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The average salary in the U.S. is $69,846.57, according to the latest data from the Social Security Administration. How your salary compares will depend on your industry and skilI set, as you’d expect. What you might not realize is that your salary is also greatly influenced by where you live, since salaries go hand in hand with the cost of living.

Here’s a closer look at the average salary in the U.S. and how income varies from state to state.

What Is the Average US Salary (2026)

The national average salary is $69,846.57. That is the sum of all incomes divided by the number of workers. Where someone lives, their industry, their education level, and the current demand for their job all contribute to how much a worker earns per year.

💡 Quick Tip: Online tools make tracking your spending a breeze: You can easily set up budgets, then get instant updates on your progress, spot upcoming bills, analyze your spending habits, and more.

Average Salary vs Median Salary: What’s the Difference?

The Bureau of Labor Statistics (BLS) provides data on median pay. As of Q2 2026, the median weekly earnings of full-time workers was $1,251, or $65,052 per year. The median is the midpoint in the data set, with 50% of incomes falling above that figure and 50% below.

Why are the average and median income figures different? With averages, unusually high or low numbers can skew the results. For instance, multi-millionaires or billionaires might drive the average higher than what the typical worker actually makes. The median is less affected by outliers.

US Average and Median Salary by State in 2026

The following chart shows both the average and median incomes (in single-income households) in each state, according to data from Forbes and the U.S. Census Bureau.

Recommended: Salary to Hourly Calculator

Why Do States Have Different Average Salaries?

The chart shows that the average salary in some states is quite different from the average salary nationwide. That’s partly because the cost of living, which affects how much a company pays its employees, varies significantly by state.

Also, inflation impacts states to varying degrees.

In addition, industries with a concentrated presence in certain states, such as banking or automobile manufacturing, can affect the overall quality of job opportunities in that area.

Which Regions Pay the Most?

Salaries tend to be higher in some areas of the country. Cities on the West Coast and in the Northeast have some of the highest average salaries:

•   Massachusetts

•   New York

•   Washington

•   California

•   New Jersey

•   Connecticut

•   Maryland

Remember, while these states have higher incomes, they may also have a much higher cost of living and higher housing prices.

Recommended: 25 Highest-Paying Jobs in the US

Which Regions Pay the Least?

The South is home to states that tend to pay the least:

•   South Carolina

•   Kentucky

•   Louisiana

•   Alabama

•   Arkansas

•   West Virginia

•   Mississippi

To determine what your personal cost of living is, try tracking your expenses with a free budget app for a few months.

Recommended: Biweekly Money-Saving Challenge

Should You Move to Make More Money?

It’s important to remember that just because a state has a higher average salary, that doesn’t mean it’s more profitable for workers to live there. Higher salaries tend to correlate with a higher cost of living.

Before making a major move, first try living below your means. One reason that people who make more money still have trouble paying their bills is the phenomenon of lifestyle creep. This is when your so-called needs expand to consume your current salary.

One of the most effective ways to counteract lifestyle creep is to downsize your home. Reducing your housing expenses to less than 30% of your gross income could help you pay down debt, increase savings, and become more conscious of how lifestyle choices affect spending.

💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

The Takeaway

The average annual salary in the U.S. is $69,846.57. The median annual salary, which is often less skewed by outlying numbers, is $65,052. It’s worth noting that average and median salaries vary quite a bit by state. States in the Northeast and on the West Coast tend to pay higher salaries, while those in the South often pay less. What’s stopping people from moving to a higher-paying state? Often, it’s housing prices, which rise along with the cost of living in “richer” states.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

How much do the top 10% of Americans make per year?

The top 10% of Americans earn $128,560 per year. Some top earners live in higher cost of living areas, so it could be more revealing to see how much the top 10% earn in your state.

What percentage of Americans make over $75K?

Only 12% of Americans make in the $75,000-$99,999 range. An additional 16.7% make between $100,000 and $149,999, and 15.1% earn in the $50,000-$74,999 range.

Which US state has the highest salary?

Massachusetts is the state with the highest average annual income of $83,050. This salary is significantly more than the national average salary of $69,846.57.

What is a good salary to have in the US?

What’s considered a good or comfortable salary in the U.S. varies. Cost of living and regional differences affect salary levels, so what is considered a high income in one state may not get you as far in another state. With the national average salary being $69,846.57, being around or above that amount can be a good salary depending on your location.

Which US state has the lowest salary?

