Credit Card Debt Collection: What Is It and How Does It Work?

Credit Card Debt Collection: What Is It and How Does It Work?

If you find yourself in a situation where you’re not able to make even the minimum payment on your credit card, your account may get sent to credit card collections. Credit card debt collection is the process where credit card companies try to collect on the debt that they are owed.

The credit card companies may try to collect the debt themselves, or they may hire a third-party credit card debt collection firm to collect. In some cases, the debt owed may be sold to another company, who might then try to collect. Here’s a look at what happens when credit card debt goes to collections.

What Are Credit Card Collections?

Credit card collections is a term referring to the process that lenders go through to try to get paid for outstanding debts they’re owed.

If you know what a credit card is, you’ll know that credit card issuers allow you to make purchases with the promise of eventual repayment. But if you don’t make even the credit card minimum payment, the credit card company eventually may send your debt to collections in an effort to recoup the money owed.

How Do Credit Card Collections Work?

Credit card credit card debt collection is the end result of repeatedly not paying your credit card bills. The best way to use credit cards is to always pay the full amount each month on the credit card payment due date. Even if you’re not able to, you’ll want to at least make the credit card minimum payment.

If you don’t make any payments toward your credit card balance, the credit card company may start the credit card collections process. At this point, a third-party debt collector will assume responsibility for trying to get you to repay the money owed, relying on the contact information the credit card company has on file to get in touch.

Recommended: When Are Credit Card Payments Due

Credit Card Debt Collections Process

Most credit card companies will begin the credit card debt collections process by attempting to contact you directly to pay off the debt. If you haven’t made any credit card payments recently, the bank will likely try to email or send you certified letters. Then, if you still don’t make any payments and don’t arrange for a payment plan with your lender within 30 to 90 days, they’ll likely turn it over to a third-party debt collector.

Most credit card companies do not have the staff or business model to engage in a long-term credit card collection process. That’s why they will usually hire a third-party company or companies to do the actual debt collection. If these companies do not successfully collect the debt, it’s also possible your debt will be sold to another company, which will then try to collect on it.

At any point, one of these companies may formally sue you in an attempt to collect the money from you, one of the many consequences of credit card late payment.

Features of Credit Card Debt Collections

The credit card collections process is not a pleasant experience. Persistent letters, emails, and phone calls are all features of the debt collections process.

At the beginning, when the credit card company itself is handling the collection process, it may be a bit better. However, once your debt has been sold and/or turned over to a debt collections agency, things often become more intense.

What Is a Collection Lawsuit?

If debt collectors are not successful in using phone calls, letters, or emails, the next step is often a lawsuit. A collection lawsuit is when either the debt owner or collector files in court asking you to pay the debt. If they win, the judge will issue a judgment, which could allow the debt collector to garnish your wages or put a levy on your bank account.

It’s important to note that different states have different rules for how long a debt collector has to file a lawsuit. In most states, if you incurred the debt, the debt collector can legally collect it, and if they have the correct amount, they can keep asking you to pay the debt. However, there may be a statute of limitations on how long they can initiate a collection lawsuit. Check with a lawyer if you’re not sure about the law where you live.

Responding to a Collection Lawsuit: What to Know

If you receive a collection lawsuit, you may be wondering if you should respond. In most cases, it’s a good idea to respond to the collection lawsuit, since that requires the owner of the debt to prove their case.

If they can’t show they own your debt and that you’re obligated to pay it, you may have the debt vacated. Further, you may also have your debt discharged if it’s past your state’s statute of limitations.

Consult with a debt relief lawyer if you’re not sure what to do in your particular circumstances.

What Happens If You Don’t Respond to a Collection Lawsuit?

If you don’t respond to a collection lawsuit, it’s possible that the judge will issue a default judgment against you. A default judgment means that the plaintiff (the debt collector) automatically wins, since the defendant (you) did not respond to the lawsuit. In that case, the debt collector or owner now has the legal right to garnish your wages and/or attempt to go after the money in any of your bank accounts.

How a Debt in Collection Affects Your Credit

Having debts that are in collection will have a negative impact on your credit score. The more recent the date of collection, the more of a negative impact it will have on your credit score.

In most cases, a debt that is in collection will stay on your credit report for seven years (though note this differs from how long credit card debt can be collected).

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

Guide to Dealing With Credit Card Debt in Collection

If you have a debt that’s already in collection, you may want to consult a lawyer that specializes in debt relief. While it may seem daunting to hire and pay for a lawyer, they may be able to help you settle the debt for a fraction of the original amount or even completely discharge the debt.

