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It’s natural to be curious about what credit score you start with at 18. You might assume you start with the lowest possible score of 300, but that’s not how it works. Instead, your credit score doesn’t exist until you begin generating financial data.

Good credit is vital if you want to be financially independent. Establishing credit early on can help you qualify for favorable rates and terms when you need to borrow money for a car or home. Here’s what you need to know about beginning credit scores and how you can build yours.

Recommended: What Credit Score is Needed to Buy a Car

What Is Your Starting Credit Score?

Essentially, your credit score doesn’t exist until you begin building credit. Before that, if a financial institution requests your credit history, they will find nothing. Only when you use a credit card or pay utility bills will there be something to put on your credit report.

This doesn’t mean you will start with the lowest score possible. Neither will you start with a high credit score, since that requires a strong credit history and proof of solid financial habits. But if you get off on the wrong foot by not paying your credit card bill on time, you may start with a lower credit score.

Usually, you need at least one or two revolving accounts that have been active for at least three to six months to begin building credit. Creditors and lenders use various credit scoring models to determine your credit worthiness. Therefore, your number may differ across different platforms. For example, your FICO score and VantageScore range between 300 and 850, while other models, such as your auto loan score, may go up to 900 or higher.

Recommended: What is The Difference Between Transunion and Equifax

Breakdown of Credit Score Factors

A number of factors affect your credit score. Here are the ones you should you know about.

Payment History

A key factor in determining your credit score is whether you pay your bills on time. In fact, when calculating your FICO score, 35% comes from your payment history. Because it plays a significant role in your overall score, paying your bills on time is crucial.

Credit Utilization

Your credit limit is the maximum dollar amount you can charge on a credit card. Credit bureaus determine your credit utilization by dividing your outstanding balance by your total revolving credit limits. This shows credit bureaus how much credit you are using against the total credit you have.

A good rule of thumb is to keep your credit utilization ratio under 30%, both for each credit card and overall. Maintaining a low credit card balance or paying it off monthly will help you maintain a lower credit utilization ratio. This factor accounts for 30% of your overall FICO score.

Length of Credit History

The longevity of your credit history also plays a part in calculating your credit score. Credit bureaus will look at the number of years your accounts have been open. The length of your credit history accounts for 15% of your FICO score.

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Credit Mix

Credit is usually broken down into three categories: revolving credit, installment credit, and service credit. With revolving credit, creditors give you a specific credit limit to spend as you wish. You can make the minimum monthly payments or choose to pay off your credit card balance every month. If you make the minimum payment, the remaining balance will carry over to the next month until you pay off the entire balance.

Installment credit is used for auto, mortgage, and other loans. With this type of credit, the creditor establishes a fixed monthly payment you agree to pay back over a set amount of time. Demonstrating that you can handle multiple types of credit can increase your credit score.

Last, service credit is when companies like home utilities or a cell phone provider report your payment history to a credit bureau. On-time payments to these businesses can help build your credit. This accounts for 10% of your FICO score.

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New Credit Inquiries

When you apply for new credit, creditors conduct a hard inquiry. This means they assess your creditworthiness by looking at your overall credit history. New credit inquiries and new accounts account for 10% of your score. Triggering a large number of credit inquiries in a short amount of time is considered risky, and will negatively impact your credit score.

What Is Insufficient Credit History?

If you don’t have any credit accounts or your credit accounts are not reported to the three major credit bureaus (Experian, TransUnion, and Equifax), you may have an insufficient credit history.

Even if you establish credit but go a long time without using it or cancel your credit cards, your credit information might be removed from your credit file. In this case, you may also have an insufficient credit history.

How to Establish Credit History

Building credit might seem daunting. However, there are a few strategies to begin establishing a credit history from scratch. Here’s how.

Apply for a Secured Credit Card

Secured credit cards require applicants to put down a deposit. This deposit will usually act as your credit limit. You will still have to make monthly payments since the deposit is used as protection or collateral if you default.

A secured card will help you establish credit as long as the creditor reports to one of the three major credit bureaus. A secured credit card can act as a stepping stone to unsecured credit cards and other forms of financing in the future.

Become an Authorized User

To become an authorized user, someone needs to add you to an existing account held in their name. You will receive your own credit card, and the account history will go on your credit report.

Keep in mind, however, that since you’re not solely responsible for payments and the management of the account, this account may have less of an impact on your credit score than if you were the sole owner of the account.

Make On-time Payments

As noted above, your payment history counts as 35% of your score. Missing a payment can hurt your credit score and stay on your credit report for up to seven years. You can establish autopay to ensure you never miss a payment. However, you’ll still want to check your account monthly to ensure you weren’t overcharged.

Keep Your Credit Balances Low

Once you get a credit card, resist the temptation to run up the balance. The amount of credit you’re using plays a role in your score. It’s best to keep your balances low and use under 30% of your total credit card limit.

How to Monitor Your Credit Score

An important component of building credit is monitoring your progress. Monitoring your credit can motivate you to keep improving your score. It can also help you spot problems quickly, such as missed payments. Finally, keeping tabs on your credit will let you see how specific actions impact your score so you can better understand how credit scoring works.

The Takeaway

The credit history you start with at 18 is a blank slate. Your credit score doesn’t exist until you start building credit. To begin your credit-building journey, consider opening a secured credit card or ask a family member to add you as an authorized user on their account.

