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Your credit card statement can feel like information overload with all of its numbers and terminology. Understanding the definition of terms like outstanding balance, statement balance, and billing cycle can help you to navigate this monthly statement a little more easily.

So what is an outstanding balance, how is it different from a statement balance, and can it affect your credit score? Put simply, the outstanding balance on a credit card is what the amount of money you still owe to the credit card company is called. Knowing this figure is important to avoiding interest and potential effects on your credit.

What Is an Outstanding Balance on a Credit Card?

Outstanding balance is another way to express current balance. In fact, depending on your credit card issuer, your monthly statement and mobile app may use the term “current balance” instead of “outstanding balance.”

But what is an outstanding balance in credit card terminology? A credit card outstanding balance is simply the amount of money you have not paid to the credit card issuer — i.e., it’s what you still owe.

Your outstanding balance includes any purchases you have made on your credit card but have not yet paid off (from the current and previous billing cycles), but it also includes:

•   Interest earned on previous balances

•   Balance transfers (and any balance transfer fees)

•   Cash advances

•   Any other fees you may owe, like late fees or foreign transaction fees

Recommended: Closing a Credit Card with a Balance

Where to Find Your Outstanding Balance on a Credit Card

You can check your outstanding balance by calling your credit card issuer or accessing your account online or through the mobile app. Depending on the terminology the company uses, you may see the outstanding balance listed as your current balance or simply your credit card balance.

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

Current Balance vs Outstanding Balance

Current balance is simply another term for outstanding balance. Depending on your credit card issuer, you might see one term or the other used. In some cases, it may simply be labeled “account balance” or “credit card balance.”

Recommended: How to Avoid Interest On a Credit Card

Statement Balance vs Outstanding Balance

So what’s the difference between a credit card statement balance and outstanding balance? Your credit card statement balance is the total amount owed after a billing cycle. It can include any purchases made during the billing cycle, plus any balance, interest, and fees carried over from the previous billing cycle.

Once issued, the statement balance amount does not change, even if you continue to swipe your card for more purchases during the grace period (this is the period between statement closing date and due date, during which you won’t earn interest on your unpaid statement balance). As long as you pay off the statement balance in full by the due date, you should not accrue any interest.

Your outstanding balance encompasses everything you owe at a specific moment in time. Sometimes your outstanding balance can be higher than your statement balance; sometimes it may be lower. Consider this example:

Your billing cycle ends, and you now have a statement balance of $1,000. In the next week, you spend $500 more with your credit card. Your statement balance remains $1,000, while your outstanding balance grows to $1,500. But as long as you pay that $1,000 statement balance by the due date, you will not incur any interest — and your statement balance will drop to $0 until the end of the next billing cycle.

Recommended: Tips for Using a Credit Card Responsibly

Remaining Balance vs Outstanding Balance

Remaining balance refers to whatever amount is still due after you’ve made your monthly credit card payment. For example, if your statement balance is $500 but you only pay $300, your remaining balance is $200. This, along with the interest it accrues, becomes a part of your outstanding balance.

You can avoid accruing interest on a remaining balance by paying off your statement balance in full each month rather than only the credit card minimum payment.

Recommended: When Are Credit Card Payments Due

What Is an Average Outstanding Balance?

The typical amount of an outstanding balance can vary widely from person to person — it all depends on how much you use your credit card, what your credit limit is, and whether you carry a balance. That being said, your average outstanding balance is simply the amount you owe on a credit card, averaged over a certain period of time.

The average outstanding balance formula for a statement period would be the total of your balance for each day of the statement period, divided by the number of days in the cycle. This can be helpful to know given most credit card issuers calculate interest on a daily basis, based on your average daily account balance.

Recommended: What is the Average Credit Card Limit

Paying Your Credit Card Outstanding Balance: What to Know

The nuances of credit card balances can be tough to nail down, but understanding how they work — particularly outstanding balances — may help you avoid interest and impacts to your credit score.

Here’s the short version:

•   Paying the minimum balance due each month will help you avoid late fees and negative marks for late payments on your credit report.

•   Paying the statement balance in full by the due date will keep you from accruing interest.

•   Paying down the outstanding balance, or current balance, even outside of your normal payment cycle, can reduce your overall credit utilization, which influences your credit score.

