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A certificate of deposit (CD) can be a good option to consider as a savings vehicle for a child. With a CD, you can deposit money for a specific term, such as a few months to a few years, and earn a fixed rate of interest.

CDs are relatively safe investments; they are federally insured for up to $250,000, and can offer minimal but steady growth for a period of years.

An adult can open a custodial account for a child who will assume management of the CD account when they reach adulthood. However, there are some pros and cons you should know before opening a CD, including how CDs compare to other investment vehicles for your child.

Understanding Certificate of Deposits

A certificate of deposit is considered a type of savings account. The account holder deposits the funds and agrees not to withdraw the money for a specific period of time, in effect, loaning the money to the bank. The bank pays the CD holder interest based on the total amount deposited and the maturity date of the CD (the term).

You can open a CD at a bank or a credit union; this can be done in person or online. Most CDs are federally insured up to $250,000.

If the account holder decides to withdraw the funds before the end of the term, they are typically charged an early withdrawal penalty, often forfeiting a portion of the interest. For example, if you deposit $1,000 in a two-year CD, and you want to withdraw the funds after one year, you would only be entitled to the amount of interest earned up until that point, minus any fees or penalties.

CDs are generally considered a conservative investment, but the interest earned on a CD tends to be less than some other investments because CDs are lower-risk investments. When opening a CD account for a child, it’s important to consider whether the peace of mind and a lower return is what you’re after, or whether you’d like an investment that potentially offers more growth, but also possibly more risk.

Can a Child Have a Certificate of Deposit?

A CD for kids can be a solid start to an investment plan for your child. It’s also a way to help explain the dynamics of saving to them and what it means to earn interest on a principal deposit.

That said, minors cannot legally open CDs. An adult must acquire a CD for the child and then transfer it to them when the child reaches adulthood.

One thing to keep in mind about a CD for kids is that funds held in CDs and other savings accounts can affect a child’s eligibility for future financial aid. This is an important consideration, which could affect how much a family might pay for college tuition.

Who Would Own the CD?

A minor cannot apply for a CD, but they do own it. That means that the account cannot be given to anyone else.

An adult, usually a parent or legal guardian, can open a custodial account for a minor under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act, which is an extension of the UGMA. A custodial account allows one person to deposit funds into an account for another. The account can be transferred to the child once they reach adulthood. The age of adulthood is not federally mandated. However, in most states, it is age 18.

How to Give a Certificate of Deposit to a Minor

Here’s how to set up a CD for a minor child, and transfer the account to them when they reach adulthood.

Select the Bank Where You Want to Purchase the CD

Explore bank account options and decide which bank or credit union you want to hold the CD for your minor child. Compare interest rates based on the amount you intend to deposit and the term for the CD. Also, look at any penalties and fees the bank might charge.

List Yourself as the Custodian and the Child as the Owner

Fill out the form online or in person stating that you will be the custodian and the minor will be the owner of the CD. You will be asked to provide identifying information such as your Social Security number and the child’s Social Security number.

Deposit the Money in the CD

Deposit the desired amount into the CD account, taking into consideration how different amounts and terms might affect the interest rate paid.

Discuss What to Do With the Funds

Opening a CD account for a child presents a “teachable moment,” in that the minor child, who is the owner of the CD, needs to think through what the money can be used for once the CD reaches maturity. When the CD matures, you can cash it out, or renew the CD. If the child is of legal age at that point, the account is transferred to the child. You may have to contact the bank to remove your name from the account.

Recommended: What Are No Penalty CDs?

Are CDs a Good Choice to Help My Child Save?

CDs are among the lower-risk investment options, and a good way to help a child save.

That said, CDs are also low-yield investments. If you are saving for your child’s education, funding a 529 college savings plan might offer more growth potential over time, if that’s your goal.

For longer-term savings, opening a Roth IRA may also be a good choice for parents hoping to provide financial security for their child.

Tax Implications of CDs for Kids

There are tax considerations to opening a CD for kids. Taxes are typically due on earnings when the CD matures, but a child will likely be in a lower tax bracket than an adult, so at least some of the earnings could be taxed at a lower rate.

