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If you have a brief credit history or dinged credit, a secured credit card can be a good tool for building credit. Why care about credit health? Because creditworthiness comes into play when applying for most loans and during any employer or other credit check.

A secured credit card allows card holders to try to improve their credit score and demonstrate to lenders that they are trustworthy. If you can’t get a regular “unsecured” credit card, a secured credit card may be a good option.

What Is a Secured Credit Card?

A secured credit card is a credit card that requires a refundable security deposit, which counts as collateral until the account is closed.

Unlike cards that don’t require a security deposit, you need one for a secured credit card to decrease the risk for the credit card issuer, as this is a card for people with damaged or limited credit.

Aside from the cash deposit, you need to provide the credit card issuer with your name, date of birth, income, Social Security number, and address in order to apply. Even if your credit score is 600 or so (fair), you may be able to get a decent secured credit card.

Most secured cards require a minimum deposit of $200 or $300, and that amount is usually equal to your credit limit. If your deposit is on the low end, you’ll want to be careful how you use the card.

Credit scoring models typically penalize utilization over 30%, so if your credit limit is $300, you may want to keep your balance under $90.

A higher deposit will provide breathing room. A deposit of, say, $1,000 boosts the 30% threshold to $300.

Finally, a heads-up if your credit is bad: Unsecured cards targeting people with bad credit are notorious for high fees and confusing terms. And issuers of these cards usually don’t have good cards to upgrade to.

Pros and Cons of a Secured Credit Card

Like most things in life, there are positives and negatives to this kind of card.

The pros include:

•   The ability to rebuild your credit if you have limited or damaged credit.
•   A lower credit line so you won’t go over your limit and risk running a high balance.
•   Benefits like fraud protection and cash back.
•   The ability to switch to an unsecured card with responsible use.
•   Potentially lower interest rates than an unsecured card.

The cons include:

•   It requires a security deposit.
•   It doesn’t come with the same robust benefits as an unsecured credit card.
•   The interest is higher than a regular credit card.
•   The issuer will need to run a hard inquiry on your credit report.

How Does a Secured Credit Card Work?

When you apply for a credit card, the issuer will run a hard inquiry on your credit report. If you’re approved, here’s how a secured credit card works:

You put down your security deposit, and then you get the same amount to spend as a line of credit.

If you want to increase your limit, you’ll have to contribute more to your security deposit. Secured credit card issuers don’t want to be left in the dust if you decide not to pay—or cannot pay—your balance. If that were to happen, they would just take your security deposit.

People who’ve gone through bankruptcy or are just starting out and have a limited credit history may be suited for this card. It might be a better option than a high-interest unsecured credit card, which those with a low credit score may be approved for.

While it may seem enticing, a high-interest card could take years to pay off and end up damaging a reputation further. A secured credit card poses a much lower risk.

A secured credit card looks the same as a regular credit card on a credit report—so users don’t have to worry about other lenders seeing that they have this type of card. And as long as the balance is paid in full and on time every month, a credit score should start to improve.

After using the card responsibly for a certain amount of time, a secured-card holder might be able to get an unsecured card. One’s secured-card company may switch a card to unsecured as well, allowing access to a higher line of credit without a deposit.

Using a Secured Credit Card

Major credit card companies such as MasterCard, Visa, and Discover offer secured credit cards. This means you can use your card anywhere these brands are accepted.

Some secured credit cards offer benefits like cash back and free access to your credit score.

Many major credit cards also provide liability protection, so you won’t be responsible for fraudulent charges on your account. You may have to pay fees like a monthly maintenance fee, annual fee, balance inquiry fee, or an activation fee.

Though you may be able to get a secured credit card with a lower interest rate than an unsecured credit card, the average rate for secured cards is still higher, at 17.2%., than the average regular credit card interest rate of 16%.

A comparison of different credit cards is in order to see which one has the most appealing terms. However, it’s best not to apply for too many; one hard inquiry can cause a credit score to drop 5 to 10 points . If you apply for more than one or two cards, that could have a negative effect on your credit score.