How Interest Contributes to Outstanding Balances

When you make purchases with your credit card throughout a billing cycle, the card issuer has lent you money to cover the expenses. And if you don’t pay the lender the statement balance in full by the specified due date, any remaining balance will become part of your outstanding balance — and it will start accruing interest.

The best way to avoid paying credit card interest is to pay your statement balance in full by each due date.

Recommended: Tips for Using a Credit Card Responsibly

How an Outstanding Balance Affects Your Credit Score

When you carry over unpaid balances, you’ll do more than earn interest that you have to pay. You’ll also increase your overall credit utilization, which is the amount of your total available credit you’re using. That’s because your outstanding balance counts toward your credit limit.

For example, if your credit limit is $5,000 and your outstanding balance is $2,500, you’ve utilized 50% of your credit limit. In general, creditors prefer to see a credit utilization of 30% or lower. This signals to them that you can responsibly pay back your debts.

In fact, credit utilization is the second most important factor affecting your FICO credit score. It accounts for 30% of your overall credit score. Thus, carrying a high outstanding balance regularly can adversely affect your credit score.

For this reason, experts typically recommend paying off your full statement balance every month if you’re able. And if you make a large payment on your credit card during a billing cycle that increases your outstanding balance tremendously, you may want to pay it off early to reduce your credit utilization — or else you chance a drop in your credit score.

Recommended: What Happens If You Overpay Your Credit Card?

The Takeaway

Credit cards can be confusing, especially when you’re new to the terminology. But once you understand how your statement and outstanding balances work and can responsibly make payments in full and on time, credit cards can be a great tool for boosting your credit score.

Interested in applying for a credit card with cash-back rewards? Try the SoFi credit card.

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

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

FAQ

Does outstanding balance mean past due?

Having an outstanding balance does not necessarily mean it’s past due. Your credit card requires a minimum monthly payment; if you have satisfied that payment, you do not need to immediately pay your outstanding balance. But keep in mind that you generally need to pay the full statement balance each month to avoid accruing interest.

How do I clear the outstanding balance on my credit card?

To clear the outstanding balance on a credit card, you can make a payment equal to the amount. This should bring the balance down to zero. However, you do not always have to pay your outstanding, or current, balance to avoid interest. Paying your monthly statement balance in full should keep you from accruing interest, even if your outstanding balance is higher.

Why is my outstanding balance negative?

Your credit card outstanding balance can go negative if you pay off the card and then receive a credit for a returned item or claim cash-back rewards from your purchases. If you want, you can request a check from the credit card issuer in the amount of the negative balance. Or, you can apply the negative balance on a credit card toward future purchases on the credit card.

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Photo credit: iStock/SARINYAPINNGAM

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

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

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

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If you’re new to credit or want to rebuild your credit, becoming an authorized user on another person’s credit card account can help. As an authorized user on a credit card, your credit score can be positively impacted when the account and its activity are reported to the credit bureaus. The card’s activity is still also reported under the primary account holder’s credit profile, in addition to yours.

Being an authorized user does have its share of responsibilities. You’ll want to make sure to maintain responsible credit card habits as an authorized user to help your credit, as well as to avoid adversely impacting the primary account holder’s credit.

Recommended: How to Avoid Interest On a Credit Card

What It Means to Be an Authorized User

When you’re an authorized user, you have a credit card that’s attached to another person’s account. This duplicate credit card, also known as a supplementary credit card, will have your name on it, and you’ll be able to use it to make purchases. Since you’re not the primary account holder, you won’t have the authority to make changes to the account.

As an authorized user, you’re not legally responsible for making a payment after each billing cycle. That responsibility remains solely with the original cardholder, which marks a major distinction between an authorized user relationship and a joint credit card account. Since you’re not liable for repaying the charges as an authorized user, you might not get a monthly statement.

In terms of getting started as an authorized user, be aware that some issuers impose an annual fee to add authorized users to a card account. Additionally, some credit cards have limits for the maximum number of authorized users permitted on an account.

Further, card issuers often have a minimum age requirement that you must meet as an authorized user. The age requirement depends on the issuer. For example, SoFi requires authorized users to be at least 15 years old, while the minimum authorized user age for an American Express Platinum Card is 13 years old.

Recommended: What is the Average Credit Card Limit

How Being an Authorized User Affects Your Credit Score

There are a couple of ways that being an authorized user on a credit card can affect your credit score.