The IRS taxes kids’ unearned income, such as interest, dividends, and capital gains, in tiers. In 2024, for a child with no earned income, up to $1,300 in unearned income is not taxed. The next $1,300 is taxed at the child’s tax rate. Any amount over $2,600 is taxed at the parent’s rate. So that is something to keep in mind.

The custodian of a CD should also be aware that they can give up to $18,000 in 2024 to a child without owing gift taxes.

Financial Aid Implications of CD Earnings

There are some implications of CD earnings regarding financial aid. If a child is applying to college and has savings in a UGMA, those assets will need to be disclosed on the Free Application for Federal Student Aid (FAFSA). It may be that the student will have to pay more of their college costs than if their money had been put in a 529 college savings account.

Is a CD a good investment for a child? That depends on the length of time between the opening of the CD account, and when the child reaches the age of majority. If the child is a teenager, a CD will provide a guaranteed amount of money, and there is no risk of loss if the market drops.

However, CDs don’t earn a lot of interest, and a growth-oriented investment might earn more and grow faster if the child is younger.

Finally, as noted above, if you are saving for the child’s education, you may want to explore a 529 college savings account, instead of or in addition to a CD for a child.

Where Can I Find a CD for a Child?

Most banks and credit unions offer CDs, and they allow custodians to open accounts for a child. Online banks can also be convenient. Many offer competitive interest rates and lower fees. Be sure to compare the interest rates and APY of each bank and make sure to understand the penalties that will apply if you withdraw the funds early.

The Takeaway

There are many ways to help your child save. Which one is the best depends on the ultimate use of the funds. CDs are lower-risk, they are federally insured up to $250,000, and they may offer higher interest rates than regular savings accounts. However, other options to consider are a 529 college savings account and a Roth IRA.

CDs are easy to open; most banks and credit unions offer these products. They earn interest on the amount invested as long as the funds are not withdrawn before the CD’s term. If the custodian does withdraw funds before the maturity date, the bank will charge a penalty.

Most online banks also offer CDs, and an adult can open a custodial account online for a child. The child is named as the owner of the account, and they will assume management of the account when they reach adulthood according to state laws.

FAQ

What is the best way to save money for a child?

The best way to save money for a child depends on your goals. Some options include a savings account or a custodial CD, a 529 college savings account, or a Roth IRA. Explore the options to determine which is best for your situation.

Can you buy a CD as a gift?

Yes. Under the Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA) an adult can gift a CD to a child.

Can I open a CD for my child?

Yes. Opening a CD account for a child is easy using a custodial account. The child will be named as the owner and you as the custodian. The owner (the child) will assume full legal ownership of the CD when they reach adulthood. The account cannot be given to anyone else but the named holder.

Photo credit: iStock/Hispanolistic

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

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® 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.

3.30% APY
Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

SOBK-Q224-1927439-V1

The longer you live in your house, the more obvious it may become that you could use more living space — perhaps for a guest bedroom, home office, or workout space. Your first thought might be to build an addition, but the sticker shock may cause you to shelve that idea and instead consider an attic conversion.

Fortunately, an attic conversion is an idea that may be more economical than a complete home addition. Read on for a full breakdown of the cost to finish an attic.

Should You Convert Your Attic Space?

There are many benefits of converting an attic into usable space, including:

•   The space already exists in your home, making this choice both cost- and time-effective.

•   You don’t need to pour a foundation, again making it a more viable and economical option.

•   Wiring is likely already in place and can be modified to suit your needs.

An attic conversion also allows you to use the entire envelope of your home, rather than wasting potential living space.

Before you fully commit to your attic remodel, though, it’s crucial to make sure your attic has the potential to become a usable living space (more on that below).

Tips on Converting an Attic

One of the first things you might do before converting your attic is to see if your roof is being supported by W-shaped trusses in your attic. If so, building an addition might be a better choice. If your attic contains A-shaped rafters, though, that’s a plus; if there’s enough open space beneath the rafters, then you can potentially convert your attic into usable space.