A money tracker tool with credit monitoring like SoFi’s can help. Track your credit score at no cost, with weekly updates to help you stay on top of when your score changes.

SoFi tracks all of your money, all in one place.

FAQ

Is a credit score of 720 good?

Yes, a 720 credit score is considered good. However, increasing your score by 20 points will make it a very good score and help you receive more favorable interest rates and terms.

Does credit build before 18?

It’s possible to build credit before age 18 if you’re an authorized user on an adult’s account or you have a secured credit card. Many financial products, such as loans and credit cards, require you to be 18 or older to apply. Being an authorized user can be your first opportunity to establish credit history.

How can I quickly raise my credit score?

Since your credit utilization ratio significantly impacts your credit score, paying off your credit card balances and increasing your limits can help you raise your credit score promptly.

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Photo credit: iStock/FG Trade

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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

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Some credit cards offer a promotional interest rate, as low as 0% APR, for purchases and/or balance transfers. Often, these promotional interest rates are offered for a limited period of time when you apply for a new card, though some issuers offer promotional rates for existing cardholders as well.

If you have a large purchase coming up, or an existing credit card balance that you want to transfer over, these cards can save you a significant amount of interest. You’ll just want to make sure to pay off the full balance by the end of the promotional period, as your interest rate will likely jump significantly when your promotional APR expires.

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What Are Credit Card Promotional Interest Rates?

A credit card promotional interest rate is an interest rate that is offered for a limited amount of time, as a promotion. During the promotional period, you’ll be charged a lower interest rate than your typical interest rate.

It’s common for credit cards to offer these introductory promotional interest rates for new members when you open a credit card account. However, it’s also possible for issuers to offer promotional interest rates to existing cardholders.

Recommended: How to Avoid Interest On a Credit Card

How Credit Card Promotional Interest Rates Work

One common scenario for how credit card promotional interest rates work is that an issuer might offer a 0% promotional interest rate on purchases and/or balance transfers for a certain period of time. When you’re using a credit card during the promotional interest period, you won’t pay any interest.

It’s important to note that there are two major types of promotional interest rates, and they vary slightly. With a 0% interest promotion, you won’t pay any interest during the promotional period. If there’s any balance remaining at the end of the promotional period, you’ll begin paying interest at that time. With a deferred interest promotional rate, on the other hand, you’ll pay interest on any outstanding balance back to the date of the initial purchase.

Benefits of Credit Card Promotional Rates

As you may have guessed, there are certainly upsides to taking advantage of credit card promotional interest rates. Here’s a look at the major benefits.

Low Interest Rate During the Promotional Period

One benefit of credit card promotional interest rates is the ability to take advantage of a low or even 0% interest rate during the promotional period. Having access to these promotional rates can give you added flexibility as you plan your financial future.

Ability to Make Balance Transfers

One possibility to maximize a credit card promotional rate is if you have existing consumer debt like a credit card balance. By using a balance transfer promotional interest rate, you can transfer your existing balance and save on interest. This can help lower the amount of time it takes to pay off your debt.

Can Pay For a Large Purchase Over Time

If your credit card has a 0% promotional interest rate on purchases, you can take advantage of that to pay for a large purchase over time. That way, you can spread out the cost of a large purchase over several months rather than needing to pay it off within one billing period.

Just make sure to pay your purchase off completely before the end of the promotional period to avoid paying any interest.

Drawbacks of Credit Card Promotional Rates

There are downsides to these offers to consider as well. Specifically, here are the drawbacks of credit card promotional interest rates.

Deferred Interest

You need to be careful if your credit card promotional rate is a deferred interest rate, rather than a 0% interest rate. Because of how credit cards work with a deferred interest rate promotion, you’ll pay interest on any outstanding balance at the end of the promotional period — back to the date of the initial purchase. This amount will get added to your existing balance, driving it higher.

Penalty Interest Rates

You still have to make the minimum monthly payment on your credit card during the promotional period. If you don’t make your regularly scheduled payment, the issuer may cancel your promotional interest rate. They may even impose an additional credit card penalty interest rate that’s higher than the standard interest rate on your card.

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May Encourage Poor Spending Habits

Establishing good saving habits and living within your means is an important financial concept to live by. While it may not always be possible, it’s generally considered a good idea to save up your money before making a purchase. While a 0% interest promotional rate means you won’t pay any interest, it can contribute to a mindset of buying things you don’t truly need.

Recommended: Tips for Using a Credit Card Responsibly

How Long Do Credit Card Promotional Interest Rates Last?

By law, credit card promotional interest rates must last at least six months, but it is common for them to last longer. You may see introductory interest rates lasting 12 to 18 months, or even longer.

Regardless of how long your promotional period lasts, make sure you have a plan to pay your balance off in full by the end of it. Credit card purchase interest charges will kick in once your promotional period is over.

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Zero Interest vs Deferred Interest Promotions

Both 0% interest rates and deferred interest rates are different kinds of promotional rates where you don’t pay any interest during the promotional period. However, they come with some key differences:

Zero Interest	Deferred Interest
Often marketed with terms like “0% intro APR for 15 months”	Often marketed as “No interest if paid in full in 6 months”
No interest charged during the promotional period	No interest charged during the promotional period
Interest charged on any outstanding balance starting at the end of the promotional period	At the end of the promotional period, interest is charged on any outstanding balance, back-dated to the date of the initial purchase

What to Consider When Getting a Card With a Zero-Interest or Deferred Interest Promotion

One of the top credit card rules is to make sure you pay off your credit card balance in full, each and every month. But if you’re carrying a balance with a promotional credit card rate, you’ll want to make sure you understand if it’s a 0% rate or a deferred interest promotion.