If the Lender Reports Authorized Users to Credit Bureaus

If your main goal in becoming an authorized user is establishing credit or rebuilding your credit history, this can be a viable option to pursue. Card issuers don’t require a credit check to become authorized use.

However, your credit score can be positively affected if the issuer reports satisfactory payment activity and usage to the credit bureaus for all persons named on the account. Keep in mind that not all credit card companies send activity data to the bureaus for authorized users though. So before going this route, ask the primary user to confirm whether it does.

How You Use the Shared Account

If the bank reports the card’s positive activity to credit bureaus for all users, it will also report unsatisfactory activity. Being an authorized user can hurt your credit if a late or missed payment is reported and included on an authorized user’s credit profile, for example. On the flipside, on-time payments or a low credit utilization rate can help the credit of both the primary and authorized users.

Since the card data that’s included for an authorized user depends on the credit bureau, ask the credit issuer to specify which credit agency it reports to. That way, you’re aware of the factors that affect credit scores.

Recommended: When Are Credit Card Payments Due

Risks Associated With Being an Authorized User

A major risk of becoming an authorized user on a credit card is that it can adversely affect your credit score. If the primary user fails to make at least the minimum monthly payment on time, for instance, that will also impact your score, assuming the bureau reports payment history for authorized users.

Additionally, the purchase behavior of all users on a card could put a strain on the account’s limit, pushing balances near or at the borrowing limit. This will affect the credit utilization on the account, which also can impact the credit score of all users on the account.

With so many factors that need to be in balance, each user associated with the card must have a clear understanding of purchase and repayment expectations. If an individual drops the ball, it can put a strain on the relationship in addition to the users’ credit scores.

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

Who Should You Ask to Add You as an Authorized User?

Asking another person to add you as an authorized user on their credit card is significant. It requires the utmost mutual trust, which is why this individual is typically someone who’s very close to you. This might include your:

•   Spouse or partner

•   Parent

•   Grandparent

•   Adult child

•   Adult sibling

•   Aunt or uncle

It’s helpful to clarify expectations around payment before being added as an authorized user. For example, do they want to cap your spending power on the card? When do they want payment for your charges? What’s the expectation if, for any unforeseen reason, you can’t cover your part of the bill?

Even though the primary cardholder is liable for the payments, it’s helpful to come to an agreement about how you two will settle your purchases, one-on-one.

Recommended: What is a Charge Card

Using Your Credit Card Responsibly

Receiving authorized user status on a credit card is a convenient way to build your credit profile. It also can help you practice responsible borrowing habits. A few sensible practices when using a credit card as an authorized user include to:

•   Avoid overspending. Examine your budget before using your card to verify that you can afford the purchase.

•   Ensure payments are made on time. Communicate with the primary cardholder to confirm that at least the minimum payment is made by the due date. If you’re covering your portion of the charges, make sure to get the money to the primary cardholder by the date you agreed upon.

•   Be mindful of the card’s limit. Avoid keeping an ongoing, high balance, which can negatively affect credit. Authorized users might not have access to the account history or statements, so regular communication with the primary user is essential.

Recommended: Tips for Using a Credit Card Responsibly

The Takeaway

As an authorized user, your credit score can benefit from the positive borrowing activity on the card, assuming the the issuer reports the account activity to the credit bureaus. Additionally, the card must be managed responsibly — otherwise, your credit could be negatively impacted. Getting added to a card that doesn’t charge an authorized user fee can be a frictionless way to get started.

If you’re looking to get a credit card like this, the SoFi credit card is one option to explore. It allows up to five authorized users on an account at no extra charge. Plus, purchases made by all users — the primary cardholder and their authorized users — earn cash-back rewards.

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

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

FAQ

Can authorized users affect your credit?

Having an authorized user on your credit card doesn’t directly impact your credit score. However, if they rack up charges, it might adversely affect your credit utilization ratio, which in turn can lower your credit score.

Additionally, you’re legally liable for all charges the authorized user makes on the card. If they’re unable to pay and you also can’t keep up with the payments, missed or late payments can negatively impact your credit.

Does an authorized user get a hard inquiry?

Typically, authorized users who are added onto an existing account don’t undergo a hard inquiry. Since the primary cardholder is the person who opened the account and is still 100% liable for all charges made to the card, credit issuers usually don’t need to verify the authorized user’s credit background or ability to repay the debt — even if they make charges.