Taking Charge of Your Finances

If you’re worrying about credit card debt collections, you may feel like your finances have spun out of your control. Here are some tips to take charge once again:

•   Only spend what you can afford to pay off: One of the best tips for using a credit card is to avoid making purchases that you won’t be able to pay off each month. This will stop your spending from spiraling into debt.

•   Always try to pay off your credit card in full: When you pay your full credit card statement amount each month, you stay out of debt and are more likely to have a good or excellent credit score. Although credit card debt can be hard to pay off, doing so can have a positive impact on your credit score.

•   Address any debt head on: If you find yourself in the position of having credit card debt, the best thing to do is to openly acknowledge your situation and make a plan to pay off your credit card bill. Start a budget, cut expenses if needed, and use any monthly surplus amount to pay down your debt. It’s also smart to stop spending on your credit card until you’ve reduced or eliminated any outstanding balance.

The Takeaway

If you don’t pay the balance on your credit card, your credit card issuer may begin the credit card debt collection process. This may mean that they contact you directly, hire a third-party collection company, or even sell your debt to another company. Having a debt in collections will have a negative effect on your credit score and is something to avoid if possible.

When your finances are back in order and you’re ready for a new credit card, consider 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

What happens when credit card debt goes to collections?

If you have an outstanding credit card balance that goes to collections, the credit card company likely will ask you to make at least the minimum payment on the debt. This may continue for the first few months, after which point they’ll likely hire a third-party debt collector. The debt collector will then start trying to collect the debt from you, which may include filing a lawsuit against you.

Can a debt collector force me to pay?

A debt collector company cannot directly force you to pay a debt. However, depending on the statute of limitations in the state you live in and how long ago the debt was incurred, they may be able to sue you in court. If they win, the court may issue a judgment, which would allow them to collect by garnishing your wages and/or levying your bank account.

How long can credit card debt be collected?

In most states, as long as it’s a valid debt, there is no statute of limitations for how long a debtor can ask for repayment. However, many states do limit how long legal action can be taken to collect the debt. Additionally, the Fair Debt Collection Practices Act details what a debt collector can and cannot do while attempting to collect a debt.

Do debt collections affect your credit score?

If you have a debt in collection, especially one that has recently gone into collections, it’s likely to have a severe impact on your score. This is because payment history is one of the factors used in the calculation of your credit score, and credit card debt in collections is considered far past due.


Photo credit: iStock/courtneyk

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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Available Credit vs Credit Limit: What Are the Key Differences?

Available Credit vs Credit Limit: What Are the Key Differences?

Your available credit and the total credit limit on a particular credit card are both tied to the potential amount that you can spend, but they differ in a few key areas. Your credit limit is the total amount of credit that the card issuer is willing to lend you. On the other hand, your available credit is the potential amount you can spend right now.

Unlike your credit limit, your available credit takes into consideration your outstanding balance and any pending charges. So, for example, if your total credit limit is $10,000, and you have an outstanding balance of $2,000, then your available credit is $8,000.

Recommended: What is a Charge Card

What Is Available Credit?

Your available credit on a credit card is the total amount that you can spend on your credit card. It is usually calculated as the total credit limit minus any outstanding balance or pending charges. If you attempt a transaction that is larger than your available credit, the credit card company will typically decline the transaction.

Recommended: What is the Average Credit Card Limit

What Is a Credit Limit?

The way most credit cards work is that the credit card company issues you a maximum amount that they are willing to lend you. This is called your credit limit. It is usually determined by your financial information, such as your credit score, income, and other items on your credit history.

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

Why Is Available Credit Important?

Your available credit is one of the most important things about your credit card. The amount of available credit you have is the total amount of money that you can spend on your credit card. If you try to make a purchase that’s more than your total available credit, your credit card company will usually decline your transaction.

Differences Between Credit Limit and Available Credit

The main difference between credit limit and available credit is one of a theoretical limit vs. a limit in practice.

Your credit limit is the theoretical limit that represents how much the credit card company is willing to lend you. If you’ve used a portion of your credit limit, then that amount is subtracted from your total credit limit and becomes your available credit. This is the maximum amount that you can spend right now on your credit card.

In other words, your credit limit will generally remain the same, whereas your available credit will vary based on your spending. When you haven’t spent any money using your credit card, meaning your balance is $0, your credit limit and available credit are the same.

