.

As mentioned, your employment status isn’t a part of your credit score’s calculation, and neither is whether or not you received unemployment assistance. It’s really all about paying back or down your debts, on time, and on schedule. As such, if you do lose your job and file for unemployment, you may find yourself in an income crunch; your unemployment check is most likely going to be smaller than the paycheck you’re accustomed to receiving, and that may make it difficult to keep up with your payments.

You may also be tempted to start using your lines of credit more while unemployed as a way of making ends meet. For example, you might start using your credit card at the grocery store as a way of keeping money in your bank account, with the thought that you’ll pay off your balance once you get another job and a regular paycheck again. Some individuals may also look into personal loans for unemployed persons, too.

That logic may not be faulty, but doing so, you will increase your credit utilization and overall debt, which can lower your credit score.

Finally, if you find that you can’t keep up with your minimum payments due to the resulting cash crunch of losing your job, that, too, will ding your credit score. That’s why it’s important to maintain a line of communication with lenders. If you can’t make your payment, let them know, and they may be willing to work with you.

And, remember, if you do have a company credit card or some other type of financial account with an employer, and you lose your job, that credit line could be severed. That, too, could affect your credit score, as it ultimately lowers your total available credit.

Recommended: What is The Difference Between Transunion and Equifax

How to Protect Your Credit Score When Unemployed

As for protecting your credit score while unemployed, the most important things you can do are to try and keep your debt balances low and to keep an open line of communication with your creditors. Of course, a loss in income will probably spur you to change your spending habits (by cutting back in certain areas), but in terms of maintaining your credit score, the best course of action is to keep doing what you’re doing: making your payments.

That means continuing to make your payments (at least the minimum) as scheduled. And, since it bears repeating, if you’re going to struggle to make those minimum payments, call your lender and let them know. Some will be willing to make accommodations (forbearance, extensions, etc), perhaps by deferring payments, although there’s no guarantee.

If you feel that you need more help, you can also work with a credit counselor to help you evaluate your options, and even negotiate with your lenders. You may also want to set up free credit monitoring, too, so that you can see any changes to your score. A money tracker app may be helpful as well.

The Takeaway

If you lose your job and file for unemployment, there shouldn’t be a direct effect on your credit score. That said, there may be indirect factors that could lower your score, but the most important thing you can do to maintain a strong credit score is to keep making your payments, and try to keep your debt balances (or credit utilization) to a reasonable level.

And remember that if you’re really struggling, it may be worth it to reach out to a professional for personalized advice. SoFi Insights can help. Track your money, monitor your credit, get a breakdown of your spending, and more all in one place.

FAQ

Can I apply for a credit card when I’m unemployed?

It’s possible to get a credit card while unemployed, but keep in mind that a creditor’s main concern is whether or not you can make your payments. As such, your approval for a credit card may hinge on your income and other debts or financial obligations.

What If my credit score goes down?

Credit scores go up and down all the time, but if you do experience a fall in your credit score while unemployed, you’ll likely know why — and it’s probably because you missed payments or saw your credit utilization go up. The good news is that you can always work on increasing it again!

What personal information does your credit report include?

The short answer? A lot of it. That includes your name, aliases, birth date, Social Security number, address (and former addresses), phone number, and possibly your employment history, among other things.

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SoFi’s Insights tool offers users the ability to connect both in-house accounts and external accounts using Plaid, Inc’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score provided to you is a Vantage Score® based on TransUnion™ (the “Processing Agent”) data.
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.
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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A prepaid credit card is a type of credit card onto which you load money in advance. You can use the card to make purchases online or at brick-and-mortar stores or to withdraw money at ATMs.

While they have “credit card” in the name, prepaid credit cards are actually quite different from a standard credit card. Wondering how does a prepaid card work exactly? Let’s take a closer look at what a prepaid credit card is, the different types of prepaid cards, and the pros and cons of having one.

What Is a Prepaid Credit Card?

As mentioned before, a prepaid card is a card on which you load money ahead of time, similarly to how you would with a gift card. Some of the same credit card issuers that offer traditional credit cards may offer prepaid credit cards.

The amount you load onto the prepaid card is the maximum amount you can spend on the card, similar to a credit limit. For instance, if you load $200 onto the card, you can spend up to $200.

You can use the card to make purchases or withdrawals from an ATM. Prepaid cards might also be used for government benefits or for payroll.

Many prepaid credit cards are also called prepaid debit cards or stored-value cards. While they may look just like a credit card and bear the logo of a major credit card company like Visa or Mastercard, they’re not actually credit cards.

Because you’re not borrowing from a line of credit, you won’t have to worry about accruing debt, making a minimum payment by a due date, or owing interest. Your activity also will not be reported to the credit bureaus, meaning it won’t affect your credit score or history.