When you start using your card, paying it on time is going to impact on your credit score rating. If you’re not going to remember to pay it each month, you could set up automatic payments to ensure your bills are up to date. You can also check your credit score every month to make sure it’s trending upward.

Denial of a Secured Credit Card

Even though getting a secured credit card with limited or damaged credit history is possible, an applicant may still be denied.

Anyone who is denied a card should receive a letter from the credit card issuer explaining why. Perhaps they didn’t fill out the application properly and all they need to do is fix it, or their credit score wasn’t high enough.

If the reason has to do with applicants’ credit report, they can get free access to their report through a service like Experian and see their entire credit history.

For example, the credit report may reveal that the credit utilization ratio, or the amount of debt compared with the amount of credit a person has, is too high.

An applicant could start paying down debt more aggressively in order to bring down the credit utilization ratio and have a better chance of being approved for a secured credit card.

Another factor that may cause a denial is if an applicant doesn’t make enough income or can’t prove income. The credit score just may be too low as well.

Tips for Secured Credit Card Approval

Applicants who’ve been denied for a secured card can take steps to try to get approved.

If there is any information on the credit report that doesn’t look right, they can always dispute it. If they can prove that the information is incorrect, they may get it removed.

Applicants could also see if the secured-card issuer will allow a co-signer.

The co-signer would be responsible for paying the debt if the primary card holder failed to do so, and the card would also appear on their credit report. This might make an issuer feel safer approving a card.

If any other lines of credit are open, paying those balances down, and on time every month, can boost a score. And if old lines of credit are open, it’s best not to close them because it can affect the length of one’s credit history—a longer credit history is better. It’s only a good idea to close them if a high annual fee that’s not worth it is involved.

Get 2% unlimited cash back towards your financial goals with SoFi’s credit card.

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SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
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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SOPL20025

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There’s no doubt that most Americans love their plastic.

Because many credit cards have low barriers to entry, they are often an easy way to obtain a credit line and build credit. So credit cards are considered a good tool for beginners to use when building their credit history. Additionally, if used responsibly, credit cards can be an important part of building a credit history.

But unfortunately, many people struggle to pay off balances.

More than 60% of U.S. adults had a credit card in 2019, according to Experian . And among households with revolving credit card debt, the average balance was more than $6,800, costing about $1,160 in annual interest, according to a 2019 survey.

Although carrying the balance isn’t necessarily an issue, not paying it off every month may cause interest accrual that can make a balance more challenging to pay off.

So, if you’re like the millions of Americans who carry a credit card balance every month, understanding the effects can help you determine how to reduce your credit card debt.

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

The Upshot on Carrying a Balance

In addition to remaining in the debt cycle, there are other financial consequences of carrying a balance on a credit card. Here are a couple of things you can expect when you don’t pay your balance off every month.

Effect on Credit Score

Carrying a high balance on a credit card relative to its credit limit could lower your credit score because it increases the credit utilization ratio, or balance-to-limit ratio, which shows the amount of available credit a person has.

To calculate your ratio, divide your total credit card balances by your total available credit. Ideally, you want to keep your credit utilization ratio under 30%. When you exceed this percentage, your credit scores may decrease a lot faster.

Borrowers trying to decrease their credit utilization should know that it can take two or three credit statement cycles for credit utilization levels to decrease when debt is being paid off.

Accrued Interest

Credit card users who don’t pay off balances every month accrue interest based on the annual percentage rate specified in the credit card terms.

The rate is the approximate interest paid on any balance that’s not paid off when the credit card bill is due, plus any fees. While APRs vary across credit cards and depend on credit history, the average credit card APR ranges from around 13% to 23%.

Most credit cards charge compounding interest. In simple terms, this means that credit card users with a balance that’s carried over from billing cycle to billing cycle end up paying interest on the interest that accrued.

Therefore, if they don’t pay off the balance every month, interest continues to accumulate and is tacked on to the balance.

The majority of credit cards compound interest daily. Therefore, if anything is owed after the payment due date, the balance can easily start climbing.

You can use a credit card interest calculator to get an estimate of how much interest has added to your balance. It might come as a surprise.