Generally, states in the South pay the lowest salaries. According to Forbes’ most recent data, Mississippi has the lowest average salary at $49,740, followed by Arkansas at $53,070 and West Virginia at $54,940.

About the author

Jacqueline DeMarco

Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.

Photo credit: iStock/artpipi

SoFi Coach 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 must confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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.

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.

SORL-Q326-026

It can take time to build credit and achieve a high credit score, especially for a 23-year-old who may have recently entered the workforce or still be in school. But as of September 2025, Generation Z, which includes people aged 18-28, had an average FICO^® credit score of 678. This is considered a “good” score that gives you access to more financial products and better interest rates than people with a lower score.

Learn more about the average credit score of a 23-year-old, what factors play a role in calculating credit scores, why credit scores matter, and some steps you can take to boost your score.

The Average Credit Score for a 23-Year-Old

As mentioned above, the average FICO credit score for a 23-year-old is 678, according to Experian^®, one of the three credit bureaus. (The other two are TransUnion^® and Equifax^®.)

Since the lowest credit score you can have is 300 and the highest is 850, this number puts you in a favorable place. You also have an opportunity to work on increasing your score.

Recommended: FICO Score vs. Credit Score

What Is a Credit Score?

A credit score is a three-digit number that creditors use to determine how likely you are to repay a loan and make payments on time. There are two main credit scoring companies that generate your credit score: FICO and VantageScore^®. However, 90% of lenders rely on FICO when making borrowing decisions.

Though FICO and VantageScore use different models for credit scoring, they both have a score range of 300-850 to signify creditworthiness. The higher your score, the less of a financial risk you may pose to lenders — and the more likely you are to get approved for a credit card, mortgage, or loan. A more robust credit score, typically 760 or higher, also means you’ll typically qualify for more favorable terms, such as lower interest rates, and possible credit card perks, such as earning cash back on purchases, airline miles, or higher credit limits.

Here’s a look at the average FICO credit score by age group to help you understand VantageScore vs. FICO:

What’s a Good Credit Score for Your Age?

A “good” FICO credit score falls somewhere between 670 and 739, regardless of your age. If, like many 23-year-olds, you lack a substantial credit history, your starting credit score probably won’t be within that range. The good news is, your score won’t be zero (no one’s credit score is), nor does it mean you’ll start out with 300, the lowest possible credit score.

Once you start showing you can manage your credit responsibly over time, your score should begin to rise. A spending app can help you manage bill paying and set budgets, which can make bill paying easier.

As you work on boosting your score, you’ll want to check it regularly — at least once a year and before applying for new credit — to track your progress and make adjustments as needed. Credit scores update at least once a month, so it could take a little time before you start to see any changes.

How Are Credit Scores Used?

Credit scores are but one factor lenders consider when evaluating whether to approve you for any type of credit or loan. If your credit score is considered “good” or better, you may be more likely to get approved because in creditors’ eyes, you’ve shown you’re able to manage debt responsibly.

Credit scores aren’t just important for people looking to borrow money or apply for a new line of credit. If you’re renting an apartment, for instance, the landlord may run a potential tenant credit check to determine if you’re a safe bet. And along with a background check, some employers may want to pull a prospective candidate’s credit score. Employer credit checks are more common in companies or businesses where the employee will be handling money and/or have access to customers’ financial information.

What Factors Affect My Credit Score?

There are five common criteria used to calculate credit scores. Here’s how much each one counts toward your FICO Score and why they can affect your credit score:

•   Payment history (35%): Your track record of bill paying can have a significant impact on your FICO Score. The more consistent and timely your payments, the better.

•   Credit utilization (30%): Credit utilization refers to the amount of available credit you’re using, and it’s a key factor in determining your credit score. A lower credit utilization rate is better for your credit score.

•   Length of credit history (15%): Generally, the longer an account is open and in good standing, the better it is for your credit score.

•   Credit mix (10%): Though not required, having a diverse array of credit, such as credit cards, installment loans, and even a home equity line of credit (HELOC), can show lenders you can handle different types of debt.

•   New credit (10%): When you apply for a loan or credit card, the lender will make a hard credit inquiry, which can cause a small, temporary dip in your credit score. If you apply for multiple loans or credit cards in a short period of time, your score can drop a bit. Lenders may also see it as a red flag that you’re taking on too many financial obligations.

How Does My Age Affect My Credit Score?

Your age doesn’t directly impact your credit score — your credit history does. But as noted earlier, credit scores do tend to increase with age and income levels. This means as a 23-year-old, you have the opportunity to establish positive fiscal habits early on, such as setting budgets, using a money tracker app to monitor spending, and living within or below your means.