With a 0% promotional rate, you’ll start paying interest on any balance at the end of the promo period. But with a deferred interest promotional rate, you’ll pay interest on any balance, back-dated to the date of the initial purchase.

In either case, the best option is to make sure that you have a plan in place to pay off the balance by the end of the promotional period.

Paying off Balances With Promotional Rates

You’ll want to have a gameplan for how to pay off your balance before the end of the promotional period. That’s because at the end of the promotional period, your credit card interest rate will increase significantly.

If you still are carrying a balance, you will have to start paying interest on the balance. And if you were under a deferred interest promotional rate, that interest will be calculated back from the initial date of purchase.

Watch Out for High Post-Promotional APRs

Using a 0% promotional interest rate can seem like an attractive option, but it can lull you into a false sense of financial security. You should always be aware that the 0% interest rate won’t last forever. Your interest rate will go up at the end of the promotional period, and if you’re still carrying a credit card balance, you’ll start paying interest on the balance.

Exploring Other Credit Card Options

There are some other credit card options besides getting a card with a promotional interest rate. For instance, you might look for a credit card that offers cash back or other credit card rewards with each purchase.

Before focusing on credit card rewards or cash back, however, you’ll want to make sure that you first focus on paying off your balance. Otherwise, the interest that you pay each month will more than offset any rewards you earn.

If you’re carrying a balance, you can also attempt to get a good credit card APR by making on-time payments and asking your issuer to lower your interest rate. By simply securing a good APR, you won’t have to worry about it expiring and then spiking like you would with a promotional APR.

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The Takeaway

Some credit cards offer promotional interest rates to new and/or existing cardholders. These promotional interest rates could be a 0% interest rate for a specific period of time, or a lower interest rate to encourage balance transfers.

While taking advantage of promotional interest rates can be a savvy financial move if you have existing consumer debt or need to make a large purchase, you’ll want to make sure you have a plan to pay off your balance in full before the promotional period ends. That way, you avoid having to pay any interest.

Another option can be to sign up for a cash back credit rewards card like the SoFi credit card.

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

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

FAQ

Will my interest rate spike after a promotional deal ends?

Yes, generally credit card promotional interest rates last only for a specific number of months. The way credit cards work is to charge interest on balances that are not paid off. So, while your credit card may charge 0% or a lower promotional rate for a period of time, the interest rate will rise once the promotional period is over and will apply to any outstanding balance on the card.

How does promo APR work?

Promotional APR offers are generally put forward by credit card companies as a way to entice new applicants. Cards may offer a 0% introductory APR for a certain number of months on purchases and/or balance transfers. Once the promotional period is over, your interest rate will rise to its normal level.

Should you close a credit card with a high interest rate?

Having a credit card with a high interest rate will not negatively impact your credit or your finances if you’re not carrying a balance. So, simply having a high interest rate is not a reason, in and of itself, to close a credit card. But if you have a balance on a credit card with a high interest rate, you might want to consider doing a balance transfer to a card with a promotional 0% interest rate while you work to pay it off.

Is my credit card’s promotional rate too good to be true?

Promotional interest rates are a legitimate marketing strategy used by many credit card companies. While you shouldn’t treat them as a scam, you also need to make sure that you are aware of the terms of the promotional rate and how long the rate is good for. Make a plan to completely pay off your balance by the end of the promotional period before your interest rate increases.

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Photo credit: iStock/Jakkapan Sookjaroen

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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A rewards credit card allows cardholders to earn incentives for purchases they already make. While the potential rewards credit card benefits are apparent, maximizing these benefits requires determining which rewards credit card is best for you. That’s because different rewards credit cards offer different types of rewards and have varying criteria for how to earn them.

Read on to learn more about how these cards work and how to choose a rewards credit card that suits your spending habits.

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What Is a Rewards Credit Card?

A rewards credit card offers cardholders bonuses based on their spending. Bonuses can come in many forms, including airline miles, cash back, or points.

The benefits of a rewards credit card will vary based on the card type. For instance, one cash back credit card may offer a flat percentage back on all purchases, while another may offer higher rates in certain categories, such as gas or groceries, and a lower rate across other areas. Meanwhile, another rewards credit card could offer cardholders one or two points for every dollar they spend using the card, which they could then redeem for airline tickets or hotel stays.

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How Rewards Credit Cards Work

Rewards credit cards operate similarly to how credit cards work traditionally, with the bonus of rewards earned based on spending. These cards offer access to a revolving line of credit that cardholders can use to make payments. Cardholders can use the card to make purchases as long as they stay under their credit limit. Anytime the cardholder makes a payment on the card, their revolving credit is restored for the amount of their payment.

Where rewards credit cards differ from other types of credit cards is that a portion of each purchase will go toward the card’s designated bonus, whether that’s cash back rewards or points to use for a hotel stay. Card issuers pay out rewards on a specific term, such as by billing period, on a monthly cycle, or based on spending. Once the rewards hit the user’s account, they can redeem them.