Reducing Credit Card Debt

Repaying credit card debt can seem like an uphill battle. But fortunately, with planning, commitment, and tools, it can be achieved. While it might not be an easy feat, taking small steps can help to chip away at credit card debt.
Here are a few options to tackle debt.

Budgeting to Repay Credit Card Debt

No matter how much credit card debt you have, you may want to start with revamping your budget. If you don’t already have one, this is the perfect time to create one. You’ll want to make a list of your monthly expenses and income.

You can record this information in a spreadsheet or a budgeting app, whichever makes it easier to track expenditures.

Once you have a list of the money you have coming in and going out, identify areas where you might be able to cut back on your spending habits. For example, do you find yourself overspending on clothes or eating out more often than not? Wherever you might be overspending, take this opportunity to eliminate some unnecessary expenses.

You may also want to incorporate a debt repayment strategy into your budget to accelerate the process. If you’re someone who is motivated by seeing fast results, you may want to consider the snowball method of repayment.

This strategy prioritizes paying off credit cards with the smallest balances first. Once you pay down the smallest balance, you move on to the second smallest balance, etc.

On the other hand, the avalanche approach could help you save more money in the future, because the goal is to repay credit card balances with the highest interest rates. Once you pay off the balance with the highest interest rate, you move on to the next highest interest rate, continuing until all debt is repaid (while making at least minimum payments on all other balances, of course).

Both debt repayment strategies have advantages and disadvantages, so you may want to consider which method you’ll be most able to stick with or use them as inspiration to create a plan that will work for you.

Recommended: Tips for Using a Credit Card Responsibly

Opening a Balance Transfer Credit Card

Another option to consider is to open a balance transfer credit card. The idea is to open a new credit card with an introductory interest rate that is significantly lower than your current credit card interest rate. This can allow you to pay off your credit card balance at a lower rate as long as you pay it off in the introductory time frame.

You can potentially pay off your balance within a shorter time while saving money on interest. It’s important to note that the low-interest rate on balance transfer credit cards is usually only offered for an introductory period, usually between six and 18 months. Once that period expires, the rates typically increase.

If you plan to repay the balance before the introductory period ends, a balance transfer credit card might be worth pursuing. Make sure to account for a balance transfer fee—usually 3% to 5%.

As with any other credit card application, your credit history will determine if you qualify and what rate you’ll receive. If your credit isn’t ideal, this might not be an option.

Making Extra Payments

If you don’t want to open a new credit card, you can make extra payments to reduce interest costs. Again, credit card interest is calculated on the account’s daily average balance. Therefore, by making one or more extra payments throughout the month, you can lower the total interest accrued by the time your bill is due.

Even if you can only put a few extra dollars toward each payment, it can help minimize the interest cost.

Using a Personal Loan

If you have high-interest credit card debt, a debt consolidation loan can be an option worth considering. Consolidating all of your debts into a personal loan may help you streamline your finances.

SoFi® offers unsecured personal loans with low, fixed interest rates and fixed monthly payments, so borrowers may be able to save money and enjoy the ease of one predictable payment.

Checking your interest rate and terms will not affect your credit score.¹ If the new rate and terms make sense for your financial situation, you can apply for a new loan with no fees, including no origination fees or late fees.

If high-interest debt is causing a revolving sense of dread, a SoFi® personal loan could be the solution.

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¹Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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.
SOPL20030

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Missing a credit card payment can happen to anyone. Unfortunately, paying your credit card bill late can come with certain consequences, such as late fees, interest accrued on the credit card balance, and potential negative impacts to your credit score. The longer your credit card payment is past due, the more consequences you may experience.

Exploring the potential consequences of a missed credit card payment and solutions to help prevent this from happening may, therefore, help you avoid the negative financial impact of a missed payment.

When is a Credit Card Payment Considered Late?

As soon as you fail to pay your credit card bill by the due date assigned, it’s considered past due. If you miss a payment, your credit card company may send you notices about it in the form of calls, emails, letters, or texts.
In the chance you don’t hear from your credit card company, you may still face some financial consequences.