At What Age Does a Credit Score Improve the Most?

According to Experian FICO Score data, baby boomers and the Silent Generation tend to have the highest credit scores of all age groups. But the biggest jump in scores — 38 points in 2025 — generally occurs between Generation X and baby boomers.

How to Build Credit

Wondering how to build credit? A good place to start is to acquire credit accounts so you can start establishing your credit history. Remember, lenders want to see a track record of responsible debt management, so it’s a good idea to create sound financial habits now. Pay your bills on time consistently. Resist the temptation to use up all of your available credit. And keep tabs on your finances so you don’t spend more than you’re bringing in.

And keep in mind, this is a long game. How long does it take to build credit? It depends, but generally speaking, it may take at least six months to build enough credit and get your first credit score.

Credit Score Tips

Whether you’re just starting on your credit journey or are preparing your finances for a major purchase, increasing your credit score is always a worthy goal. Here are some tips to help you do just that:

•   Pay your bills on time, every time. It bears repeating: A track record of on-time payments shows lenders that you’re serious about being fiscally responsible. It also can go a long way toward building your credit score.

•   Keep older accounts open. Closing any credit card accounts ends your payment history with that lender. Eventually, this account will drop off of your credit report and potentially impact your credit length and credit utilization rate. If you have an older credit card account in good standing, consider keeping it open — and even using it occasionally for smaller charges.

•   Get credit for other bills you pay. A 23-year-old can work toward increasing their credit score by looking into including rent payments, streaming services, and even some utility bills. Check out Experian Boost, which allows you to include these types of on-time payments in other accounts to your Experian credit report.

•   Check your credit report. You can check your credit reports without paying weekly via AnnualCreditReport.com. Ensure all the information is correct, and fix any errors you see.

Note that your credit report won’t show you your credit score. Instead, you may be able to get that important three-digit number from a number of sources, including your bank, credit card company, or Experian. As with checking your credit report, monitoring your credit scores helps you identify discrepancies or fraudulent activities.

Recommended: Why Did My Credit Score Drop After a Dispute?

The Takeaway

The average FICO credit score for a 23-year-old is 678, which is considered a “good” credit score. Having a score in this range can help make getting loans, credit cards, apartment rentals, and maybe even certain jobs a little easier. If you’re able to boost your credit score into a “very good” or even “exceptional” range, you may be able to qualify for loans with better terms or credit cards with attractive perks.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

What’s a good credit score for a 23-year-old?

No matter what your age is, a credit score that falls between 670 and 739 is considered good. The average FICO credit score for a 23-year-old is 678, which falls in the “good” range.

Is a 760 credit score at 23 good?

Yes, a 760 FICO credit score puts you in the “very good” range. It shows lenders that you’re creditworthy and able to capably manage credit.

What is a good credit limit for a 23-year-old?

Credit limits differ from person to person. The average limit for Generation Z consumers is around $14,000.

Is 720 a good credit score for a 23-year-old?

Yes, it is. A 720 credit score is classified as a “good” score, according to FICO, and a “prime” score per VantageScore.

How rare is an 800 credit score?

It’s not that common to have a credit score of 800 or higher, which is categorized as “exceptional.” Case in point: Only about 22.8% of Americans had a FICO Score in the 800-850 range in 2025.

How rare is an 825 credit score?

Less than a quarter of Americans boast a FICO credit score of 800 or higher. Having an 825 credit score is rare because it reflects, among other things, a near-perfect history of on-time payments. Late payments, defined as 30 days past due, appear on only around 0.7% of credit reports for people with a FICO credit score of 825, according to Experian.

Photo credit: iStock/BongkarnThanyakij

SoFi Coach 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 must confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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 .

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.

SORL-Q326-018

Almost everyone in the U.S. (and many other countries) has a credit score, which is a three-digit number that some lenders use to evaluate whether or not to extend credit to you. In some cases, a lender will use your exact credit score as a determining factor. In other cases, they’ll group similar credit scores into a credit score range.

Different companies use different credit score ranges, but in most cases, your credit score will be grouped into one of five different categories: excellent, very good, good, fair, or poor. The better your credit score, the more likely you’re to get approved for new loans and the lower your interest rate may be if you’re approved.

What Is a Credit Score?

A credit score is a three-digit number that attempts to encapsulate your total credit history, meaning your track record of repaying debt. There are a few different companies and models that are used, but credit scores typically range from 300 on the low end to 850 on the high end. Many lenders will use your credit score to determine whether or not they want to issue you new credit.