Other steps to take before an attic remodel include:

•   Check your local building codes to make sure your remodel will fit. The rules vary by area but a typical requirement is that the attic space must be at least 7.5 feet high and over 50% of the floor area. The thickness of the material will also factor into the final headroom and ceiling height. The quickest way to add significant costs to your attic remodel is to be forced to change course mid-project because of a code violation.

•   Determine how you’ll get into the space. Will you need to add a staircase or expand the current one? Stairs that go straight up will need more floor space than, say, spiral staircases. Or perhaps your only option is a pull-down access point; this will limit what furniture and materials you can fit into your attic conversion and how utilitarian the new living space might be.

•   Consider whether you’ll need to add windows. If you’re creating an additional bedroom, codes may require an egress window in case of fires. But even if they aren’t required, you might consider adding windows or punching skylights that open to brighten the space with natural light.

•   Decide how much flooring needs to be reinforced, along with any electrical or plumbing issues. If you ultimately decide that your attic has what’s needed for a successful conversion, it’s time to think both practically and creatively to shape what may well become the most interesting — and potentially challenging — room in your house.

•   Consider your priorities and budget. Once you get a sense of costs (listed below) and what’s most important to you, you’ll want to come up with a budget and a plan for how you’ll pay for the upgrade. If you don’t have enough cash to cover the project, you may want to explore financing. Funding options for finishing an attic include using a credit card (generally the most expensive route), getting a home improvement loan (a type of unsecured personal loan designed for small to mid-sized home renovations), or applying for a home equity loan or line of credit (which uses your home as collateral for the loan).

•   Consult with a professional unless you’re already an experienced builder. Ask friends, family members, and building associations for recommendations and referrals, then request quotes from at least three contractors to understand both possibilities and associated costs. When you contact contractors, ask them for credentials. Compare bids and, tempting as it may be, don’t automatically choose the lowest one. Make sure the contractor describes what will be provided as well as the estimated time frame.

Want to know how much value your attic conversion will bring to the table? Check out SoFi’s Home Project Value Estimator.

How Much Does It Cost to Finish an Attic per Square Foot?

On average, you can expect to pay between $10,600 to $50,000 — or $50 and $150 per square foot — to refinish your attic, according to Angie (formerly Angie’s List). A specialized or high-end attic conversion can cost as much as $200 per square foot.

Overall, costs vary depending on the overall square footage and the materials you use.

How Much Does It Cost to Finish an Attic per Task?

If you hire individual contractors for each aspect of your attic remodel, then it’s easy to see what each portion of the remodel is costing you. However, if you hire a contractor to manage the entire project, you likely won’t receive the project broken down into great detail.

What follows is a breakdown of common costs involved in an attic renovation.

Cost of Walls and Ceilings

New walls and ceilings can effectively transform an unfinished attic into a space that’s both comfortable and livable. Although prices vary by where you live, attic drywall can cost an average of $1,000 to $2,600 to install, with ceilings costing anywhere from $200 to $12,000.

Other aspects to consider: Will you paint the walls and ceilings? Add wallpaper? Do you need trim and crown molding? All of these features will be additional costs and can quickly cause your project budget to skyrocket.

Cost of Flooring

Flooring is another important consideration, so first think about what’s located directly below the attic space. Do you need soundproofing? If a bedroom is located below the attic space, you’ll likely want some sound control. Insulation provides that to some degree, and carpeting adds even more dampening.

The cost of attic flooring will depend on the current state of the attic and what materials you choose. Replacing floor joists to beef up the strength will cost anywhere between $1,000 and $10,000, while installing subfloor will run between $500 and $800. Installing the flooring itself averages between $1,531 and $4,848, depending on material and square footage.

Recommended: Renovation vs. Remodel

Cost of Windows and Skylights

If there currently are no windows in your attic, you may want to add an egress window, which will run you between around $800 and $2,400, as a safety precaution. You also might want windows or skylights to brighten the space with natural light. Expect to pay an average of $2,500 – $5,500 to install an attic window, and $1,000 to $2,400 to add a skylight.

Recommended: How Much Does It Cost to Replace Windows?

Cost of Heating and Cooling

Your attic conversion might require additional heating and cooling. The price to install an attic fan is around $400 to $900, and a standard window AC costs about $150 to $800 per unit. A skillful contractor could also potentially tie in your current climate control system.