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Photo credit: iStock/tolgart

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

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

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

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

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When you make a transaction with a credit card, it’s common for a temporary hold to be issued to your account. These pending credit card charges are often used by merchants to verify your account details. While pending credit card charges may affect your total available credit, they don’t have any impact on the amount you owe.

There are several different reasons why you might see a pending charge on your credit card account. If you check into a hotel, the hotel company may put a pending charge on your account to cover any damage or incidental expenses you charge to your room. Similarly, a sit-down restaurant may place a hold or pending charge or hold on your credit card for the amount of the bill, only finalizing the charge once you’ve elected how much to tip.

What Are Pending Transactions on a Credit Card?

Pending transactions on a credit card are temporary holds on your credit card account, often representing transactions that have not been finalized. These transactions usually show up on your online account, but often in a different color or font, differentiating them from posted transactions.

Pending transactions may affect how much credit you have available. However, you won’t have to actually pay them until and unless they actually post to your account.

Recommended: What is a Charge Card

What Causes Pending Credit Card Charges?

There are a number of things that can cause pending credit card charges. Here are some of the most common.

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

Credit Card Holds

One of the most common causes of pending credit card charges are credit card holds. Credit card holds happen when the merchant places an initial hold when you start a transaction.

One common scenario for a credit card hold is when you check into a hotel. The hotel company will put an initial hold on your card when you check in. This initial hold may be for more than your actual hotel bill, so as to cover any potential damages or expenses you charge to your room. Then, when you check out, the hold is removed and a final charge is posted to your credit card account.

Billing Errors

Another potential cause of pending credit card charges are billing errors. If there is a mistake on a billed transaction, it may show up as pending until the merchant corrects the error. This can happen during credit card processing, and it may take several days to resolve.

Fraud

It’s also possible that a pending charge can be the result of fraud. Most credit card issuers regularly and proactively monitor accounts for potential fraudulent transactions. If your issuer spots a transaction that might be fraudulent, they may deny the transaction or keep it in a pending status until they can verify its authenticity.

Anti-Fraud Preauthorizations

Because credit card issuers are actively monitoring accounts for fraud, they may also place a pending charge that serves as an anti-fraud measure. Most credit cards have a $0 fraud liability policy, meaning that you are not liable for any unauthorized transactions. As part of this, you may see pending charges or refunds from your card issuer as an anti-fraud measure.

Changing Your Mind About a Purchase

If you’ve changed your mind about a purchase and the transaction is still showing up as pending, you may be able to more easily cancel it with the merchant. Contact the merchant as soon as possible to see if you can get a credit card refund before the transaction officially posts to your account.

How Long Do Pending Credit Card Transactions Take?

Most pending credit card transactions will stay in a pending state for a few days. After the initial pending period, they will either post to your account, getting added to your total credit card balance, or fall off, in the case of a temporary hold.

In certain rare cases, some pending transactions may stay on your account for a longer time. If that has happened to you, reach out to your credit card issuer to see what options you have.

How Does a Pending Charge Affect My Balance?

Any pending charges do not count toward or affect your statement balance. This means that they won’t be included in your required payment or the amount of credit card purchase interest that you’re potentially charged.

However, pending charges do typically count against your total available credit (here’s more on the difference between credit card available and current balance). This could mean you have less available to spend than you might otherwise think.

Recommended: When Are Credit Card Payments Due

Tips for Canceling a Pending Credit Card Charge

Because pending credit card charges have not officially been posted to your account, you generally can’t cancel them by doing a credit card chargeback with your issuer. Instead, if you want to dispute credit card charges that are still pending, you’ll need to contact the merchant directly.

If the merchant is not willing to cancel the charge, you can follow up with the credit card company once the charge is posted to your account.

Recommended: Tips for Using a Credit Card Responsibly

The Takeaway

It is common for new charges to show up as pending when they’re first created. This may be because the merchant is still processing the transaction or due to the placement of temporary hold until the transaction is completed (like with a hotel or rental car). Pending charges do not count toward your statement balance, but they usually do reduce your total available credit. Most pending transactions either post to or fall off of your account within a few days.

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

Are pending credit card charges included in the current balance?