There are a number of ways that cardholders can redeem the credit card rewards they earn. This could include as a statement credit, for merchandise or gift cards, for stays at hotels and resorts, toward airline tickets, as a direct deposit to a bank account, or in the form of a check mailed to the cardholder.

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Types of Credit Card Rewards Programs

Rewards credit cards break down into six broad categories based on the earning and redemption processes.

Cash Back

With cash back rewards cards, users get a percentage of “cash back” on every purchase made with their card. Cash back rewards rates are typically around 1% to 2% of every purchase, but some cards may offer higher returns based on the spending category.

Cardholders can redeem cash back rewards in several ways, including as:

•   A credit against the card’s balance

•   Gift cards from select retailers

•   Donations to charity

•   A check sent by mail or direct deposit

Travel Rewards

Credit card issuers also offer general travel cards, where cardholders can earn points or miles through their spending that they can then put toward all manner of travel expenses. This could include everything from car rentals to hotels to flights, effectively allowing the cardholder to use credit card rewards to travel for less.

Typically, general travel cards offer points or miles on any purchase, often at a rate of 1 or 2 miles or points per dollar spent. However, general travel rewards cards may offer 2x or 3x points on specific spending categories, such as dining out or travel.

With general travel cards, users can typically redeem points through the issuer’s booking platform or transfer the value to a partner. Unlike co-branded cards that may restrict where cardholders can redeem their points, general travel cards usually allow redemption at a variety of airlines or hotels.

Points

Credit cards that offer rewards points can provide access to a variety of rewards, including options for cash back or travel redemption. Generally, a base rate of 1 point per dollar spent is offered.

However, the value of points can vary depending on the card issuer and how the cardholder redeems their points. Reward point cards could be redeemed for gift cards, travel, donations, or cash, depending on the issuer.

Gas

Gas cards help users save money on filling up the tank. Typically, these cards only offer rewards or redemptions for purchasing gas at a gas station. A cardholder could redeem their rewards as a statement credit or a discount at the pump.

Hotel or Airline

Hotel and airline-branded credit cards reward users when they spend with a particular company. For instance, booking nights at the same hotel brand could earn a cardholder points, bumping up their status, or give them access to room upgrades or a free night’s stay.

Similarly, airline credit cards reward users for traveling on their airline. They also can include opportunities for status upgrades, and being a loyal airline traveler could lead to receiving perks like lounge access in the airport or free bag check.

Retail

Retail credit cards is a broad designation that encompasses any credit card reward tied to a specific retailer or store. Rewards vary based on the card issuer and the store. However, they could include point-of-sale discounts with every purchase or the chance to earn points to use toward discounts and gift cards at the store.

Factors to Consider When Comparing Rewards Credit Cards

There’s a wide range of reward programs to take advantage of, and the policies of these programs vary from credit card issuer to issuer. This is why it’s important to take the time to compare rewards credit cards. Before applying for any rewards card, it’s worth looking at each of the following factors.

Annual Fees

Some rewards credit cards include an annual fee. This fee could be as low as $50, while other cards’ annual fees may range closer to $700 a year.

It’s important to consider whether the rewards you earn from the card will offset the cost of a card’s annual. Depending on how often someone uses the card, and how frequently they redeem rewards, they could determine that the fee is worth it.

Additionally, it’s worth looking into whether the card offers a lucrative opening bonus offer that essentially cancels out the annual fee, at least for the first year.

Recommended: How to Avoid Interest On a Credit Card

Interest Rates

Interest rate, or annual percentage rate (APR), is the amount of interest a person will pay on the money they borrow from the credit card issuer. If the credit card holder carries a balance month to month, they may owe interest charges on their outstanding balance.

Currently, the average APR is around 17%, though APRs on rewards cards tend to be on the higher end. A high APR on a credit card could translate to steep interest charges if the cardholder carries a balance. As such, keep an eye on the interest rate when comparing cards.

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Tiered vs Fixed Rewards

Tiered vs. fixed refers to the way the card structures its rewards, which is another important consideration to keep in mind.

With tiered rewards, a credit card offers different points or values based on the category of purchase. For example, a travel card may offer more points for a travel-related purchase as opposed to groceries.

Fixed rewards, on the other hand, offer the same rate for every purchase. An example of this is a cash back rewards card that gives cardholders 2% cash back on every purchase, no matter the spending category.

The type of rewards structure that’s right for you will depend on your spending habits. If you know you spend mostly in one category, you could find that a tiered rewards card that prioritizes that category is the right fit. But if your spending doesn’t align with the highest rewards categories, fixed rewards may pay off more.

Cashback Rewards Caps

When researching cash back rewards cards, keep an eye on the fine print around rewards caps. Some cards may cap redemption after a certain amount of spending.

For example, it may offer 3% cash back on purchases up to a certain dollar value, then only offer 1% once the cardholder hits that amount.

If you’re between two cards, the one with the higher cap — or better yet, no cap at all — could help you determine which one will win out.

Guide to Choosing the Best Rewards Credit Card for You

Rewards credit cards sound exciting, but with a little research, the question, “which rewards credit card is best for me?” inevitably comes up. While no two cardholders are the same, many can approach the search for the perfect card by asking the same questions.