What Happens if You Make a Late Credit Card Payment?

The Credit Card Balance Could Increase

Even if you didn’t use the card to make new purchases during a particular billing cycle, making a late payment could increase your balance in several ways.

With even the first missed due date, the credit card company can charge a late fee of up to $28. If you miss another payment within the next six billing cycles, the late fee can go up to $39.

The silver lining here is that the late fee can’t be more than the minimum amount due on the account. Credit card companies typically calculate the minimum payment due on a set fee plus a percentage of the new balance for that billing cycle. So if you have a low balance, your minimum payment is likely to be lower than if you have a high balance.

There’s also a chance the creditor will increase your interest rate. For example, let’s say your credit card payment is 60 days late, at which time your credit card company may decide to increase your interest rate.

Increasing your interest rate will also increase your total credit card balance because that new, higher rate (generally referred to as a “penalty APR”) will apply to the entire unpaid balance.

Not all credit card companies have penalty APRs for late payments, so check with your credit card company to verify.

Your Credit Score Might Be Affected

Since your credit score includes information about your credit history, such as your payment history and the standing of your accounts, a late payment may negatively impact your score. However, the amount of time it’s impacted may vary.

Generally, creditors send information to credit bureaus using different codes to indicate if a payment is current or late. Since there is no credit code for payments that are one to 29 days late, they may use a “current” code.

Once the payment passes 30 days late, creditors generally use the “late” code, which is considered a delinquent payment. But different creditors will send different codes at different times so there’s no way to know for sure when you will see the late payment reflected in your credit report.

Creditors may not report a late payment to credit bureaus at all until a full billing cycle has gone by with no repayment (typically 30 days). With this in mind, if your payment’s due date was the 11th and you paid on the 13th, there’s a chance your credit won’t take a hit.

Although every situation is different, a late payment might end up staying on your credit report for several years. And because credit history is only one of the factors used to determine your credit score, it’s hard to predict exactly how a late payment will impact your score.

The Balance Could Be Charged Off

Another consequence of not paying your credit card bill is that the credit card company may not allow you to continue to use your card for other purchases until your account is in good standing.

Also, if your payment is 180 days past due, the credit card company can close your account and charge off the balance. “Charging off” means the credit card company will permanently close the account and write it off as a loss, but the debtor still owes the balance remaining.

Sometimes, credit card companies will attempt to recover what’s owed through their own collection department, but charged-off debts are sometimes sold to third-party collection agencies, which then attempt to get payment from the debtor.

Credit card companies do have leeway to work with their customers. Under FDIC regulations governing retail credit, the creditor can help customers who have had financial setbacks—like job loss or the death of a family member—get back on track.

This leniency is typically shown to people who are willing and able to repay their debt, and the FDIC encourages creditors to proceed with this step with a structured repayment plan and to monitor the progress of the plan.

How to Resolve a Credit Card Late Payment

Paying it Right Away

If the payment just slipped your mind, don’t panic—there are a few solutions for tackling a late credit card payment. Contacting your credit card company when you realize you’ve missed a payment is a smart move.

Paying the credit card balance in full immediately helps avoid accruing interest charges and potentially saves your credit score from dropping. Alternatively, you might want to ask about arranging a payment plan to minimize the damage.

Negotiating Fees

Even though your credit score may not drop because of one missed payment, you may incur late fees or an interest rate increase. Additionally, the late payment may result in a penalty interest rate (or, more accurately, a penalty APR as mentioned above), which will likely increase your total balance.

But, even if you do incur additional fees, sometimes credit card companies are willing to work with you to waive the fees.

Calling your credit card company to request a waiver of late fees could be a first step. If you’re unsure what to say when calling your credit card company, Experian suggests something like the following script.

“I missed a payment on my card recently, but I’m up to date now. Would you consider waiving the late fee? As you can see, I’m normally a good customer who always pays my bills on time.”

If the representative doesn’t seem willing to make any changes, you may want to request to speak with a manager. But if you’re not a repeat offender, credit card companies may be willing to waive fees.