Pending credit card charges are not usually included in your current credit card balance. They should not be part of the calculation of your minimum payment due or interest charges. However, pending charges may affect the total amount of credit that you have available to you.

Do pending transactions show on credit card statements?

Pending transactions do not typically appear on your credit card statement as charges that are included in your statement balance. That means that any pending transactions that you have will not be subject to credit card purchase interest charges or credit card fees. You will not be charged fees or interest until the charge actually posts to your account.

Can you pay off pending transactions on a credit card?

Because pending transactions are not officially posted to your account, you won’t be able to make payments against them. One reason for this is that pending charges are by their nature temporary — so it’s possible they may end up posting for a different amount or being removed completely before they hit your account. You’ll want to keep an eye on your account to see what happens when a pending transaction actually posts.

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Photo credit: iStock/damircudic

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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Private label credit cards are a particular kind of credit card that’s typically only good at one specific store. Some stores or other merchants offer private label credit cards to give better terms to certain customers than they might otherwise be able to offer. Many merchants also provide these cards as an incentive for customers to spend more, since they can potentially defer payment and/or earn loyalty rewards.

These perks are among the reasons why private label credit cards are popular. But before you start thinking about how to get a private label credit card, it’s important to consider their pros and cons.

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What Is a Private Label Credit Card?

Also called a store credit card or a closed loop credit card, private label credit cards are credit cards that can only be used at one particular store or merchant.

Generally, a merchant’s private label credit card is partnered with and issued by a third-party financial institution, such as a bank. These institutions act as private label credit card issuers, and they’re responsible for funding the credit line and collecting all payments.

Recommended: Tips for Using a Credit Card Responsibly

How Do Private Label Credit Cards Work?

If you understand how credit cards work, you’ll know they usually can be used anywhere the processor (often Visa or Mastercard) is accepted. In contrast, private label cards are intended for use only at the store or merchant where they are issued.

In other respects, private label cards work in much the same way as traditional credit cards. These cards offer a revolving line of credit that cardholders can borrow against, up to their predetermined credit limit. It’s necessary to make at least a minimum credit card payment to avoid a late payment fee. Balances that carry over from month to month will accrue interest.

Recommended: What is the Average Credit Card Limit

Getting a Private Label Credit Card

In most cases, the easiest way to get a private label credit card is to apply at the store that’s issuing or sponsoring the private label credit card. Many stores offer incentives for applying for their private label card while you’re shopping in the store. You also may be able to sign up for a private label card on the store’s website.

But even if you can get one, should you get a private label credit card? Choosing a credit card depends on your specific financial situation. However, if you have sufficient income and strong credit, you may be able to get a traditional credit card that may offer rewards and more flexibility than a private label card that’s only good at one store may provide.

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

How to Set up a Private Label Credit Card

Because banks or other financial services companies serve as the credit card issuers for most private label credit cards, you’ll likely be familiar with the setup process if you’ve ever had any other credit card.

Once you’ve applied for and been approved for a private label credit card — assuming you met the credit card requirements — you’ll typically go through the process of setting up your card. You’ll want to make sure to log in to your online account, review your statements, and set up payments.

Recommended: When Are Credit Card Payments Due

Benefits of Private Label Credit Cards

Wondering why are private label credit cards popular? Here are some of the upsides of these types of credit cards:

•   Easier to qualify for: Private label credit cards are often thought of as being easier to get approved for than general purpose credit cards. So if you don’t have an excellent credit history, you may consider a private label credit card as a way to help build your credit.

•   Earn rewards and other benefits: Another benefit of private label credit cards is that stores often use them to build loyalty with their best customers. This might include offering rewards, loyalty points, or even nixing the credit card annual fee some cards have.

Drawbacks of Private Label Credit Cards

Even if the pros of private label credit cards may seem enticing, it’s also important to account for the downsides. These include:

•   Lack of flexibility in use: The biggest drawback of a private label credit card is that it typically can only be used at one specific store or merchant. The lack of flexibility means that it is difficult for a private label credit card to be your only or main credit card.

•   Potentially higher APRs: Another potential drawback is that many private label cards have annual percentage rates, or APRs. Make sure you read the terms and conditions before signing up for a private label credit card to ensure you know the consequences of carrying a balance. Otherwise, you could end paying exorbitant interest — which is how credit card companies make money.