Recommended: What is a Charge Card

Types of Prepaid Credit Cards

There are two main types of prepaid credit cards: open-loop and closed-loop. Here’s how they differ.

Open-Loop

An open-loop prepaid credit card can be used anywhere that accepts the credit card network that the card is within. For instance, if your open-loop prepaid credit card has a Visa logo, then your prepaid card will be accepted at any merchant, location, or ATM where Visa cards are accepted.

Closed-Loop

Also known as a single-purpose card, a closed-loop prepaid credit card can only be used to make purchases from a single retailer or a group of stores. For instance, you may only be able to use the card when you shop at a particular grocery store chain. Closed-loop prepaid credit cards usually don’t have a credit card network logo on them.

How Does a Prepaid Credit Card Work?

You can use a prepaid credit card to make purchases and take out money at ATMs, just as you can get cash from a credit card. Each transaction you make using the prepaid card will reduce the total balance you have available. So, for instance, let’s say you loaded a total of $500 onto your card. Then, you make a purchase for $150. You would have $350 remaining to spend with your card.

Though it depends on the prepaid credit card, you may be able to reload additional funds onto your card. You can do so by depositing money from a bank account or paycheck, reloading the card at a retail location using cash, or buying a reload pack to add a certain amount to your card.

Recommended: Can You Buy Crypto With a Credit Card

Advantages of a Prepaid Credit Card

Let’s look at some of the benefits and risks of prepaid debit cards, another common name for prepaid credit cards. Here are some of the upsides to weigh if you’re considering getting one.

Doesn’t Require a Credit Check

A credit check isn’t required to open a prepaid card. As such, it may be an option available to those with lower credit scores or a thin credit history. Further, getting a prepaid credit card won’t require a hard credit inquiry, which can ding your credit.

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

Provides a Safe Alternative to Cash

A prepaid credit card is a safe, easy alternative to using cash. Depending on the network, a prepaid card might come with liability protections similar to those offered by debit cards.

Doesn’t Necessitate a Bank Account

You won’t need a bank account in order to get or use a prepaid debit card. Unlike debit cards, prepaid credit cards don’t require you to draw funds from a bank account, though if you do have one, you have the option to deposit money from your checking or savings account.

Won’t Cause You To Go Into Debt

Since you’re using money that’s already been uploaded to the card, you won’t have to worry about running a balance on your credit card. Further, you won’t have to worry about making payment due dates, one of the cardinal credit card rules, or the possibility of incurring interest if you can’t pay off your balance in full.

Recommended: When Are Credit Card Payments Due

Disadvantages of a Prepaid Credit Card

While there are a number of positives to prepaid debit cards, there are disadvantages worth considering as well.

Can Carry High Fees

Fees are probably the biggest drawback of a prepaid credit card. Many prepaid credit cards come loaded with fees, which can include the following:

•   Activation fees

•   Monthly maintenance fees

•   Reloading or card replacement fees

•   Purchase fees

•   ATM fees for transactions or balance inquiries

•   Check deposit fees

•   Declined transaction fees

•   Inactivity fees

•   Foreign transactions fees

•   Customer service inquiry fees

Just as you would consider how much a credit card costs before applying for you, do the same due diligence on prepaid card fees before getting one.

Does Not Boost Your Credit Score

Prepaid credit cards aren’t actually credit cards, which offer a revolving line of credit. Because they aren’t a form of credit, your activity is not reported to the credit bureaus. In turn, they aren’t a way to build your credit.

Offers Fewer Fraud and Liability Protections

While prepaid credit cards might come with some fraud and liability protections, they typically don’t have the full suite of protections that standard credit cards offer. Instead, their protections, if offered, may be more akin to those offered by debit cards, which are generally weaker than those of credit cards.

Recommended: How to Avoid Interest On a Credit Card

Alternatives to Prepaid Credit Cards

Besides prepaid credit cards, here are a few other options you might consider:

•   Gift cards: A gift card can be used at particular merchants or retailers. There are also gift cards offered by credit card networks, such as Visa or Mastercard, that you can use anywhere these networks are accepted. Like a prepaid credit card, you don’t need a bank account to get a gift card, though using one won’t help you boost your credit. Unlike prepaid credit cards, gift cards don’t typically carry any fees aside from potentially a one-time activation fee.

•   Debit cards: Another option you might consider is a debit card. These do typically require a bank account, however. Like a prepaid card, you’re only using the funds available in the account connected to the card. As such, getting a debit card does not involve a credit check nor will you have to pay interest since you’re not borrowing funds. There may be fees involved though.