For heat, baseboard heaters run $942 on average. If you need to add HVAC ductwork and vents to extend your home’s AC and central heating systems to the attic, you can, expect to pay anywhere from $1,000 to $5,000.

If your attic is difficult to access during the renovation period, contractors may tack on a surcharge. To get an idea of how much your attic renovation will cost, you may want to use an online home improvement cost calculator.

How Much Does It Cost to Finish an Attic Yourself?

It’s generally cheaper to go the DIY route than to hire a professional — though you will need some know-how. If you’re making minor improvements to your attic space (such as adding an attic fan and cleaning it up, you may be looking at an attic remodel cost as low as $300. However, if you’re looking to make a total transformation, your costs for materials could run as high as $50,000.

Though you’ll certainly save on labor costs, make sure to take into account the time involved if you decide to do it yourself as opposed to bringing in a professional.

Recommended: Four Ways to Upgrade Your Home

How Much Does It Cost to Finish an Attic by Type?

How much it costs to finish an attic will also vary depending on the type of attic space you’re creating. Here’s a look at how much an attic remodel costs by attic type.

Cost of Finishing a Walk-Up Attic

The cost of finishing a walk-up attic generally ranges anywhere from $8,100 and $26,000. Large portions of the costs are typically adding a staircase and installing flooring.

Finishing an Attic as a Storage Space

If you’re finishing an attic to serve as a storage space, your costs are generally a little lower as there isn’t as much polishing involved. Generally, the attic remodel cost for a storage space runs from $4,600 for a simpler setup to $18,900 if the space is larger and you opt for more elaborate storage systems.

Cost to Finish an Attic With a Dormer

Installing a dormer — a window that juts out vertically on a sloped roof — can add in some ceiling height and natural sunlight into an attic. However, it will set you back. On average, the cost to add in a dormer along with finishing the attic can run between $8,800 and $32,400.

Cost to Finish an Attic Above a Garage

The cost to finish an attic above a garage can vary widely depending on what’s involved, such as the installation of heating, insulation, or ventilation. You can typically expect to pay anywhere from $4,600 up to $24,000.

Recommended: Garage Conversion Ideas Worth the Effort

What Factors Influence the Cost of Finishing an Attic?

As you may have guessed from the wide-ranging estimates above, the cost of finishing an attic can vary a lot depending on what’s involved and what materials you use. Here a look at some major factors that can affect how much it costs to finish an attic.

•   Square footage: How large your attic is will play a big role in the total costs involved in remodeling. The bigger an attic is, the more materials required and the more time it will take to finish it, which translates to additional labor costs.

•   Need for structural changes: You’ll also pay extra if your attic is an odd shape or difficult to access. These challenges could call for structural updates, such as the addition of height, the expansion of space, or the creation of a staircase.

•   Intended use: Your planned purpose for your attic will also influence cost. If you just want to add in some additional storage space, you’ll pay a lot less than if you plan to install a full suite complete with a bedroom, bathroom, and closet.

•   Extra features desired: Perhaps unsurprisingly, the more features you want in your newly remodeled attic, the more it will cost you. Big-ticket items include windows, electricity, plumbing, and heating and cooling.

Of course, another factor that influences your cost is whether you need to get financing for the project and, if so, what terms you’re able to secure.

The Takeaway

An attic conversion can be one way to create a unique room and add more usable space to your home. It also tends to be more economical than adding an addition to your house. There are a lot of technical aspects to consider, and before getting started, it’s best to check with your local building department so you know any building or permit requirements upfront. You can then come up with a project wishlist and start soliciting bids from at least three contractors.

At the same time, you’ll want to determine if you’ll pay cash or finance all or some of the project. One financing option you might consider for an attic renovation is an unsecured personal loan. Offered by banks, credit unions, and online lenders, rates are typically lower than credit cards. And unlike a home equity loan or home equity line of credit (HELOC), you don’t need to use your home as collateral to qualify.

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.