What Happens If You Go Over Your Available Credit?

If you have a credit card balance or outstanding pending charges on your credit card, those amounts are subtracted from the total credit limit that you have on that card. This marks your current available credit, and it’s the maximum amount that you can charge on your credit card at the current point in time.

If you try to make a charge for more than your available credit, it’s likely that your credit card company will decline the charge. With some credit card companies or specific credit cards, it’s possible that the credit card company will allow a charge above your available credit, but they may charge additional fees and/or interest. Check with your credit card company for the specific rules and terms for your particular card.

Recommended: How to Avoid Interest On a Credit Card

What Happens If You Go Over Your Credit Limit?

If you continue to spend all of your available credit until you’ve reached your total credit limit, you may not be able to continue to use your credit card. You’ll first need to make payments to lower your total balance and raise your available credit.

In some cases, if you continue to keep your outstanding balance near your total credit limit, the credit card company may choose to close your credit card account. If this doesn’t happen, your card issuer may also increase your interest rate, lower your credit limit, or even raise the minimum payment requested.

Going over your credit limit can also have serious implications for your credit score. This is because credit utilization — how much of your available credit you’re currently using — is a major factor used to determine your score. It’s recommended to keep your credit utilization below 30% to maintain a healthy score; if you’ve reached your credit limit, your utilization will be at 100%.

Recommended: When Are Credit Card Payments Due

How to Increase Your Available Credit

The best way to increase the available credit on your credit card is to spend less on your card and make additional payments toward your total outstanding balance. Every dollar that you pay toward your outstanding balance will increase your available credit.

Ideally, you’d get to a situation where you’d pay off your statement balance in full, each and every month. In that scenario, your available credit and your total credit limit would be equal.

How to Increase Your Credit Limit

You have a few options for increasing credit limit. Some credit card companies will regularly review the accounts of their cardmembers, and proactively increase their credit limits.

You also have the option to contact your card issuer directly and ask them to increase your credit limit. Keep in mind that most issuers are more likely to increase your credit limit if you’re already using your credit card responsibly.

If you’re not having any luck increasing the credit limit on your existing credit card, another option is to open a new credit card. This could substantially increase your available credit if you’re approved — especially if the new card’s limit is at or above the average credit card limit.

Recommended: Tips for Using a Credit Card Responsibly

The Takeaway

Your total credit limit and available credit are two terms that refer to the amount of money that you can spend on your credit card. However, there is a difference between credit limit and available credit. Your credit limit usually refers to the maximum amount that your card’s issuer is willing to lend you. Meanwhile, your available credit is the maximum credit limit, minus any outstanding balance or pending charges on the card.

If you’re looking to increase your credit limit, another way to do so is by opening a new 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

Why is my available credit less than my credit limit?

Your available credit will often be less than your credit limit based on any outstanding balance or pending charges that you have on your credit card. If you have a total credit limit of $7,500 on a particular card, and an outstanding balance of $1,000, then your available credit is $6,500. The available credit amount is the maximum amount that you can charge on your credit card at the current moment.

Why is my available credit higher than my credit limit?

It’s rare that your available credit will be higher than your total credit limit. Instead, it’s much more common for your available credit to be less than (or equal to) your total credit limit. One scenario where your available credit may be higher is if you have a credit on your account, such as from a refunded transaction.

How is my credit limit determined?

Credit card issuers typically determine your total credit limit based on the financial information that you provide when you apply for the card. This includes your employment information, salary, and overall creditworthiness. If your financial situation has materially changed since you first applied, or if you have a history of responsibly using your card, you may be able to contact your issuer and have your credit limit increased.

What is a good amount of available credit?

Experian reported that in 2020, the average credit card limit was just over $30,000, though credit limits vary widely by card issuer, credit card, and individual. A good amount of available credit is one that allows you to make all of the transactions that you need to make each month, with a little bit of buffer room. You should aim to put yourself into a financial position where you can pay off each of your credit card statements in full, each and every month.


Photo credit: iStock/Georgii Boronin

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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Credit Card Closing Date vs. Due Date: What’s the Difference?

Credit Card Closing Date vs Due Date: What’s the Difference?

The difference between a payment due date vs. closing date is important to know for responsible credit card management. The credit card closing date marks the end of your billing cycle, which determines how much you’ll owe when your credit card payment comes due. Your credit card due date, on the other hand, is when you’ll need to make at least the minimum payment if you want to avoid a late fee.