•   Secured credit cards: If you have a low credit score or a thin credit profile, a secured credit card — one of the different types of credit cards available — can help boost your credit if you’re using the credit card responsibly. Secured credit cards require a deposit, and the deposit amount is usually the same as the card’s credit limit. Secured credit cards usually have lower fees than prepaid cards, but they do have interest fees. Plus, a credit check is required.

Recommended: What is the Average Credit Card Limit

The Takeaway

Contrary to its name, a prepaid credit card isn’t actually a credit card. You aren’t accessing a line of credit with a prepaid card, and you can’t build credit. Instead, you load cash onto the prepaid card, which effectively acts as your credit limit. You can then use the funds to make purchases or withdraw money from an ATM.

When considering a prepaid credit card or any type of credit card, for that matter, be sure to look at both the pros and cons, particularly the fees involved. If you’re looking for a new credit card rather than a prepaid card, the SoFi Credit Card is worth considering. There are no foreign transaction fees. Plus, SoFi cardholders earn 2% unlimited cash back rewards when redeemed to save, invest, or pay down eligible SoFi debt. Cardholders earn 1% cash back rewards when redeemed for a statement credit.¹

FAQ

Do prepaid cards require monthly payments?

Prepaid cards can have a monthly maintenance fee. The amount of this fee varies, typically ranging from $10 to $15 a month. The money is drawn from the existing balance on your card.

Do prepaid cards cost money?

Prepaid cards usually do have fees. This may include an activation fee, ATM fees, reload fees, and foreign transaction fees, among others. Before getting a prepaid credit card, make sure to check what fees are involved.

Is an account needed for a prepaid credit card?

Are you wondering, ‘Can you get a prepaid credit card without a bank account?’ The answer is yes. A bank account is not required for a prepaid credit card.

Do prepaid cards help build your credit?

Prepaid credit cards do not help you to build credit. That’s because they’re not actually credit cards and don’t offer a revolving credit line. In turn, your payment history isn’t reported to the three credit bureaus.

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¹See Rewards Details at SoFi.com/card/rewards.
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 .
The SoFi Credit Card is issued by The Bank of Missouri (TBOM) (“Issuer”) 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.

Photo credit: iStock/towfiqu ahamed
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Both Buy Now, Pay Later (BNPL) and credit cards are ways to spread out the payment for a purchase over time, but they have a few key differences. Buy Now, Pay Later plans typically have a specific number of payments that are determined upfront. You’ll often pay a portion at the time of purchase, and then make regular payments over time, often with zero interest.

In contrast, when you pay with a credit card, you may not have to make any payment immediately. Instead, the credit card company will send you a monthly statement with all of the charges you made during the month. You’ll generally need to make a minimum payment, and will owe interest on any remaining balance. As long as you continue to make the minimum payments and are okay paying interest each month, there’s no limit to how long you can take to repay your purchase.

Read on for more on the differences between Buy Now, Pay Later vs. credit cards.

Recommended: What is a Charge Card

What Is BNPL (Buy Now, Pay Later)? And How It Works

BNPL (Buy Now, Pay Later) is a type of installment loan that allows customers to purchase something (either online or in-store) and pay for it over time. In recent years, there’s been a big jump in growth of Buy Now, Pay Later programs.

Several retailers and even some credit card companies offer Buy Now, Pay Later. The details of these programs vary depending on the merchant, but there are some similarities. With a BNPL plan, generally you make an initial deposit of around 25% at the time of purchase. Then, you’ll make a series of installment payments until your balance is paid off, similarly to how you would with layaway.

Recommended: When Are Credit Card Payments Due

Pros and Cons of Buy Now, Pay Later

Now that you’re familiar with the definition of Buy Now, Pay Later, here are some of their pros and cons:

Pros	Cons
No hard pull on your credit to apply	May influence you to make purchases outside your budget
Generally 0% interest or lower interest than using credit cards	You won’t earn any rewards like you might by using a credit card
Can get approved even with less-than-stellar credit	May hurt your credit if you miss payments or pay late

Recommended: What is the Average Credit Card Limit

What Is a Credit Card? And How It Works

A credit card is a type of revolving credit that allows you to make charges against your line of credit.

When you apply for a credit card, the issuer will do a hard pull on your credit. If approved, you’ll be given a specific credit limit that is the maximum amount you can borrow. As you borrow against that limit when using a credit card, your available credit is reduced. Similarly, it’s replenished when you make payments.

Each month, you’ll get a statement listing all of the charges you made that month, plus any outstanding balance. If you pay off the balance in full, you won’t be charged any interest due to how credit cards work. However, if you pay less than the full amount, you’ll owe interest on any remaining balance.