Getting married can be a pricey proposition, with the average wedding in the U.S. now running $35,000. If you don’t have access to a large stockpile of cash, you may think you’ll never be able to afford the kind of wedding you envision. But that’s not necessarily the case. The key is to start budgeting and saving well ahead of the big day.

Whether you long for a fairy tale wedding or you prefer something more scaled back, there are ways to save for your dream day that will ensure you have the magical moment you’ve always wanted without having to start off your marriage mired in debt.

Set a Budget

Do you want a big lavish wedding worthy of the royals? A destination wedding? Or maybe you want something more intimate with just a few friends and family? There are different levels of spending when it comes to weddings, and deciding what is most important to you can help you determine just how much you’ll need to save.

Is the venue a priority? The number of people? The food? The DJ (or band)? It’s smart to start by making a list and getting a solid estimate of the costs for each of your need-to-haves and your want-to-haves. It’s also wise to leave a little wiggle room for unexpected wedding costs. Little things like the marriage license, dress or suit alterations, and even insurance costs, can start to eat into your budget pretty quickly.

Start a Savings Plan

Before you’ve locked in the date, you and your partner can start a savings plan. Some couples open a separate bank account and set up automatic monthly transfers to that account to build their wedding fund. When savings are automated, you often don’t notice the missing funds. And by picking an account with a competitive interest rate, your money can make money while you continue to plan and save.

If you’re thinking about financing part of your wedding, you’ll want to start investigating your options, which can range from credit cards to personal loans (which typically have lower rates than credit cards), early on and weigh the pros and cons of taking on debt.

Put the Wedding First

Sure, you may want to go on vacation, eat at fancy restaurants, and buy those new clothes, but that will put you further from your goal. Instead of spending on those luxuries now, cutting back and putting that money into your shared dream wedding account can help you get to your savings goal quicker.

There are also some simple ways to cut back that won’t make you feel deprived. For example, you can take local day trips or regional vacations instead of traveling afar. Eating out just once a month and cooking at home more can cut costs. You could even get swanky and hold cocktail hour with friends at your house instead of going to happy hour. Your new bank account will thank you.

Recommended: The Cost of Being in Someone’s Wedding

Do It Yourself

One way to keep wedding costs down is to plan the majority of the wedding yourself. If you already have experience managing projects, then this should be within the realm of your abilities. Researching the typical steps and fees associated with weddings before making any concrete decisions can be helpful. If that feels daunting, you may want to keep in mind that wedding planners cost an average of $2,100. And while there are advantages to using a planner (they already have a contact list of professionals and know their rates, saving you a lot of time and energy), the downside is you could be getting a one-size-fits-all experience instead of the personalized ceremony and party you may want.

Recommended: 8 Tips for a Budget Dream Wedding with Budget Breakdown

Comparison Shop

Just like other big expenses, getting more than one quote for each service you need can help you find the best price point to fit your needs and wants. Does your preferred venue charge a premium for a wedding, but a lower price for a party? You may want to consider negotiating the price. Calling multiple DJs and catering services can help you ensure you are not overpaying. New York City is going to have very different rates than, say, Asheville, North Carolina. This might even be a factor in deciding when to have your wedding, too. For a better idea of how much costs can vary, you can check out this comparison of costs by state .

You can wind up saving a ton of money by doing away with an expensive venue altogether and looking for a free or really inexpensive location, like parks, gardens and even beaches.

And if you’re able to hold your celebration on a weekday or during off-season, you’re likely to find some additional savings. For example, you can pick Friday instead of Saturday; or you can have a fall or winter event to help lower your costs.

Reassess the Dress

Maybe your dream wedding includes a Vera Wang gown, but your bank account can’t swing that. Consider shopping for a vintage dress and having it altered. Or if you want a more modern look, you don’t necessarily have to buy brand new — wedding dresses are usually only worn once and then either sit in the back of a closet or get sold or donated. Resellers often offer beautiful dresses at a fraction of the initial cost.

Consider this: Dresses less than three years old are usually sold for half their original price. And that Vera Wang might not be out of reach after all if you buy it used. Designer brands can sell for 60% to 70% of their original cost.

Recommended: What is the Ideal Wedding Budget?