Some credit card companies may not be as willing to waive interest increases. So, if your credit card company seems unwilling to change your rate back to the original amount, you might consider asking if they will do so once you show responsible payment history.

Automating Your Credit Card Payments

To help prevent any late credit payments in the future, one option might be to set up autopay to cover the minimum payment on your credit cards.

This way, if a payment slips your mind, you shouldn’t face any late payment consequences. Setting your bill to be automatically paid in full a few days before the payment is due can ensure you pay your balance by the due date.

If you would prefer not to sign up for autopay, many credit card companies have an option to sign up for notifications that remind you when your payments are due.

Getting Out of Credit Card Debt

To avoid late credit card payments once and for all, you may want to consider solutions for getting out of credit card debt entirely. Strategies depend on your unique financial situation, of course, but here are several for getting rid of debt for good.

Budgeting to Get Out of Debt

First, you may want to put together a budget. Creating a budget can help you better manage your money so you know what you have coming in and going out.

You can use either a simple spreadsheet or a budgeting app to simplify your efforts. Once you have a handle on how much extra money you can put toward your debt, you may want to select a debt repayment strategy such as the snowball method or avalanche method.

With the debt snowball method, the focus is on paying off the smallest debt balance first and then moving on to the second smallest debt balance, and so on, while still making minimum payments on all debt. This type of method is meant to give a psychological boost.

The debt avalanche method tackles the most expensive debt first—the one with the highest interest rate. Since you’re starting with the most expensive debt, this strategy can be a big money saver.

Opening a Balance Transfer Credit Card

If your credit is in good standing, you may want to consider opening a balance transfer credit card as a solution. Usually, these types of credit cards come with low or 0% APRs for a certain period.

Some companies may offer up to 21 months of interest-free payments during the promotional period. But, while the introductory period might be interest-free, you may still have to pay a balance transfer fee between 2% and 3%.

Ideally, you would pay your credit card balance in full by the time the introductory period is over, which would allow you to avoid interest payments on the debt.

Keep in mind, however, many balance transfer credit cards have restrictions. For example, if you make a late payment, you may lose your introductory rate.

Another limitation may be that your introductory APR only applies to the transferred balance and all other transactions may have a higher rate.

Before taking out another line of credit, understand that it can impact your total credit score. Credit scores are calculated using several factors, including credit history and new credit, both of which could be affected when opening a new account.

Consolidating Debt with a Personal Loan

Another option may be to consolidate your credit card debt with an unsecured personal loan. Essentially, when you consolidate your credit card debt, you take out a loan to pay off that existing debt, then make payments on the one new loan.

There are several reasons for choosing consolidation to help eliminate debt. For starters, you might be able to get a lower interest rate with a new personal loan, which could enable you to pay off your debt faster.

For example, very few credit cards have fixed interest rates, and the average variable APR for credit cards is about 17%. In contrast, for a person with better-than-average credit, the average rate for a credit card consolidation loan is currently lower. Depending on how much you owe and what your credit score is, you could save some money.

But, it’s important to note that personal loan rates and terms will vary. The rates and terms an applicant is offered are usually determined by their credit history and other financial factors. Essentially, different borrowers may qualify for different rates. With this in mind, consolidation might only be ideal for those in good financial standing.

With SoFi, It takes just a few minutes to check eligibility and possible rates—and there’s absolutely no obligation to continue if you don’t wish to. Applying for a personal loan can be a useful step to help you regain control of your finances.

See if a credit card consolidation loan from SoFi can help you get your finances back on track.

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SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
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 .
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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.

SOPL20029

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Debts fall into two broad categories: secured debt and unsecured debt. Stop paying one and in addition to credit issues and loan collectors, you could also lose a major asset, like your house or car.

Stop paying the other and you could ruin your credit and debt collectors could come a-knocking. It’s crucial to know the difference between the two—and what’s at stake—before taking on either kind of debt.

What is Secured Debt?

Secured debts are backed, or secured, by an asset, such as your house. This asset acts as collateral for the debt, and your lender is what is known as the lien holder. If you default on a secured debt, the lien gives your lender the right to seize the asset and sell it to settle your debt.