Recommended: How to Avoid Interest On a Credit Card

Private Label vs General Purpose Credit Cards

As you can see, slightly different credit card rules apply to private label credit cards. Here are the major differences to keep in mind when comparing a private label card to a general purpose credit card:

Private Label Credit Cards	General Purpose Credit Cards
Can usually only be used at one store or merchant	Can be used anywhere the issuer (e.g. Visa, Mastercard, etc.) is accepted
Only offers store-specific rewards or perks	May offer cash back or travel rewards on every purchase
Generally are easier to get approved for than traditional credit cards	Often more difficult to get approved for than private label cards

Private Label vs Co-Branded Credit Cards

Some merchants offer a co-branded credit card that offers specific perks for their particular store but is issued by a major credit card processor (i.e., Visa or Mastercard). This means that you can also use the co-branded credit card at other merchants. As one example, Old Navy and Barclays offer the Navyist Rewards Mastercard, which offers Old Navy perks but can also be used anywhere that Mastercard is accepted.

Here’s a breakdown of the key differences to keep in mind to distinguish between private label credit cards and co-branded credit cards:

Private Label Credit Cards	Co-Branded Credit Cards
Can usually only be used at one store or merchant	Can be used anywhere the issuer (e.g. Visa, Mastercard) is accepted
Only offers store-specific rewards or perks	Also offers store-specific rewards or perks but can also offer rewards on purchases at other merchants
Generally are easier to be approved for than traditional credit cards	Often more difficult to be approved for than private label cards

Alternatives to Private Label Credit Cards

Two alternatives to private label credit cards are general purpose credit cards and co-branded credit cards. Here’s what you need to know about each of those other options as you’re deciding which type of card is right for you:

•   General purpose credit cards are what you probably think of when you think of a credit card. These cards can be used anywhere that processing network, such as Visa or Mastercard, is accepted.

•   Co-branded credit cards are cards that share branding between a bank or credit card issuer and another merchant or company. Examples include airline or hotel credit cards or the credit cards of some retail stores. With a co-branded credit card, you can also use the card anywhere the processing network is accepted, and you’ll often earn brand-specific perks on every purchase.

Recommended: What is a Charge Card

The Takeaway

A private label credit card is a type of credit card that can typically only be used at one particular store or merchant. Many merchants use private label cards as a way to incentivize and reward their most loyal shoppers. It can also motivate shoppers to spend more, since they have the convenience of a credit card and can defer payments to a later date.

While it may sometimes be easier to get approved for private label credit cards, if your credit and income support it, you may be better off with a cash-back rewards credit card like the SoFi Credit Card.

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

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

FAQ

How can I get a private label credit card?

The easiest way to get a private label credit card is to apply on the website or in the store of the merchant that offers the card. If you meet the credit card requirements, you will be approved for the card. Then you can start using it while shopping at this particular merchant.

How do private label credit cards make money?

Private label credit cards make money in much the same way that any other credit card companies make money. They make money from the fees associated with the card (late fees, possible annual fees, etc) and interest paid by cardholders who carry a balance. Additionally, they may rake in money from “swipe fees” paid by the merchant each time the card is used.

Who do you make payments to when using a private label credit card?

While a private label credit card often has the logo of a particular merchant or store, the day-to-day processing is handled by a bank or other financial services company. You’ll make your payments directly to the processing company, usually not to the store itself. One of the credit card rules for successfully managing your credit is to pay your bill in full, each and every month, so make sure you understand who and when you need to pay.

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

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

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One of the main advantages of using a credit card for purchases is that, in most cases, you’re not liable for fraudulent charges. If your card is lost or stolen, usually all it takes is a quick chat with your credit card issuer to resolve the issue. Where this gets a bit murkier is when it’s a family member or friend who uses your credit card without your permission.

While you’re still not liable, the process of dealing with unauthorized credit card charges by family members or friends can get more complicated. Your credit card issuer may want you to file a police report and even take legal action against the person who made the charges. You’ll have to decide whether it’s worth potentially damaging your relationship with your family member or friend.

Authorized vs Unauthorized Credit Card Charges

While you are legally responsible for paying back any authorized credit card charges, in most cases, you will not need to cover any unauthorized credit card charges.

Most credit cards come with a 0% liability guarantee, meaning that you’re not liable for any unauthorized or fraudulent charges that were made with your credit card or account information. This can help protect you against credit card scams and other fraudulent activity, as well as charges made to your card without your permission.