What Are Credit Score Ranges?

Credit score ranges (sometimes referred to as a credit rating scale) are a way to group together similar credit scores. Each company that makes credit scores has its own way of grouping credit scores, but they tend to follow a similar pattern. There are usually five different credit score ranges — excellent, very good, good, fair, or poor.

Here is an example from one of the most popular rating systems, the FICO® Score:

• 300-579: Poor

• 580-669: Fair

• 670-739: Good

• 740-799: Very good

• 800-850: Exceptional or Excellent

As of March 2026, the average credit score in the U.S. was 714, which is solidly in the good range.

Recommended: Does Applying for a Credit Card Hurt Your Credit Score?

How Credit Scores Are Calculated

There are a few different companies that calculate and monitor credit scores, and each one does it in a slightly different way. Typically, the various credit bureaus, such as Experian®, Equifax®, and TransUnion®, collate all sorts of information about each individual, from their payment history to their credit usage to the age of their credit accounts. They lease this information to companies such as the Fair Isaac Company (FICO), which then uses that information to calculate a FICO score.

Recommended: When Are Credit Card Payments Due?

How to Check Your Credit Score

There are a few ways you can check your credit score. You can purchase it from a provider, or your credit card company or other financial institution may provide your credit score for free. Or you may use a free credit scoring website or other service to get your score.

Your credit score updates regularly as the underlying information that the credit bureaus report changes. Every time you open a new credit card, make a payment to one of your debts, apply for credit, or do anything else credit related, your credit score may update.

What Is a Good Credit Score?

The various companies that calculate credit scores have different models and different ranges for what credit score is considered “good.” Typically, a credit score of 670-739 is considered good, with credit scores of 740-799 being very good and scores over 800 being considered excellent.

Factors That Impact Your Credit Score

Each company that calculates credit scores uses their own proprietary formula to calculate credit scores. Five of the common criteria used to calculate credit scores are:

• Payment history, meaning do you have a history of paying on time

• Credit usage, which is typically expressed as your credit utilization ratio, meaning how much debt (or a balance) you have vs. your credit limit

• Length of credit history, or how long you have been accessing credit

• Credit mix, which considers whether you have shown yourself to be capable of managing, say, both installment loans and lines of credit

• Recent credit inquiries, since too many hard credit inquiries in a short period of time can negatively affect your credit score

Credit Models Applied by Different Companies

You may wonder why you have different credit scores, and the answer is that there are different credit models applied by different companies. Depending on what company is doing the calculation, they may calculate your score slightly differently.

Generally speaking, each company that calculates credit scores looks at mostly the same types of information, so your different credit scores should be similar. It would be rare (if not impossible) to have a bad credit score from one credit model and excellent credit in another.

Lenders Credit Score Grouping

Some lenders may use your exact credit score to determine whether to extend credit, whereas others may group scores into a range. For instance, a particular lender might give one interest rate to people with excellent credit and a higher rate to those with very good or good credit. Meanwhile, they may choose not to extend credit at all to those with a fair credit score or lower.

Credit Score in Relation to Your Age

There is not a strict correlation between your age and your credit score. You might think that there is a specific starting credit score, but the truth is that when you are just starting out, you don’t have any credit score at all. As you get older, however, you have more chances to show that you are responsible (or not responsible) with your credit, and your credit score is adjusted accordingly.

Consequences of Having a Low Credit Score

Having a low credit score can have quite a negative impact on your financial life. If your credit score is too low and you don’t meet the minimum credit score for a credit card, you may not be able to get approved for loans or a credit card. And if you are approved, you may have to pay significantly higher interest rates than someone with better credit.

Tips for Building Your Credit

There is no one magic way to build your credit — instead, your credit will build as you show that you’re responsible with the loans that you already have. For example, as you use your credit card responsibly by paying your monthly statement on time, your credit score may be positively impacted vs. paying late or missing payments, which can lower your score.

Other ways that you can work toward building your credit include avoiding using too much of your available credit and keeping old accounts open to maintain the age of your accounts.

Recommended: Understanding Purchase Interest Charges on Credit Cards

Monitor Your Credit Score

Another thing you can do to try and secure a solid financial future is to regularly monitor your credit report and credit score. Keeping an eye on the information in your credit report can help you know if there’s any inaccurate or incorrect information in it. If there is, correcting it can be one way to build your credit score.

Additionally, keeping an eye on your credit score can clue you into what effect different behaviors have on your credit score. This can help you make more informed credit-related decisions in the future.