Mortgages and auto loans are two common types of secured debt. A mortgage loan is secured by the house, and an auto loan is secured by the vehicle. You may also encounter title loans, which allow you to use the title of your vehicle to secure other loans once you own a car outright.

What Are the Possible Benefits of Secured Loans?

Because lenders can seize an asset to pay off the debt, secured loans are considered less risky for the lender than unsecured loans. “Low risk” for a lender can translate into benefits for borrowers. Secured loans generally offer better financing terms such as lower interest rates.

Secured loans may also offer some easier qualifying criteria. For example, secured loans may have less stringent requirements for credit score vs unsecured loans, which generally rely more on the actual credit and income profile of the customer.

What Are the Stakes?

The stakes for borrowers can be pretty high for secured loans. Consider that if you stop paying these debts (timeframes for secured loan default can vary depending upon the type of secured debt and lender terms), the bank can seize the secured asset, which might be the house you live in or the car you need to drive your kids to school or yourself to work.

Failing to pay your debt, or even paying it late, can possibly have a negative effect on your credit score and your ability to secure future credit, at least in the shorter term.

What is Unsecured Debt?

Unsecured debt is not backed up by collateral. Lenders do not generally have the right to seize your assets to pay off unsecured debt. Examples of unsecured debt include credit cards, student loans, and some personal loans.

What Are Some Benefits of Unsecured Loans?

Unsecured loans can be less risky for borrowers because failing to pay them off does not result in your lender seizing important assets.

Unsecured loans often offer some flexibility, while secured loans can require that you use the money you borrow for very specific purposes, like buying a house or a car. With the exception of student loans, unsecured debt often allows you to use the money you borrow at your discretion.

You can buy whatever you want on a credit card, and you can use personal loans for almost any personal expense, including home renovations, buying a boat, or even paying off other debts.

What Are the Stakes?

Though unsecured loans are less risky in some ways for borrowers, they are more risky for lenders. As a result, unsecured loans typically carry higher interest rates in comparison.

Even though these loans aren’t backed by an asset, missing payments can still have some pretty serious ramifications.

First, as with secured loans, missed payments can negatively impact your credit score. A delinquent or default credit reporting can make it harder to secure additional loans, at least in the near future.

Not only that but if a borrower fails to pay off the unsecured debt, the lender may hire a collections agency to help them recover it. The collections agency may hound the borrower until arrangements to pay are made.

If that doesn’t work, the lender can take the borrower to court and ask to have wages garnished or, in some extreme cases, may even put a lien on an asset until the debt is paid off.

Managing Secured and Unsecured Debt

Knowing whether a loan is secured or unsecured is one tool to help you figure out how to prioritize paying off your debt. If you’ve got some extra cash and want to make additional payments, there are a number of strategies for paying down your debt.

You might consider prioritizing your unsecured debt. The relatively higher interest typically associated with these debts can make them harder to pay off and could end up costing you more money in the long run.

In this case, you might consider a budgeting strategy like the “avalanche method” to tackle your debts, whereby you’d direct extra payments toward your highest interest rate debt first.

(Be sure you have enough money to make at least minimum payments on all your debts before you start making extra payments on any one debt, of course.)

You can also manage your high-interest debt by consolidating it under one personal loan. A personal loan can be used to pay off many other debts, leaving the borrower with only one loan—ideally at a lower interest rate. Shop around at different lenders for the best rate and terms you can find.

Be cautious of personal loans that offer extended repayment terms. These loans lengthen the period of time over which you pay off your loan and may seem attractive through lower monthly payment options, but choosing a longer term likely means you’ll end up paying more in interest over time.

What’s Right for You?

Everyone’s financial situation is different, so what works for one person may not work for another. If you’re interested in an unsecured personal loan, consider SoFi.

With competitive interest rates and flexible options for a fixed monthly payment, you can explore options to consolidate credit cards and/or other high-interest debt or make a major purchase. It only takes minutes to check your rates.

Learn more about how personal loans can help you manage your debt with low interest rates and no fees required.