By understanding the implications of both your credit card closing date and your credit card due date, you can better strategize to make purchases and also ensure you make on-time payments.

Recommended: Tips for Using a Credit Card Responsibly

What Is a Credit Card Closing Date?

A credit card closing date determines your credit card “billing cycle,” which spans an interval of about 28 to 31 days. This day might vary each month, but according to the Consumer Financial Protection Bureau (CFPB), it can’t vary by more than four days.

The bank uses your credit card’s statement closing date to determine which purchases are calculated toward the current statement’s total balance and the minimum credit card payment that’s due. Any purchases made after your credit card closing date are applied to the next month’s billing statement.

The closing date for a credit card is also the date the bank uses to calculate your credit card’s finance charges, which are also called the interest charges. Typically, credit card issuers offer a grace period on new purchases starting on the date after the closing date until your credit card payment due date. During this time, interest charges aren’t incurred yet.

Although many credit card companies offer a grace period, it’s not a requirement, so check the terms of your credit card closely.

Recommended: What Is a Charge Card?

What Is a Credit Card Due Date?

Another critical date to remember when it comes to your credit card account is your credit card due date. Payments received by the bank by 5 p.m. on the credit card payment deadline are considered on-time; after this period, your credit card payment is considered past due.

Your credit card due date is the same for each billing statement. For example, if this month’s credit card bill is due on June 15, your next billing statement will be due on July 15. This due date applies regardless of whether you’re making a full payment for your statement balance or the minimum amount due.

Although you should always aim to make your credit card payment on time, card issuers generally don’t report late payments to credit bureaus until 30 to 60 days after your credit card due date. Late fees might be applied to your credit card account if you don’t make a payment by the credit card payment due date, however, given how credit cards work.

Recommended: When Are Credit Card Payments Due?

Differences Between a Credit Card Closing Date vs Due Date

Here’s a look at some of the key distinctions between credit card payment due date vs. closing date to keep in mind:

Credit Card Closing Date

Credit Card Due Date

Last date of billing cycle Last date to submit an on-time payment
Date before grace period begins Date before the next billing cycle begins
Date might change slightly Same date every statement period
Affects your credit utilization ratio Can impact your credit score

How Your Credit Card Closing Date Affects Your Credit Score

On your credit card statement closing date, your card issuer typically reports your account activity, including your card’s outstanding balance, to the three credit bureaus — Experian, Equifax, and TransUnion. This information impacts your credit utilization ratio, which is the ratio of credit in use compared to the amount of credit you can access.

As an example, let’s say your closing date is May 20, and you made a $2,000 purchase on your credit card on May 15. That purchase will be reported and can increase your credit utilization ratio. A high credit utilization ratio can adversely affect your credit score.

Now, let’s assume the purchase isn’t urgent and you waited until May 21 to put the charge on your credit card. In this scenario, your $2,000 credit card purchase wouldn’t be reported to the credit bureaus until the end of your next billing cycle. And if you pay it off before then, it might not affect your credit utilization ratio.

Determining Your Next Credit Card Statement Closing Date

Knowing how to decipher your credit card bill each month can help you to uncover your statement closing date. Typically, you’ll find your billing cycle dates at the top of your credit card bill. This might be called your “opening/closing dates,” and it typically will be displayed as a date range.

When reading your credit card statement, you can find these dates and then count the number of days between the dates. Then, count forward from the credit card closing date to determine your next credit card statement closing date.

Guide to Changing Your Credit Card Due Date

You might find that changing your credit card due date can help you better manage your credit card payments. This might come up if you get paid on a certain date each month and want your due date to fall closer to payday.

Generally, card issuers are willing to work with you on a due date that will help you make regular, on-time payments. However, credit issuers have different restrictions, so talk to your credit card issuer to see whether it’s flexible.

To change your credit card due date, you can either:

1.    Call the phone number at the back of your credit card to speak to a customer service associate who can help.

2.    Log in to your credit card’s online account and make the change (if available) yourself.

Be aware that it can take one to two billing cycles to see the change on your account.

What You Should Know About Determining Your Time to Pay

Your credit card closing date and payment due date can help you strategically decide when it’s time to pay your credit card bill. For example, if you need to keep your credit utilization low to improve your credit to secure a mortgage loan approval, then paying your credit card bill before your closing date can help.