Where not to Cut Costs

While you might not have much of an appetite on your big day, your guests likely will, so it’s a good idea not to scrimp on the food. It doesn’t have to be a five-star, multi-course meal, but if you want to create a memorable experience for all, it’s smart to offer quality food that doesn’t leave anyone grumbling about “wedding food.”

And what good is a dream wedding if you have bad or no photos to remember it? A good photographer can capture all of the moments of both you and your guests. These are photos that you will cherish when you are older and wiser, that will adorn your dresser and be sent out to family, so skimping here is best avoided if you can. The average cost of a wedding photographer is about $2,900, but It could end up being the best you put toward your special day.

Recommended: 2024 Wedding Cost Calculator with Examples

The Takeaway

Saving for your dream wedding might seem impossible, but it’s within your grasp if you’re willing to put in the time and effort. By cutting a few everyday costs and making automatic transfers into a high-yield savings account every month, you and your soon-to-be spouse will be able to slowly but surely build your wedding fund.

You can also find ways to trim wedding costs while still staying true to your vision for the day. If you find you’ll still need to rely on some type of financing to pay for your big day, be sure to look at all your options to find one with the least cost.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

Photo credit: iStock/standret

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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.

Adding supplementary credit cards — credit cards tied to a primary credit card account — can be a good way to help someone establish credit. For example, adding a supplementary credit card for a child can help them build credit, since they will get the benefit of the primary cardholder’s good credit history. Someone working to rebuild their credit could also benefit.

Still, it’s important to keep in mind that the primary cardholder is responsible for any charges made by any authorized users on the account. Read on to learn more about who can benefit from a supplementary credit card and the pros and cons of adding an authorized user to your account.

What Is a Supplementary Credit Card?

A supplementary credit card, also known as an authorized user credit card, is a secondary credit card tied to the account of an existing user. This existing user could be a trusted friend, family member, or caregiver. The primary cardholder is responsible for all charges made by any authorized users or supplementary credit card holders.

Recommended: What Is Considered a Fair Credit Score?

How Do Supplementary Credit Cards Work?

When you add a supplementary credit card to your credit card account, your credit card company will send a new physical card. The credit card issuer will typically mail the card to the address of the primary cardholder in order to prevent fraud.

In some cases, the supplementary credit card number will be the same as the card number of the primary credit card. In other cases, it may have a different number. Either way, all charges made on the account — including those made by supplementary cardholders — are the responsibility of the primary cardholder.

Supplementary Credit Card Annual Fees

For most credit cards, there is not a charge to add a supplementary credit card or authorized user. However, some premium cards, such as The Platinum Card from American Express, do charge an annual fee for additional cards.

Supplementary Credit Card Sign-Up Bonuses

Typically there is not a sign-up bonus or welcome offer for adding a supplementary card user. If you want to enjoy credit card bonuses, you must apply as the primary account holder.

Supplementary Credit Card Earnings and Redemption Rates

The earnings rates for supplementary credit cards are the same as the rates for the primary credit cardholder. Because the primary cardholder is financially responsible for all charges, they will receive the benefits of all rewards, regardless of which account makes the charges.

Who Needs a Supplementary Credit Card?

A supplementary credit card can be useful for someone who does not meet the credit card requirements to qualify for a credit card on their own.

For instance, you can get a supplementary card for a child to help them establish credit. Adding them to your account also offers an opportunity for you to teach them the ins and outs of using a credit card responsibly.

You might also add a trusted friend or family member to your account to help them build their credit score although this will depend on the primary cardholder keeping the account in good standing. Another reason you might add an authorized user to your account is to allow them to take advantage of travel or other benefits when you are not with them.

It’s also possible to add someone as an authorized user without actually giving them a card. This can allow them to enjoy the benefits to their credit score without the risk that they’ll overspend or otherwise use the card irresponsibly.

Pros and Cons of Supplementary Credit Cards

While there are benefits to supplementary credit cards, there are also downsides that are worth noting. Consider these pros and cons.

Do Supplementary Credit Cards Affect Your Credit Score?

Yes, using a supplementary credit card can affect the credit score of both the primary and the secondary user. Depending on how a credit card is used, the effects could be either positive or negative.