Recommended: Tips for Using a Credit Card Responsibly

Analyzing Your Spending Habits

Where or what a person spends the most on will directly impact which rewards card is the best fit for them.
Here’s an example of how that would play out in the decision between credit card miles or cash back rewards. If someone prioritizes travel and lives near an airport that’s a central hub for one particular airline, they may choose to get an airline credit card that rewards their travel spending with airline miles for future flights.

However, if someone travels very little, they may benefit more from earning cash back on their everyday spending rather than airline miles.

To figure out where you spend the most, look at your credit card and bank statements from the last quarter. Whichever spending category comes up the most may be the best fit for a rewards card. On the other hand, if there are no clear patterns, a standard cash back card may be the right fit.

Checking Your Credit Score

Checking credit score may give credit card applicants a healthy dose of reality. Most rewards credit cards require a good or excellent credit score, which means a score of 670 or above. Those with a credit score lower than 670 may not be able to qualify for a rewards credit card.

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

Pros and Cons of Rewards Credit Cards

Credit card rewards may sound too good to be true, and in some ways, they are. Here are some rewards credit card benefits and drawbacks:

Pros of Rewards Credit Cards	Cons of Rewards Credit Cards
Rewards for everyday spending	Often charge annual fees
Opportunity to earn more in certain categories, depending on the card	Tend to have a higher APR
May come with additional perks like travel insurance or free credit monitoring	Generally require a high credit score to qualify

Making the Most of Your Rewards Card

Ready to reward regular spending? Keep these final tips in mind make the most of your rewards credit card:

•   Spend within your means. It may feel tempting to overspend when every purchase means more points, but overspending can lead to debt, interest charges, and even a negative impact on credit score.

•   Aim to snag the bonus. Most rewards credit cards offer an introductory bonus when the cardholder hits a certain spending threshold within a specified period. Plan purchases strategically to hit this bonus.

•   Plan card opening around large purchases. Planning a wedding, buying a house, or making a large purchase? It may be the perfect time to open a new card, as a few large charges could mean hitting the bonus.

•   Use rewards wisely. Rewards are only really redeemed when they’re spent. Take time to read up on the fine print around redemption, as there’s often a strategy associated with getting the best value out of card rewards. That may mean redeeming them for a gift card of the highest conversion rate or booking travel through the card issuer’s platform to make miles stretch further.

The Takeaway

Rewards credit card benefits can make them very enticing for many credit card holders. However, consider a card with benefits that “pay” for themselves, meaning the benefits fit within the cardholder’s lifestyle and suit their existing spending habits. A card with a high annual fee and rarely used benefits likely isn’t worth someone’s time or money.

FAQ

What are the benefits of having a rewards credit card?

The main rewards credit card benefit is earning rewards — whether points, miles, or cash back — from everyday spending. Rewards credit cards can also offer additional perks, such as free credit monitoring, travel insurance, and purchase protection.

Are credit card rewards taxable?

In most cases, credit card rewards are not taxable, as they’re considered rebates or discounts. However, if a credit card reward is given without the user doing any spending to earn it, then those rewards may be considered taxable income.

What credit score do I need to get a rewards credit card?

Most rewards credit cards require a good or excellent credit score in order to qualify. This is typically 670 or higher.

What can I do with credit card rewards?

You can redeem credit card rewards for cash, statement credits, hotel and airline bookings, store discounts, or gift cards. Ultimately, what you’re able to do with your credit card rewards will depend on the type of card you have.

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Photo credit: iStock/Hiraman

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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Using a credit card to make a purchase can be a great way to earn rewards like cash back and travel points. Because of these rewards, it can feel tempting to use a credit card for every possible purchase. This raises the question: Can you pay bills with a credit card?

In fact, it is possible to pay bills with a credit card. Keep reading to learn what bills you can pay with a credit card and how using a credit card to pay bills works.

Can You Pay Bills With a Credit Card?

Yes, it is possible to pay certain bills with a credit card. However, using a credit card responsibly is key.

When using a credit card to pay bills, it’s important to make sure doing so won’t cause you to rack up a high balance. Paying bills with a credit card makes the most sense when you can easily pay off your credit card balance in full right away.

If done responsibly, a card holder can earn credit card rewards — like cash back, travel points, and gift cards — for spending on purchases they have to make every month without paying interest. Plus, making regular, on-time payments can help boost your credit score.

Recommended: When Are Credit Card Payments Due

When Should You Not Use a Credit Card to Pay Bills?

As great as the potential to earn rewards is, if someone can’t afford to pay their credit card balance, charging their bills can lead to high interest charges and late fees (which are two ways credit card companies make money).

It also might not make sense to pay bills with a credit card if it leads to paying an extra fee from the merchant (we’ll talk more about how this happens shortly).

Recommended: Can You Buy Crypto With a Credit Card

What Bills Can You Pay With a Credit Card?

There are limitations on which bills you can pay with a credit card. And, as briefly noted earlier, you may owe a fee for using a credit card to pay bills, which could outweigh the benefits earned.

Here are 10 examples of bills you can pay with a credit card, as well as explanations on how paying these bills with a credit card works.

Recommended: What is the Average Credit Card Limit

1. Streaming Services

About 95% of streaming services accept credit card payments to cover the monthly cost of the subscription. To pay this bill with a credit card, all you’ll need to do is enter their credit card number on the streaming service’s website. The card will then automatically get charged each month unless you cancel or suspend your membership.

It’s unlikely any streaming service will charge an extra fee for using a credit card to pay for their subscription.