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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 .
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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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Renting a car. Booking a hotel room. There are plenty of reasons a credit card can be a worthy addition to your wallet. But as you’ve doubtless heard, credit cards can also be dangerous: an easy way to rack up a towering debt total that can be difficult to pay off.

If you’re able to play it smart, credit card benefits can outweigh the drawbacks. And one of the most important parts of any smart credit strategy is to make your payments on time.

So how do you determine when your credit card payments are due—and what else should you keep in mind to ensure you’re using your credit cards wisely?

Recommended: Tips for Using a Credit Card Responsibly

Are Credit Cards a Smart Financial Move?

These days, it may feel like you’re bombarded with news about the staggering credit card debt plaguing American households. Based on that, how can using credit cards ever be a wise choice?

After all, Americans often carry revolving consumer credit card debt in amounts that can be detrimental to overall financial health. According to the latest data from The Federal Reserve , Americans have trillions of dollars in revolving credit balances. And that debt total is steadily increasing year by year.

That doesn’t mean credit cards can’t be part of a smart financial strategy. In some ways, credit cards can be a factor in helping you get closer to some of your financial goals.

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

Credit Cards May Help You Build Your Credit

Even if you want to live a largely credit-card-free lifestyle, having a solid credit history is helpful. If you ever want to take out a mortgage or finance a car, a good credit score might help you secure better terms and lower interest rates—while a poor one can keep you locked out of those financial products entirely.

Credit cards can be a relatively easy way to build good credit: When you pay in full and on time, that behavior is reported to the credit bureaus and often reflects well on your report.

However, since credit card companies will likely run a hard credit check on you when you’re applying for a card, opening a new credit card may temporarily lower your credit score.

Of course, if you max out your cards and rack up a ton of revolving debt, that can reflect badly on your score; your total debt load is another important, heavily weighted factor in the total credit score calculation.

Credit Cards Can be Used to Earn Valuable Rewards

Many credit cards come packed with rewards that may really add up, whether they’re airline miles or a cash-back percentage of each item you purchase.

That said, if you end up making sky-high interest payments on a large revolving balance, that might eclipse the value of any reward your card offers.

Credit Cards are Sometimes a Useful Tool in Paying for Certain Goods and Services

Ever try to book a hotel room or rent a car without a credit card? If so, you already know that plastic can unlock a whole host of possibilities—even in a world where “cash is king.”

While relying too much on credit cards or charging more than you can actually afford to pay off each billing cycle may be a recipe for disaster, it can also be helpful to have the power of plastic at your disposal.

Some Things to Look for When Opening a New Credit Card

There are many different types of credit cards to consider if you’re in the market, and which will work best for you depends on your specific set of goals and circumstances.

Type of Credit Card

For instance, if you’re trying to repair shoddy or short credit history, a secured card can go a long way, though opening one may require you to spend money upfront as a security deposit.

On the other hand, if you already have great credit and are looking to maximize your card’s value, you could choose a travel reward or cash-back card to help you rack up points, pennies, or miles.

But no matter what kind of card catches your fancy, there are a few key aspects worth keeping an eye on before submitting your application.

Credit Card Fees

A good first step is to check if the card carries an annual fee—that’s a once-yearly cost required to pay for the privilege of simply holding the card. In some cases, the rewards and benefits you can earn may outweigh this fee, but there are many cards that don’t carry an annual fee, so you may want to skip the expense entirely.

Your credit card may also carry other types of fees: for balance transfers, foreign transactions, or late payments. (Of course, you won’t have to worry about this last one, since you’re going to figure out when your credit card is due and pay on time every month… right?)

Credit Card Interest Rates

Last but certainly not least is the card’s interest rate. This will be expressed as an APR, or annual percentage rate, and will probably be listed as a range (say, 14.24% to 25.24%).

If you’re approved, the exact rate you’ll pay will likely depend on your credit score and history; as well as other factors. Often, the better your score, the lower your interest rate.

Some credit cards may offer a promotional 0% interest rate, which means for a given length of time your revolving balance will not accrue interest. However, after the promotional period is up, the regular interest rate will kick in, so you ideally want to be able to pay off whatever balance you’re carrying before that happens.