However, if you simply want to avoid interest charges and late fees on your purchases, making a payment by your credit card due date is sufficient. Still, make sure to stay mindful of the potential to fall into credit card debt, which can be hard to shake (here’s what happens to credit card debt when you die).

Recommended: Can You Buy Crypto With a Credit Card?

The Takeaway

Your payment due date vs. closing date are two very important dates that relate to your credit card account. However, they aren’t the same and have different implications for your credit. Being aware of both dates can help you strategically make purchases in a manageable way and ensure you make payments on time.

If you’re looking for a new rewards credit card, the SoFi Credit Card is an option to consider.

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

Should I pay off my credit card before the closing date?

Paying off your credit card as early as possible is always ideal, if it’s possible. Doing so can help you maintain a low credit utilization ratio, which is beneficial to your credit score.

Can I make more than one payment per statement period on my credit card?

Yes, you’re allowed to make more than one payment per statement period to pay off your statement balance. In fact, doing so can help you potentially avoid incurring interest charges and rolling a balance into your next billing cycle.

Can I use my credit card between the due date and the closing date?

Yes, you can use your credit card between the due date and the credit card statement closing date. Purchases made after your credit card due date are simply included in the next billing statement.

Is the credit card closing date the same every month?

Not always. Your credit card closing date might be the same date each month, but billing cycles can vary up to four days from the regular closing date.


Photo credit: iStock/Seiya Tabuchi

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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How Do Credit Card Miles Work? Earning, Redeeming, and More

How Do Credit Card Miles Work? Earning, Redeeming, and More

The world of earning and burning credit card miles has an undeniable appeal. However, figuring out how credit card miles work can have you falling into a rabbit hole of bonus offers and travel portals.

Before you go click-happy with applying for travel credit cards, it’s important to know how miles work on credit cards. That way, you can make a solid choice in your travel cards, and make the most of your miles. We’ll share the ins and outs of credit card miles, including how they work, how much they’re worth, how to earn miles with a credit card, and how to use credit card miles.

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

What Are Credit Card Miles?

So, what are miles on a credit card? In short, they’re a way for credit card issuers to reward you for using their card to make purchases.

Typically, the more you spend, the more miles you rack up. Depending on the card, you can rack up a higher number of points when booking travel on certain airlines or in certain categories.

Aside from redeeming miles to cover the cost of flights, you might be able to use credit card miles for hotel reservations, ride shares, or car rentals. Many credit cards also allow you to redeem your miles for cash back, gift cards, or online purchases with partnering retailers. If it’s an airline-branded credit card, you might also be able to use your miles for upgrades, free checked bags, and in-flight purchases.

Credit Card Miles vs Frequent Flyer Miles

Credit card miles and frequent flyer miles are customer loyalty incentives that both offer ways to earn miles to redeem for free flights.

Most major airlines have a frequent flyer program. Signing up for a frequent flyer account is usually free, and it allows you to earn miles when you book with that particular airline. Depending on the program, you can also use those miles for travel perks, such as seat upgrades, priority boarding, and free in-flight purchases.

With credit card miles, on the other hand, you earn miles when you make purchases on your credit card. Unlike with frequent flyer miles, you don’t have to make these purchases with a particular airline in order to earn credit card miles. However, you will have to apply for a credit card and get approved to get those miles.

Recommended: Can You Buy Crypto With a Credit Card

How Do Miles Work on Credit Cards?

A credit card will reward you with miles when you spend a certain amount on the credit card. Often, cards will offer one mile per dollar spent, though this can vary depending on how a credit card works. In turn, you can redeem these miles for a free flight or other perks.

Some credit cards offer bonus miles for spending in different categories, allowing you to earn more than the standard mile per dollar. For instance, if you use your credit card at restaurants during certain months of the year, you could receive three miles per dollar spent, instead of the usual one mile per dollar.

As for the redemption value (or how much a point is worth in booking flights), that’s worked out between the airline and the credit card issuer. If the redemption value is 1 cent per mile, for instance, you’d need 40,000 miles to cover a $400 flight.

How Much Are Credit Card Miles Worth?

How much credit card miles are worth depends on several factors, including the redemption value, whether you’re booking through a travel portal, and the particular credit card. But typically, each mile is worth 1 cent apiece.

The number of points that you’ll need to book a free flight varies. It largely boils down to the redemption value, or how much a point is worth in dollars. As mentioned before, this value is determined between the airline and the card card company. Additionally, the cost of the flight itself will influence how many points are needed.