2. Utilities

Some utilities providers allow credit card payments, so it’s worth investigating this option to determine if it’s accepted. If your utility provider will take a credit card payment, then setting it up is usually as simple as providing your credit card number when you pay your bill online, over the phone, or through the mail. You can often set up autopay as well.

However, watch out for the additional convenience and processing fees that some providers may charge. Higher bills are more likely to offset this fee given the greater earning potential for credit card points or other rewards.

3. Cable

Cable is another bill you can pay with a credit card. To determine how to do so, you’ll want to consult your cable provider. You may be able to enter your credit card number on the online payment portal or provide this information over the phone. Setting up autopay is also usually an option with a credit card.
There is typically no additional processing fee to pay cable bills.

4. Phone

Another bill you might pay with your credit card is your phone bill. You can likely set this up online on your phone provider’s website or by giving them a call. If you’re unsure of how to pay bills with a credit card, simply consult your phone provider.

You’ll typically face no additional processing fees.

5. Internet

Your internet service is another bill that you can cover using your credit card. As with other utilities and services, consult your internet provider if you need assistance getting this set up. In general, however, you can do so through your online payment portal. If you don’t want to go through the legwork each month, you can usually set up autopay with your credit card.

Most internet providers won’t charge an additional processing fee to pay your bill with a credit card, meaning those costs won’t cut into any rewards you earn with a cash back credit card or other type of rewards card.

6. Rent

Most landlords don’t allow credit card payments, but there are third-party solutions that can allow someone to pay their rent with a credit card. This includes services such as Plastiq and PlacePay, which act as intermediaries.

However, you’ll generally pay a convenience charge or other fees. You’ll want to assess whether the benefits of using your credit card to pay rent outweigh the costs.

7. Mortgage

Mortgage servicers generally don’t allow credit card payments. However, there are third-party payment processing services through which you could pay your mortgage. Still, some credit card issuers may prohibit you from paying your mortgage through these services.

In addition to restrictions, you’ll want to look out for processing fees. These could cancel out any rewards you could earn from covering your mortgage with a credit card.

8. Car Loan

Just like mortgage services, most auto lenders also don’t accept credit cards for loan payments. If you do find an auto lender who’s willing to accept a credit card for payment, you’ll likely face a hefty processing fee.

Additionally, credit card interest rates tend to be higher than those of auto loans, so if you’re not confident you could immediately pay off your credit card balance in full, you could simply end up paying a lot more in interest.

Recommended: How to Avoid Interest On a Credit Card

9. Taxes

It is possible to pay some taxes with a credit card. The IRS allows you to pay on its website using a credit card. However, you’ll face a processing fee ranging from 1.87% to 1.98% depending on which payment processor you select. If you opt to pay using an integrated IRS e-file and e-pay service provider, such as TurboTax, your fee could range even higher.

10. Medical Bills

While you can pay medical bills with a credit card, it might not be the most cost-effective option. This is because credit cards can charge high interest and fees, and there’s the potential to damage your credit score. Many medical providers may offer interest-free or low-interest payment plans, or a personal loan could offer a lower rate than a credit card.

If you do think the rewards and convenience of using a credit card is worth the risk, the process of paying bills with a credit card will vary by medical institution. Before charging your medical bills to a credit card, you may want to at least try to negotiate medical bills down.

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

Benefits of Paying Bills With a Credit Card

There are a few key benefits associated with paying bills with a credit card.

1. Ease of Payment

It’s possible to pay a bill with a credit card online or over the phone.

2. Easy to Prove Payment

If a payment dispute arises, paying by credit card is an easy way to keep a paper trail of payments.

3. Identity Theft Protection

If either a credit card or someone’s personal information gets stolen, a credit card issuer will pay back some or all of the charges.

4. Autopay

It’s easy to use a credit card to set up autopay for bills so you never accidentally forget to pay them.

5. Can Build Credit History

Given how credit cards work, using a credit card to make payments and then paying that balance off on time and in full can help build your credit score.

6. Earn Rewards

Purchases made with a credit card helps earn cash back and credit card points.

Downsides of Paying Bills With a Credit Card

There are also some downsides to paying bills with a credit card that are worth keeping in mind.

1. May Cost More

Because many bill services charge fees to pay with a credit card, it’s possible to spend more than necessary on processing fees.

2. Can Lead to High-Interest Debt

If someone can’t afford to pay off their credit card balance after using it to pay for bills, they can end up with high-interest debt on their hands.

3. Processing Fees Can Cancel Out Rewards

It’s important to do the math to make sure that the cost of processing fees isn’t canceling out the cash back you’re earning with the purchase.

4. Leads to Another Bill to Pay

Similar to when you pay a credit card with another credit card, paying a bill with a credit card simply leads to another bill to pay. This can cause more hassle than it’s worth.

5. Can Hurt Credit Utilization Ratio

Carrying a higher balance on a credit card can lead to a higher credit utilization ratio, which is damaging to credit scores. One of the common credit card rules is to keep your utilization below 30%, meaning you’re not using more than this percentage of your total available credit at any given time.

Recommended: What is a Charge Card

Guide to Using a Credit Card to Pay Bills

At this point, it’s clear that it is possible to pay some bills with a credit card. The more important question now is not can I pay bills with a credit card, but should you pay bills with a credit card? In short, it depends.