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

Pros and Cons of Credit Cards

Credit cards can serve as a useful financial tool when you use them responsibly and adhere to credit card rules. However, they also have the potential to cause harm. Here are some pros and cons of using credit cards:

Pros	Cons
Many more retailers accept credit cards than offer BNPL plans	May encourage you to spend outside of your budget
Credit cards may offer cash back or rewards for using them	Many cards come with high interest rates
Can help build your credit when used responsibly	Can hurt your credit if you keep a balance or miss payments

Difference Between Buy Now, Pay Later and Credit Cards

While Buy Now, Pay Later plans and credit cards have some similarities, they have a few key differences. Here’s a look at BNPL vs. credit card distinctions:

	Buy Now, Pay Later	Credit Cards
Opening the account	Apply with participating retailers at the time of purchase; no hard pull on your credit required	Apply directly through the credit card issuer; hard pull on your credit
How they affect credit scores	Usually no effect on your credit score	Can help build your credit when used responsibly, or hurt your credit when misused
Interest	Often no interest when paid on-time in full	Interest charged on any outstanding balance each month
Fees	Often no fees when paid on-time in full	Fees vary by credit card and issuer, including a fee for late payments
Rewards	No rewards earned	Many credit cards offer cash back or rewards for purchases

Recommended: Can You Buy Crypto With a Credit Card

What Is a Buy Now, Pay Later Credit Card?

Traditionally many Buy Now, Pay Later plans were offered by companies that were not traditional credit card companies. However, several issuers are now starting to offer credit cards with Buy Now, Pay Later features available.

With these Buy Now, Pay Later credit cards, you can combine some of the benefits of both options. You can use your credit card like you normally would (including earning rewards) and then identify larger purchases that you’d like to pay for over time with the Buy Now, Pay later card feature.

Choosing a Buy Now, Pay Later Credit Card

Credit card issuers that offer Buy Now, Pay Later credit cards each run their programs slightly differently. You’ll want to look at the terms and conditions of each credit card you’re considering to see which works best for you. If the Buy Now, Pay Later options are similar, you can compare the credit cards themselves to find the best option.

Benefits of Buy Now, Pay Later Credit Cards

These are some of the upsides of BNPL credit cards to consider:

•   Earn rewards on your purchases.

•   You can finance the purchase for a variable length of time.

•   Responsible and on-time payments can help your credit score.

Risks of Buy Now, Pay Later Credit Cards

That being said, there are potential downsides to know about too, including:

•   Buy Now, Pay Later cards may encourage you to spend more than you have.

•   Unlike traditional Buy Now, Pay Later plans without credit or debit cards, you may be charged a fee to pay for your purchase over time.

•   There is a minimum purchase amount you must meet to be able to use the BNPL feature of your credit card.

Recommended: How to Avoid Interest On a Credit Card

The Takeaway

Buy Now Pay Later and credit cards are two ways to pay for your purchases over time. With BNPL, you’ll usually pay an initial deposit at the time of purchase, and then you’ll make several fixed payments over the course of a few months. With credit cards, you have a set credit limit that represents the maximum you can spend on any purchases. Each month, you’ll get a statement with your total monthly charges and any outstanding balance. If you don’t pay your statement balance in full, you’ll owe interest on any unpaid amount.

Buy Now, Pay Later and credit cards can both make sense in certain situations if you need to make a purchase and don’t have the money right now. Another option is to get a Buy Now, Pay Later credit card, which combines features from both types of plan.

With the SoFi credit card, you can earn up to 3% cash back rewards that you can use to save, invest, or pay down eligible SoFi debt. Cardholders earn 1% cash back rewards when redeemed for a statement credit.¹ Plus, you can earn even more when you set up direct deposit on your SoFi account. Learn more and get SoFi’s credit card today.

FAQ

Is Buy Now, Pay Later better than a credit card?

Buy Now, Pay Later and credit cards can both be the right answer depending on your specific situation, so it’s hard to say that one is better than the other for every scenario. Buy Now, Pay Later can be a good option if you want to finance a purchase over a fixed period of time with low interest and fees.

Will BNPL affect my credit score?

Generally speaking, BNPL plans do not impact your credit score as long as you make your payments on time. However, if you do not fulfill your BNPL contract, your outstanding debt may be reported to the credit bureaus, which could have a negative impact on your credit score. All BNPL plans work differently, so you will want to make sure you understand the terms and conditions of the plan you’re using.

Will BNPL replace the use of credit cards?

While BNPL and credit cards are both financial instruments that allow you to pay for purchases over time, they have some important differences. Since they have different pros and cons, it is unlikely that one will completely replace the other. Instead, it is more likely that both will continue to be used in different situations.

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Photo credit: iStock/RgStudio

¹See Rewards Details at SoFi.com/card/rewards.
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 .
The SoFi Credit Card is issued by The Bank of Missouri (TBOM) (“Issuer”) 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.
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