Some of the major credit card issuers, airlines, and hotels have travel portals where you can redeem your credit card miles for flights, hotel stays, and car rentals. An incentive might be offered to use these travel portals. For instance, your miles might stretch further if you redeem them through the portal. Or, there might be a featured, limited time offer where your miles are worth more if you travel to certain cities or regions.

How to Earn Airline Miles With a Credit Card

Now, we’ll dig into the fun part: how to earn credit card miles. There are a bunch of ways to rack up airline miles. Let’s take a look at the most common avenues.

Spend on the Card

The more you spend on your credit card card, the more miles you’ll earn. Plus, a credit card might offer the opportunity to earn more miles in certain categories (i.e., 5 times more on flights booked through a portal) or in rotating bonus categories.

While it might be tempting to keep spending in order to earn more miles, remain mindful of your credit card limit and avoid racking up too much debt (not to scare you, but here’s a look at what happens to credit card debt when you die).

Sign Up for a New Card

A credit card might feature a generous sign-up offer. If you hit the minimum on the sign-up offer, you could rack up a slew of credit card miles (just make sure you can afford to still pay off at least your credit card minimum payment).

Typically, you’ll need to spend a certain amount within a particular period after opening your account. For instance, if you spend $4,000 on transactions within the first three months of being a new cardholder, you could net 75,000 credit card miles.

Sign-up bonus offers are constantly changing, so it’s a good idea to check what a card’s intro bonus is currently before you apply. Also make sure to weigh factors aside from just a welcome bonus, like whether there’s a good APR for a credit card.

Recommended: When Are Credit Card Payments Due

Refer Friends

As a cardholder, you also can earn credit card miles when you refer friends. Often, there’s an affiliate link that you can send to your friends and family members. If they decide to apply and get approved for the card, you’ll earn a referral bonus.

Credit card referral bonuses often have limits though. For instance, a credit card might offer a 20,000 bonus miles per referral, but with a 100,000 limit per year. That breaks down to a maximum of five referrals per year.

How to Redeem Credit Card Miles

Once you’ve racked up credit card miles, you’ll need to redeem them. Let’s take a look at how to do so.

•   Credit card’s travel portal: Travel portals usually give you the option to redeem your credit card miles in a number of different ways, such as flights, car rentals, or hotel stays. You might even get a better deal than you would purchasing tickets outside of the portal. Typically you won’t need to provide information, such as your CVV number on a credit card, to redeem your miles.

•   Travel-related platform: Besides redeeming credit card miles through a credit card network’s travel portal, some hotel chains offer their own online platforms. You can choose to redeem credit card miles there as well.

•   Bundling with a partner loyalty program or frequent flyer program: Some credit cards give you the option to transfer your credit card miles to a hotel, airline, or car rental transfer partner.

Recommended: Tips for Using a Credit Card Responsibly

How to Use Credit Card Miles

Perhaps the most obvious way to use your credit card miles is for free flights. However, you may also be able to redeem them for the following benefits as well:

•   Seat upgrades

•   Priority boarding

•   In-flight purchases

•   In-airport purchases

•   Purchases with specific retailers

•   Gift cards

•   Events

Do your homework and look for ways to get the most out of your miles. For instance, some travel portals give you a higher redemption value. In other words, your credit miles will be worth more and go further, and you’ll get more bang for your buck.

How to Check Your Credit Card Miles Balance

Wondering how many credit card miles you’ve racked up? Here are a couple easy ways to check your balance:

•   On your credit card app: You can easily check your credit card miles through the credit card app. Usually, it will also direct you to ways that you can spend your miles.

•   On your online credit card account: Once you log onto your cardholder account, you’ll typically find the number of credit card miles you’ve racked up on the dashboard. You can also see a breakdown of how many miles each transaction yielded. This is important to check regularly anyways, in case you need to dispute a credit card charge or request a credit card chargeback.

•   By contacting your credit card issuer: You can also reach out to your card issuer over the phone to learn your credit card miles balance. Simply call the number listed on the back of your credit card to speak to a representative.

Recommended: What is a Charge Card

Other Types of Credit Card Rewards

Credit card miles aren’t the only reward you can earn from using your credit card. Here are other types of credit card rewards you can swoop in on:

Cash Back

With cash back, you earn back a percentage of eligible purchases made with your card in cash. For example, you might earn 3% cash back, which means you’d get 3 cents back for every dollar you spend.