If the bill provider won’t charge a processing fee and the consumer can afford to pay off their credit card balance in full, then paying their bills with a credit card is a great way to earn rewards and build a credit score.

However, in many cases, the processing fee some merchants charge can outweigh the value of cash back or other rewards earned. Not to mention, carrying a credit card balance can lead to incurring expensive interest and fees.

The Takeaway

It is possible to pay some bills with a credit card, but doing so can lead to paying costly processing fees or even accruing interest charges. It’s important to crunch the numbers to see if paying a bill with a credit will result in earning enough rewards to justify any processing fees.

Want to earn more rewards for your everyday purchases?

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 put non-debt bills on a credit card?

If someone can afford to pay off their credit card balance in full and the processing fee they’ll owe isn’t, it can make sense to put a non-debt bill on their credit card. They just have to remember to then pay their credit card bill to avoid owing any fees or interest, which could undercut the potential benefits.

Is it wise to pay monthly bills with a credit card?

Paying monthly bills with a credit card can lead to processing fees in some scenarios. If someone won’t owe a fee, they can benefit from earning cash back by paying their bills with a credit card. This can be a savvy move to make if they can afford to pay off their credit card bill in full each month, thus avoiding interest charges.

Is it better to pay bills with a credit or debit card?

Paying a bill with a credit card can lead to earning rewards, which a debit card can’t offer. However, if you’re worried about handling credit card debt responsibly, you may opt for using a debit card, as this will draw on money you already have in your bank account. With either a debit or credit card, however, you’ll want to look out for fees.

Should I pay off my credit card in full or leave a small balance?

It’s always best to pay off a credit card balance in full if possible before a credit card’s grace period ends. The grace period is the time between when the billing cycle ends and your payment becomes due. You won’t owe interest as long as you pay off your balance in full before the statement due date. Otherwise, you could owe interest charges and fees.

What happens if you pay the full amount on your credit card?

Paying the full amount on a credit card makes it possible to avoid paying interest. After a credit card is paid off in full, the consumer can simply enjoy the rewards they earned by making purchases with their credit card. However, having a $0 balance doesn’t necessarily boost your credit score.

Does paying a bill with a credit card count as a purchase?

Yes, paying a bill with a credit card does count as a purchase. This makes it possible to earn cardholder rewards like cash back when paying bills.

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Photo credit: iStock/Damir Khabirov

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

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

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

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

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

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

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Credit cards, when used responsibly, can enhance your financial life, allowing you to build your credit score, earn rewards, and more. Unfortunately, if you’re not careful and make credit card mistakes, using a credit card can have the opposite effect on your financial life.

Here are some of the most common credit card mistakes to avoid, including some specific travel credit card mistakes to watch out for.

Credit Card Mistakes to Avoid

When using your credit card, here are some credit mistakes you could be making — and how you can avoid them by following some basic credit card rules.

Making Late Payments

Payment history is one of the most significant factors in determining your credit score. The more payments you miss, the more your credit score could go down, and it could take a fair amount of time to repair your credit. A late or missed payment can stay on your credit report for up to seven years (unless you can prove it was a credit report mistake).

How to avoid it: Set up automatic payments, or set reminders to help yourself remember when your credit card payment is due.

Making Only Minimum Payments Monthly

While making minimum payments is important to avoid incurring late fees, it won’t allow you to avoid interest charges. In fact, by only making the minimum payment, you’ll end up paying a high amount of interest (assuming you’re not using a card in its 0% introductory period). You also risk getting further into debt if you keep using your credit card, and it could take years to pay off your balance in full.

How to avoid it: Budget carefully so you can pay off more than the minimum amount due or ideally, the entire balance off each month.

Recommended: What is a Charge Card

Misunderstanding Credit Card Interest

Interest is a key part of what a credit card is, but the way credit card interest is charged can be confusing. A credit card can have a few different annual percentage rates (APR) depending on the type of transaction, including on purchases, cash advances, and balance transfers.

The bottom line: To avoid incurring interest on new credit card purchases, make sure to pay off your balance in full each month. You’ll owe interest on any amount you carry over.

How to avoid it: Check your credit card agreement to understand how interest is charged, and aim to pay off your balance in full to avoid incurring interest.

Recommended: How to Avoid Interest On a Credit Card

Ignoring Your Credit Card Agreement

Credit card agreements contain important details like fees, your credit limit, and other important terms you’ll benefit from knowing. Ignoring credit card terms could lead to nasty surprises, like fees you didn’t anticipate paying.

How to avoid it: Set aside time to read your credit card agreement, and contact your credit card issuer if you have any questions about how credit cards work.

Neglecting Your Monthly Statement

It might seem like a slog, but reading your monthly statement is important to staying on top of your credit card account. For starters, it includes a plethora of important information, such as your statement balance, the amount of your minimum payment owed, and your payment due date. Plus, regularly reviewing your credit card statement can ensure you quickly spot any signs of fraud.

How to avoid it: Set reminders to look at your monthly statement to see how much you owe, and make sure to dispute any transactions you didn’t approve.

Recommended: When Are Credit Card Payments Due

Getting Close to Your Credit Limit

Your credit limit is the amount that you can charge your card. If you get close to hitting your limit, it could hurt your credit score because you’ll have a higher credit utilization ratio. This ratio compares your balance to your available credit, and the higher it is, the more adversely it could affect your score.