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

Legal Protection Against Unauthorized Use of Credit Cards

There are two main federal laws that help to protect you against unauthorized use of your credit card or account information:

•   Fair Credit Billing Act (FCBA): This law limits your liability for unauthorized credit card charges to $50, though many card issuers lower your liability to $0 for all unauthorized charges.

•   Electronic Fund Transfer Act (EFTA): Sometimes referred to as Reg E, this law limits liability for ATM transactions or debit card charges, among other types of transactions, if it’s reported within 60 days.

Recommended: What is a Charge Card

Tips for Handling Accidental Possession of Credit Cards

One of the best things you can do to help avoid unauthorized use of your credit card by a third party is to keep it in your possession. Make sure you know where your credit cards are at all times, especially if you have teens or other adults living in your home.

It’s also a great idea to regularly monitor your bank and credit card accounts. That way, you can spot any unauthorized charges quickly.

Tips for Handling Unauthorized Credit Card Charges

If unauthorized charges were made to your credit card, here are some tips for how to handle the situation.

Contact Your Credit Card Issuer

The first thing you’ll want to do if you spot an unauthorized credit card charge on your account is to contact your credit card issuer. You can do this by calling the number printed on the back of your credit card or contacting your issuer through your online account.

Request a Refund

As the refund process may vary slightly by issuer, the customer service representative you talk with can help you figure out how to request one. A refund is also sometimes referred to as a credit card chargeback. In many cases, the bank will provisionally credit your account within 24-48 hours while they investigate the fraudulent charges.

File a Police Report

In some cases, your bank or credit card company may request you to fill out a police report. In other cases, the card issuer may file a police report themselves. This can make the situation complicated if it’s a friend or family member who made the unauthorized charges.

Disputing Credit Card Charges

Disputing credit card charges is another term for reporting unauthorized or fraudulent activity on your account. When you dispute a credit card charge, you’re letting the card issuer know that you believe you should not be responsible for paying that particular charge. It’s important to dispute any fraudulent charges as soon as possible.

Recommended: Tips for Using a Credit Card Responsibly

Reporting Unauthorized Credit Card Use

It’s good financial practice to regularly review your bank and credit card accounts for a number of reasons. One reason is to report any unauthorized credit card use as soon as you see it. The best way of handling fraudulent charges is to report them immediately and then let your bank or credit card company investigate them.

Recommended: How to Avoid Interest On a Credit Card

Tips for Avoiding Credit Card Fraud and Unauthorized Use

There are two things that you’ll want to do to avoid unauthorized use on your credit card:

•   First, make sure that you keep track of your cards and don’t leave them where someone else might use them.

•   Second, regularly monitor your bank and credit card accounts. That way, you can report any unauthorized use to avoid being liable for any credit card purchase interest charges that may accrue otherwise.

The Takeaway

Federal law limits consumer’s liability for fraudulent or unauthorized charges, and most credit cards have a $0 fraud liability policy. So if you do have any unauthorized or fraudulent charges, make sure to report them to your credit card issuer right away.

Where it can get complicated is if it’s a friend or family member who made the unauthorized charge. In the case of unauthorized use of a credit card by a family member or friend, you’ll need to decide whether to try and get the money back directly from that individual or report the charge to your card issuer, which may mean filing a police report.

To learn more about options for protecting your credit cards and tips for managing your accounts, explore our credit card guide.

FAQ

Who is liable for unauthorized credit card charges?

Federal law limits a consumer’s liability for unauthorized credit card charges and credit card fees stemming from unauthorized use. If you see a charge on your credit card account that you don’t recognize, make sure to report it to your card issuer as soon as possible.

How do credit cards investigate unauthorized charges?

Credit card companies have a variety of different ways that they investigate unauthorized charges. They may contact the merchant, review video from the purchase, or check online activity. In some cases, they may work with local law enforcement and/or pursue criminal charges.

Should you report a family member for unauthorized credit card use?

Whether or not you report a family member for unauthorized credit card use depends on the situation. Keep in mind that reporting a family member for unauthorized credit card use may lead to the card issuer pressing charges against them for fraud. So, depending on your relationship, you may not want to report your family member to the card issuer and instead try to get the money back directly from them.

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Photo credit: iStock/Erdark

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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