If all cardholders on the account use their credit card responsibly, a supplementary credit card can have a positive impact on their credit scores due to how credit cards work. However, if the supplementary cardholder makes charges that the primary cardholder can’t repay, both of their credit scores could go down. Similarly, if the primary cardholder fails to make on-time payments, that could hurt the supplementary cardholder’s credit rather than helping it.

This is why it’s important that both cardholders are on the same page when it comes to credit card rules and best practices.

Recommended: When Are Credit Card Payments Due

How Much Do Supplementary Credit Cards Cost?

In most cases, there is no charge for adding supplementary credit cards or authorized user cards. However, some credit card issuers do charge an additional fee for adding supplementary cards. Make sure to check with your issuer before ordering one.

Applying for a Supplementary Credit Card

Because any supplementary credit cards are tied to the account of the primary cardholder, you can’t apply for a supplementary credit card directly. Instead, the primary cardholder will need to request an additional card directly from the issuer.

To do so, the primary cardholder can either call the customer service number listed on the back of their credit card or request an additional card through their online account or app.

Alternatives to Supplementary Credit Card

Opening a supplementary credit card can be a good way to help a family member build their credit, but it does come with some risk. One alternative to giving someone a supplementary credit card is to open a supplementary credit card account but keep the actual card.

With this arrangement, the authorized user gets the advantages of a supplementary account — namely, building their credit through the primary cardholder’s responsible use — without the risk that they will use their card irresponsibly.

The Takeaway

Supplementary credit cards, or authorized user cards, are additional cards tied to the credit card account of a primary cardholder. When used responsibly, they can help the authorized user build or establish credit. However, the primary account holder is responsible for all charges made by supplementary cardholders, so there is also some risk if the supplementary credit card is used irresponsibly.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

Are bills paid with the card number of the primary or supplementary card?

The card numbers of the primary and supplementary cards are both tied to the primary cardholder’s account. As such, the primary cardholder is responsible for all charges made, including by authorized users.

Is a supplementary credit card the same as a joint card?

A joint credit card account allows two people to use the same credit card account, with both account owners holding responsibility for all charges made to the account. In contrast, a supplementary credit cardholder is not responsible for charges they make. Instead, only the primary cardholder is financially responsible for all charges made by any user.

Who is responsible for a supplementary credit card?

Only the primary account holder is responsible for charges made by any and all authorized users. Any secondary or supplementary cardholders are not considered financially liable for any charges they make.

Does a supplementary card affect credit score?

Yes, having a supplementary card can affect your credit score. It can help build credit when used responsibly. But because the primary cardholder is ultimately responsible for all charges, their credit could suffer if an authorized user uses the card irresponsibly. An authorized user could also see their score suffer if the primary account holder fails to manage their account responsibly.

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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 .

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Credit card residual interest is interest that builds up between when your billing cycle ends and when the issuer actually receives your payment. Read on to learn more about what is residual interest, when it may apply, and how you can avoid it.

What Is Credit Card Residual Interest?

Residual interest, also called “trailing interest,” is one of the ways credit card companies make money. It’s a finance charge that’s applied to any balance that is carried over to the new billing cycle.

The charges accrue from the date your statement was issued until the bank receives your credit card payment.

How Credit Card Residual Interest Works

If you thought you paid your last credit card bill in full, you might be surprised to see a residual interest charge on your next statement. However, this can occur if you keep a rolling balance on your credit card, meaning you’ve carried an unpaid portion of your credit card balance from month to month.

Some credit card issuers charge interest based on a daily periodic rate. To calculate your daily periodic rate, the issuer divides your APR (annual percentage rate) by 360 or 365 days. Then, it adds the result to your daily balance.

Here’s where credit card rules around interest get tricky, so take a closer look:

•   Your card issuer is required by law to provide you with your billing statement at least 21 days before your credit card payment due date. If you always make on-time full payments, your card issuer typically won’t charge interest during this “grace period.”

•   However, if you’ve been rolling over a balance to your new statement, trailing interest on the old charges are applied. You’ll also lose your grace period for new purchases made during the billing cycle so interest charges accrue immediately. Each day that the balance goes unpaid, the residual interest compounds.