That’s because credit card interest rates tend to be higher relative to other kinds of loans and financial products. For example, unsecured personal loans typically have lower interest rates than credit cards; as of this writing, the average consumer credit card sits at more than 17% APR. Unsecured personal loans, in contrast, are averaging around 10% to 12% APR for well-qualified borrowers.

That’s one reason why it’s so easy to get into a lot of credit card debt quickly—and why credit card debt is one of the toughest types of debt to pay off. When you’re constantly struggling just to keep up with interest payments, it can be difficult to chip away at the principal—especially when you’re also using the card for everyday purchases.

If you’re already in credit card debt, you can use this credit card interest calculator to see an estimate on how much you could end up paying in total interest over the course of your repayment.

In some cases, it may be a smarter financial move to take out a personal loan to pay off a credit card fully. Depending upon the term length you choose, you may end up saving money if the interest rate you’re offered is lower than the one offered by the credit card.

Determining When Your Credit Card Payment Is Due

Now that you’ve got that credit card in your wallet, how do you find your credit card due date? Unlike other sorts of bills, credit cards aren’t always due on a regular date like the first of the month. The exact due date will vary depending on your credit card billing cycle, and may fall on a seemingly-random date.

To find your credit card due date, you can check your billing statement. The due date, along with the minimum payment due, will likely appear close to the top of your written statement.

You can also find due date and payment information in your online account, if you’ve created one; these digital portals also often make it simple to make online payments.

If you don’t have access to either a paper or digital billing statement, you can call the customer service number on the back of your card and ask a representative when your payment is due. Most cards also allow you to make payments over the phone, either through an automated system or with a live customer service agent.

How to Pay Your Credit Card on Time—and Why it’s Important

To pay your card on time, you’ll pay at least the minimum amount listed by the credit card payment due date. Generally, the cutoff time is 5 p.m. on the day the payment is due, but you may want to reach out to the issuer directly to get exact details.

That said, it may be a better idea to avoid cutting it so close, if you can help it. You can make your credit card payments before the due date typically both online and by phone, and doing so can help ensure the payment has time to post to your account before the cutoff.

Paying your credit card on time will help you avoid paying late fees, for one thing—which, when added to interest payments, can make your credit card debt spiral.

But on-time payments can also help bolster your credit history since they’re reported to the major credit bureaus, and your payment history—including timeliness—accounts for around 35% of your FICO® Score. And there’s one more compelling reason to make payments before the deadline.

The Grace Period

It’s helpful to understand that practically all credit cards offer a grace period: the time between your statement closing date and the due date, in which the purchases you’ve made during that billing cycle do not accrue interest.

By law, if offered the grace period must be at least 21 days, which means you get a three-week window to pay your card off in full without being responsible for any finance charges. (This may not be true in the case of balance transfers or cash advances, and interest may accrue immediately.)

But it’s possible to use a credit card on a regular basis without paying interest. All you have to do is pay it off on time and in full each and every month.

Paying Your Credit Cards on Time

Even if you only have one or two credit cards, chances are you have a lot on your plate on any given month.
Between making rent, shelling out your car payment, and actually keeping the job that lets you pay for all this stuff, keeping tabs on your credit card due dates may feel like just another task in a long list of chores. (It’s true: Adulting is hard.)

No matter how you decide to stay on top of your credit card due dates and manage your finances overall, paying your cards in full and on time can help you keep your debt total low, avoid paying interest, and possibly bolster your credit score.

That way, you are more likely to take advantage of all the benefits credit card use offers without dealing with any of the financial fallout.

If you are looking to get your credit card debt in control, think about learning more about credit card consolidation loans with SoFi. Using a personal loan to consolidate your credit card debt might help your financial position and possibly lower your interest rate.

Learn more about the 2% cashback credit card from SoFi. Apply for the SoFi Credit Card today. 

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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 .
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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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SoFi cardholders earn 2% unlimited cash back rewards when redeemed to save, invest, or pay down eligible SoFi debt. Cardholders earn 1% cash back rewards when redeemed for a statement credit.¹

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