How to avoid it: Monitor your balance to ensure you’re not close to your limit — ideally, you’re only using up to 30% of what’s available to you.

Recommended: What is the Average Credit Card Limit

Applying for Multiple Credit Cards at Once

Each time you apply for a new credit card, lenders will conduct a hard inquiry, which tends to temporarily lower your credit score. While this dip might not make a huge difference, applying for multiple accounts could cause lenders to take pause, and possibly give them the wrong impression as to why you want so many new cards.

How to avoid it: Get pre-approved for a credit card before applying to see your chances of getting approved before submitting a full application.

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

Applying Without Comparing Credit Cards

There are many benefits and features that come with credit cards, and without comparing them, you may not end up opening a card that’s not the right fit. By shopping around and exploring different credit card rewards, you’ll ensure you understand your options and get the most competitive choice available to you.

How to avoid it: Take the time to think about the features you want the most from a credit card and do some research to narrow down your choices before applying.

Canceling Your Card on a Whim

Canceling a credit card could mean the issuer will require you to pay off your entire balance with interest. Plus, it could affect your credit utilization ratio since it will lower your overall credit limit. It also could shorten the length of your credit history, which is another factor used when calculating credit scores.

How to avoid it: Consider the consequences of canceling your credit card, and make sure to pay off the entire balance before you do so.

Not Reporting Lost or Stolen Credit Cards Instantly

The longer you go without reporting a lost or stolen credit card, the more likely you’ll be responsible for fraudulent changes that show up. Some credit card companies waive all fraudulent charges (or up to $50) as long as you’re quick to report.

How to avoid it: As soon as you notice your card missing, report it to your credit card company, and then continue to monitor your statements for any fraudulent charges.

Loaning Your Credit Card

When you give your credit card to someone else to use, you’re still responsible for the charges made on it. If the person you lent your credit card to doesn’t pay you back, then you’re stuck with the bill. The same applies with an authorized user on a credit card — you’re the one ultimately responsible for paying even if you didn’t make the charges yourself.

How to avoid it: Don’t let anyone borrow your card, and if you do, ask them to pay you upfront for the changes they intend to make.

Travel Credit Card Mistakes to Avoid

In addition to the mistakes above, take care to avoid these particular mistakes if you have a travel rewards credit card.

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Overspending

To earn welcome or bonus offers, credit card companies typically require you to spend a minimum amount within a certain period of time. If you don’t plan ahead properly, you could end up making unnecessary purchases and racking up charges you can’t afford to pay off.

How to avoid it: Have a plan for how you’ll meet the minimum spending requirements, such as by timing a big purchase you need to make with opening a new card.

Underspending

On the opposite spectrum, opening a new credit card and not meeting the minimum spend requirements could mean you’re disqualified from earning the welcome bonus. This would mean passing up a big benefit of getting the card.

How to avoid it: Review your spending habits before opening a credit card to ensure you can meet the card’s minimum spending requirements.

Spending Points vs. Paying a Low Cash Price

Redeeming your credit card points is fine (it’s free!), but spending them on low-value rewards may be a waste. For example, you might be able to nab a flight or hotel at a much lower price in cash than you’d get if you used points for the purchase.

How to avoid it: Research reward redemption options to ensure you maximize the value from the points you’ve earned.

Not Using Your Benefits

Travel credit cards can offer other perks, such as annual credits toward travel and free stays at hotels. However, you’ll typically need to take advantage of them within a year, and they won’t roll over. In other words, if you don’t use these benefits in time, they’ll go wasted.

How to avoid it: Read your credit card agreement to see what additional benefits you can take advantage of.

Losing Your Points

Some points earned through rewards programs expire. In other cases, you’ll automatically lose your points when you decide to cancel your credit card.

How to avoid it: Use up your points before canceling your card, or check if they expire and make sure to use them up in time.

Failing to Transfer Points

Most card issuers allow you to transfer points to travel partners like airlines and hotels. This can offer a greater value for your points compared to what you’d get through the card issuer’s travel portal.

How to avoid it: Before booking travel, check whether it’s more valuable to book through the card issuer’s travel portal or by transferring points instead.

Not Understanding Credit Card Bonus Categories

Many travel credit cards offer bonus points if you spend in certain categories. These bonus rewards tend to vary for different cards. Not understanding what each card offers could result in losing out on earning extra points.

How to avoid it: Read through the terms and conditions of each travel credit card you own to ensure you’re maximizing your earnings.

Redeeming Points at Low Value

Not all points are created equal. You might not get the same value from your travel points if you redeem them for a gift card as opposed to with partner hotels or airlines, for instance.

How to avoid it: Do your research on how best to redeem your rewards for your credit card to get the most value.

Apply for the SoFi Credit Card Today

If you’re looking for a rewards card to make the most of, 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 are some of the most common credit card mistakes?

Some of the most common credit card mistakes include not paying on time, only making the minimum payment, and not understanding the terms of your credit card agreement.

What credit card mistakes can damage my credit?

Major factors that can damage your credit include late or missed payments, having a high credit utilization ratio, and having too many new credit inquiries. Making all of these mistakes can lead to damage to your credit.

Can problems arise from not using my credit history?

Having a lack of credit history could make it harder to qualify for loans. Or, you may only qualify for ones with higher interest rates.

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Photo credit: iStock/Mikolette

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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