•   Since this residual interest is added during the days after your billing statement was sent, they can feel like unexpected credit card charges on your next billing period despite making the “full” payment the prior month.

Do All Credit Cards Charge Residual Interest?

Generally, the practice of charging residual interest is common across credit card companies. However, how and when it charges trailing interest varies between issuers.

If you’re unsure how your card issuer handles this type of interest charge, review your credit card agreement, or contact your issuer directly to learn more about its terms.

Why Is It Important to Keep Track of Residual Interest?

Residual interest can impact your finances in many ways. For starters, you’ll owe more money on interest fees and miss out on a grace period. Additionally, a residual interest charge can easily slip past your radar if you thought you’ve zeroed-out your credit card balance.

If you didn’t add new card purchases during a billing period, you might not even look at your new statement and can easily miss a residual interest charge. This seemingly small issue can snowball into a late payment — or worse, a missed payment — that adversely affects your credit rating.

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

Tips for Avoiding Credit Card Residual Interest

To avoid this costly mistake, make sure you’re practicing smart habits when using a credit card responsibly.

Making the Full Payoff Amount

Given how credit cards work, the best way to know your card’s true outstanding balance is to directly ask your credit card issuer for your “full payoff amount.” Since residual interest is charged daily, your full payoff amount will change each day your account goes unpaid.

On the day you’re ready to make your credit card payment, contact the phone number on the back of your credit card. Ask the associate for your full payoff amount to date. Or look for this information on the credit card issuer’s website or in their app. This is the payment amount you can make toward your bill to fully pay your account.

Paying Your Bills on Time

If you haven’t carried a balance between statements and your credit card offers a grace period, making a payment for the full statement balance by the credit card’s due date is enough to prevent residual interest. This can also help you maintain your grace period.

If you’ve already rolled over a balance, pay off your total account balance before the billing cycle closes. This can help you avoid trailing interest charges that start between the date your statement is sent and when the bank receives your payment.

Considering a Balance Transfer to a 0% APR Card

A 0% APR balance transfer card can be a useful tool if you have a balance that’s too large to pay off early or in one fell swoop. Balance transfer cards effectively allow you to pay a credit card with another credit card by transferring the prior balance onto the new card at no interest.

Keep in mind that the promotional interest rate is only valid for a short period of time. For example, the transferred amount might incur no interest for six months or a year, depending on the balance transfer terms. After that, the standard interest rate will apply.

When considering this strategy, make sure you weigh the pros and cons of a balance transfer card, such as the cost of a balance transfer fee. This fee might be a fixed dollar amount or a percentage of the amount you’re transferring. Always do the math to ensure that the amount you’ll save on residual interest from your original card outweighs the balance transfer fees.

Recommended: How to Avoid Interest On a Credit Card

How Long Does Credit Card Residual Interest Last?

Typically, if you’re hit with residual interest, it might take about two consecutive statement periods to clear out residual interest charges. However, you can get rid of residual interest faster by contacting your card issuer to request your full payoff amount.

The Takeaway

Carrying a balance into a new statement period results in losing your interest-free grace period on all purchases shown on that statement. You’ll owe residual interest on purchases carried over from the previous cycle, and you’ll also be charged interest immediately on new purchases made within the new billing cycle.

To avoid getting residual interest credit card charges, always pay your entire statement balance in full. By doing so, you can pay less interest (or none at all) on your credit card purchases.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

What is credit card residual interest?

Residual interest is the interest that’s charged on purchases you’ve rolled over from one statement into the next. It starts accruing the day after your new billing cycle begins to the date when the bank receives your payment.

Do all credit cards charge residual interest?

Yes, most credit cards charge residual interest when you carry over a balance between billing statements. However, when and how your card issuer applies residual interest can vary; check your card’s terms of agreement to learn more.

How can I pay off residual interest?

If you see a residual interest charge on your credit card statement, the best way to pay it off is by making a payment for the full payoff amount, rather than just the statement balance. This helps you capture daily trailing interest charges as of the day you plan on making a payment.

Photo credit: iStock/fizkes

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