The Takeaway

A good credit score can make borrowing easier and less expensive by improving your chances of approval and helping you qualify for better loan terms. While scores range from 300-850, the average U.S. score is in the good range, showing that building strong credit is achievable. By paying bills on time, keeping credit card balances low, and using credit responsibly over time, you can maintain good credit and broaden your financial options.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

FAQ

What is the average credit score?

As of 2026, the average credit score in the United States is 714, which falls in the good credit range. Maintaining a score in the good range can still help you qualify for better loan options and lower interest rates.

What benefits does a good credit score provide?

Having a good credit score can have a variety of positive financial impacts. You may need a minimum credit score to get a credit card that you want to apply for, or you may qualify for a lower interest rate on some loans as compared to someone with a lower credit score.

Can my credit score affect my loan eligibility?

Yes, your credit score can absolutely affect your eligibility for certain loans. If you have a bad credit score, you may not get approved for a loan from some lenders. Or, if you are approved, you may have to pay a higher interest rate than someone with a better credit score.

Can a very poor credit rating prevent me from getting a cell phone contract?

Yes, it is possible that having a low credit score might prevent you from getting a cell phone contract. Some cell phone providers look at your credit score when you’re applying for a cell phone contract. If you have a low credit score, you may not be able to qualify for some contracts, or you may have to put down a security deposit beforehand.

Will low credit impede my chances of getting a rented apartment?

There are some landlords or property managers who look at your credit score when deciding whether or not you qualify for an apartment. If that’s the case for an apartment you’re looking at, then having a low credit score may have a negative impact on your chances of qualifying.

Photo credit: iStock/anyaberkut

SOCC-Q326-011

A credit card convenience fee is an additional charge that a merchant collects on a purchase to compensate them for accepting your card vs. their usual form of payment. Perhaps they usually accept cash, check, or an electronic transfer, and allowing you to use plastic requires more time and effort for them, or it triggers fees for them.

Given that more than 80% of Americans use credit cards, it’s likely that many people get hit with a convenience fee at some point. Here’s what you need to know about how these fees work and how to avoid them.

What Is a Convenience Fee?

A convenience fee is a flat fee, such as $1, or a percentage of your purchase (up to 4%) that’s tacked onto the cost of your transaction that you, the cardholder, are expected to pay. Here’s some more intel about these fees:

•   A credit card convenience fee is typically charged by merchants when a customer uses a credit card in a payment channel that isn’t the usual one for the business. For instance, if a trade school usually accepts payments in person and you choose to pay online, you might be assessed an additional fee for the convenience of not turning up at their place of business.

•   The fee can reflect a merchant trying to pass along some fees they pay when you choose to use a credit card vs. other methods. When merchants allow a customer to use a credit card as a payment method, they (the retailer) are charged a credit card processing fee for the transaction. By charging a convenience fee, the merchant may offload that processing fee.

In some cases, a retailer will factor such credit card fees into their business model and won’t pass along the additional charge. That is why you may notice that convenience fees seem somewhat random. However, convenience fees must be disclosed when they are charged, meaning they can’t be added without a consumer being informed of them.

Example of a Convenience Fee

Here are examples of convenience fees in action:

•   When you fill up your tank at a gas station, you may notice that the price for gas is, say, 2.5% or 3% higher per gallon if you pay with a credit card vs. cash. That could be how the gas station owner recoups the credit card processing fees they must pay on such transactions.

•   You might pay an extra charge of a couple of dollars when you buy movie tickets online or via an app instead of at the box office. You enjoy the convenience of buying something with your card (and perhaps snagging seats to a show that could sell out), and the merchant is able to offset their costs somewhat.

Recommended: How Does a Credit Card Work?

Why Do Convenience Fees Exist?

The main reason you’re getting stuck with these convenience fees is that the merchants have to pay processing fees to payment networks, as noted above.

•   The payment networks or payment processors work with credit card issuers (such as your bank) and the card network (Visa, Mastercard, Discover, or American Express) to make sure the transaction is secure and processed smoothly.

•   The bank that issues the cards often charges the merchant a credit card processing fee for allowing them to accept this card. This is typically 1.5%-3.5% per transaction. The merchant might pass those fees on to you, the consumer, as a convenience fee.

This is also another reason some small businesses may not accept credit cards at all: They don’t want to have to pay the fees associated with taking them or pass them on to you.

Credit Card Company Rules on Convenience Fees

Here’s the breakdown for how some of the major credit card brands handle fees.