You can redeem the cash-back rewards you earn in a number of ways, such as a statement credit or as straight cash. However, you might not snag great travel deals like you would with more travel-oriented credit card rewards.

Points

Credit card points offer you a certain number of points for your spending on the credit card. You could get two points for every dollar you spend, for instance. You’ll then be able to redeem those points for a wide range of purposes, though the value of the points can vary depending on the card and how you opt to use your points.

The Takeaway

Credit card miles allow you to get rewarded for your spending with your card. You’ll earn miles whenever you make a purchase on your card, and you can then use those miles to cover the cost of flights and enjoy other travel-related perks.

Beyond looking at a credit card’s miles-earning potential, you’ll also want to look at the APR on a credit card, as well as its fees, terms and conditions, and other featured perks. With the SoFi Credit Card, for instance, you can earn cash-back rewards. Plus, travelers will be happy to hear that the card charges no foreign transaction fees.

FAQ

Is earning credit card miles worth it?

As long as you’re using your credit card responsibly, earning credit card miles to use toward free flights, car rentals, travel perks, and other rewards can potentially help you save.

Which types of credit cards offer airline miles?

Many different credit cards offer airline miles. Usually, travel credit cards or credit cards co-branded with an airline offer additional perks or a greater number of miles earned per dollar.

What are the different types of credit card rewards?

The main types of credit card rewards are miles points, and cash back. Each type of reward has its pros and cons, but they all allow you to earn rewards for your spending on your credit card.

What is the difference between credit card miles and points?

Typically, miles can be used for travel, and they may be tied to a specific airline’s frequent flyer program. Points, however, can be used toward a slew of non-travel related rewards.


Photo credit: iStock/Prostock-Studio

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.

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

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

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

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Guide to Changing the Name on Your Credit Card

Guide to Changing the Name on Your Credit Card

If you’re going through a life transition or identity shift, you’ll need to change your legal name. And beyond making the update on government-issued IDs and your social media account, you’ll need to change your name on your credit cards as well.

If you have multiple cards, this might be a tad trickier — and more time-consuming. To avoid the process turning into a stressful, hair-pulling endeavor, we’ll go over the process of how to change your name on credit cards.

Recommended: Tips for Using a Credit Card Responsibly

Reasons for Changing Your Name on a Credit Card

Here are the most common reasons for undergoing a legal name change:

•   Getting married

•   Getting divorced

•   Changing your name to one that’s a better fit for you

•   Changing to mother’s or father’s last name as an adult

•   Undergoing a gender transition (i.e., male-to-female [MTF] or female-to-male [MTF]) and adopting a moniker that’s more representative of your new identity

Steps to Get a Name Change on a Credit Card

Are you asking yourself, “Can I put a different name on my credit card?” The answer is yes — canceling your credit card won’t be necessary. Here’s how to change your name on credit cards.

Update Your Name on Government-Issued ID Cards

Before you reach out to your credit card issuer to change your name, you’ll need to update your alias on government-issued ID cards, such as your Social Security card, driver’s license, and passport.

Not taking this initial step will leave you at a standstill with changing your name on a credit card. That’s because your credit card company will most likely request a legitimate form of ID that verifies that your name has already been legally changed.

To change your name on your Social Security card, you’ll need to submit an application. You’ll also need to provide proper documents verifying your name and identity change. Then, you must submit everything via snail mail or by dropping it off at a nearby Social Security office.

As for changing your name on your driver’s license, each state has slightly different steps. For more information, start by sleuthing around your state’s DMV website.

To learn how to update your name on your passport, visit the U.S. Department of State’s website , where it lays out the process.

Contact Your Credit Card Issuer for Necessary Information

Next, you’ll want to check your credit card issuer’s website for details on how to go about making a legal name change on your credit card. Credit card requirements and procedures for each card issuer can differ.

A time-saving tactic: If you need to change your name across all of your credit cards, block out a few hours and research the steps and necessary information and documents you’ll need to execute the name change. Jot down the main steps and what information and documentation is needed.

Depending on the credit card company, you may have to go to a physical location to make the change, or you may be able to do it over the phone or online. An issuer might ask that you fill out a form through its online portal, while another may have you talk to someone via chat or phone first.

Collect Documents and Information Requested by Your Issuer

If you’ve done your research ahead of time by looking on a credit card issuer’s website, then you might have handled this step before reaching out to the issuer.

Either way, depending on the reason for the name change, here are some documents and information that you might need to gather:

•   Photo ID

•   Government-issued ID like a driver’s license or other legal document showing the name change

•   Signed W-9 with your new name

•   Social Security number

•   Marriage certificate

•   Divorce decree

•   Birth certificate

•   Court order approving the name change

Some credit card issuers will ask for a driver’s license and ID, while others might need more substantial proof, such as a marriage license. Similarly to if you were getting a credit card for the first time, it’s worth investigating in advance.

Submit Your Documentation

As previously mentioned, how you can submit documentation will depend on the requirements and process of the credit card issuer. Some issuers allow you to do everything online or over the phone, while others require you to step foot inside a physical office and speak with a representative. Issuers may have a handy form that you can easily access online, or they might require that you give them a call.

One thing to keep in mind: When making the name change across your cards, or when applying for new cards, make sure to be consistent in how your name appears. Otherwise, this could cause issues later on, given what a credit card is and how it works.

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

Follow Up If the Name Change Doesn’t Take Effect After Some Time

After the name change is approved by the credit card issuer, you’ll need to wait to receive a new card in the mail. How long you’ll wait before you have a new card in your hands can vary, but expect to wait at least five days.

If it’s been more than 10 days after the change was given the green light, follow up by reaching out to the credit card issuer and asking for a status update. If there’s been a snag, they can look into this further.

Changing Your Name on Your Credit Report

Once you change the name on your credit card accounts, you don’t need to take any action to have this change reflected on your credit reports.

Your credit card issuers will automatically let each of the three credit bureaus know. This usually happens at the end of the billing cycle. And should you open a credit card with your new name, this will also be reflected on your credit report.

If you notice that something went awry while changing your name — for instance, the new name shows up incorrectly — make sure to reach out to the credit bureau where the error appears and file a dispute. Once your dispute is received, the credit bureau usually has 30 days to look into it and get back to you.

How Long Will a Name Change Take to Update?

As mentioned before, how long a name change takes to update will largely depend on the credit card company. Each card issuer has different time frames for when the name change will get approved and processed.

For instance, one credit card issuer number may be able to approve the change over the phone and drop a card in the mail right away. Another issuer might require you to talk to them over the phone, then pay them an in-person visit to drop off your forms and required documentation.

What to Expect After a Name Change

Once your name is updated on your credit cards, you can go out into the world under your new moniker. The transition is usually pretty seamless, though you’ll want to look out for any typos or errors.

You’ll be able to use your credit cards in all the ways you had before — online, in-person, and through your digital wallet. If you’re still waiting for your new card with your updated name to arrive in the mail, you might consider carrying an unexpired government-issued ID with your old name on it just in case.

Does Changing Your Name Affect Credit?

Changing your name doesn’t not affect your credit in any way, shape, or form. While your new name will be reported to the three major credit bureaus on both existing and new cards, it won’t impact your credit history.

Keeping an Eye on your Credit

After you’ve updated your name on all your credit cards, stay on the lookout for any potential snags, such as a typo in your name. Certain mistakes can create confusion and further errors given how credit cards work. If you see anything amiss on your credit report, make sure to report it immediately.

Otherwise, the same basic credit card rules and practices apply once you’ve submitted your request for your name change.

The Takeaway

Making a name change on a credit card doesn’t have to be an overwhelming process. While there are certain steps to take, doing your homework and learning what those steps are and how they differ between different credit card issuers will help ensure smooth sailing. If you’re applying for a credit card, remember you’ll need to open it under your updated name as well.

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

How can I change the name on my credit card after marriage?

You’ll need to make the change directly with each credit card issuer. Before you reach out, poke around the credit card issuer’s website and look into the specific steps involved. From there, gather the information and required documents. Depending on the issuer, you’ll need to submit an application either online or in person.

Does changing my name impact my credit score?

Changing the name on your credit cards to match your legal name will not impact your credit score in any way. Once the name is updated, the credit card companies will report the change automatically to the credit bureaus.

Does the name on a credit card matter?

Yes, the name on a credit card needs to match legal documents, such as your Social Security number and driver’s license. So if you’re undergoing a name change, you’ll need to update your cards to reflect this.

Should I leave my credit cards in my old name?

No, your credit cards need to match your legal name. If you’re changing your name due to a marriage, divorce, gender transition, or some other reason, you’ll need to update the name on your credit cards so everything is the same.


Photo credit: iStock/BongkarnThanyakij

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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