Convenience Fees vs Surcharge Fees: What’s the Difference?

While they both add to a purchase’s cost, here is the difference between what you may hear referred to as convenience fees and surcharge fees.

•   A surcharge fee covers the cost of you having the privilege of using a credit card. It’s added before taxes. Sometimes called a “checkout fee,” it is usually a percentage of the sale. Credit card surcharges are prohibited by law in a number of states. These charges are currently illegal in Connecticut, Maine, Massachusetts, and Puerto Rico, but these laws are subject to change.

•   A convenience fee, as noted above, typically covers the cost of doing a transaction with a credit card instead of another payment method. Sometimes, this is charged as a percentage of the transaction. Other times, it is charged as a flat fee, regardless of the cost of the products or services purchased.

How Can Convenience Fees Be Avoided?

When you’re trying to avoid credit card convenience fees, you can use these tactics:

•   You can choose to pay with a method other than plastic, such as cash, check, or money orders, at some merchants. Or you may be able to use an electronic payment, such as an eCheck or ACH payment.

For example, if you’re paying for college tuition, you might be able to set up an online payment using an electronic check, money order, or personal check. At some schools, this could save you up to 3% per payment transaction. (That being said, if you have a high-rewards credit card, conducting an expensive transaction might be beneficial if you can get cash back.)

•   You can scan for notices about convenience fees before conducting a transaction. You can look for posted signs in brick-and-mortar locations and read the payment terms on websites and in apps.

•   You can ask before purchasing a product or service if paying by cash will save you money (this can sometimes be the case with service providers) or if using a credit card will trigger a fee.

Credit card fees are fairly common today, so you’ll want to be alert to how they can crop up and avoid them when you can.

Recommended: How to Use a Credit Card

The Takeaway

Knowing that credit card convenience fees (and surcharge fees) exist, the regulations merchants must follow when charging them, and how to avoid them can help save you money in the long run.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

FAQ

Why am I being charged a convenience fee?

A credit card convenience fee typically reflects that the merchant is willing to accept plastic vs. other payment methods they usually take. These fees may be a way that merchants recoup the processing fees that they then must pay when they allow customers to use a credit card.

Is it legal to charge a convenience fee for credit cards?

Credit card convenience fees are generally legal in all U.S. states. However, they can’t be added on without a customer being informed.

How to avoid credit card convenience fees?

You can usually avoid credit card convenience fees by using an alternate payment form. For example, you could use cash, a check, or an electronic payment.

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What unlimited cash back means is you can earn uncapped rewards using the card — in other words, your earning potential isn’t limited to a certain amount. While this might sound too good to pass up, there are both pros and cons to consider to determine whether unlimited cash back is worth it for you.

What Is Cash Back?

Cash back is a type of reward that a credit card issuer may offer through its rewards credit cards. Depending on the terms, cardholders can earn a certain percentage back on qualifying purchases (cash advances typically don’t qualify). For instance, you may be able to earn 2% cash back on purchases at gas stations or 3% back at grocery stores.

Some cards may put caps on how much cash back you can earn. As an example, a card may limit cardholders to 2% cash back for up to $5,000 in purchases in a calendar year. While cardholders may still be able to earn cash back after they’ve hit their certain earnings threshold, they may earn rewards at a lower rate thereafter.

What Is Unlimited Cash Back?

Unlimited cash back means that your credit card offers cash-back rewards with no caps or limits on how much you can earn. In most cases, you can earn cash back on all of your purchases, though some cards may only offer unlimited cash back on certain spending categories.

For most credit cards, your cash-back rewards don’t expire as long as you keep your card open. This means that if you continue racking up rewards, you may be able to redeem your accumulated cash-back rewards for a sizable statement credit or other perks.

How Unlimited Cash-Back Credit Cards Work?

How credit cards work that offer unlimited cash back is that they allow cardholders to earn cash back on their purchases with no earning cap. In other words, there is no limit to how much you can earn on qualifying purchases with these types of credit cards.

As you earn these rewards, you can redeem them in several ways, including as a statement credit or actual cash via a check or bank transfer.

In general, you’ll need good or excellent credit (meaning a score of 670 or above) to qualify for an unlimited cash-back card. That being said, there are also cash-back credit cards with less stringent credit card requirements, meaning you may be able to qualify even if you have a fair credit score or limited credit history. In general, however, the higher your score, the better the rewards tend to be.

Recommended: Does Applying for a Credit Card Hurt Your Credit Score?

Pros and Cons of Unlimited Cash Back

Before signing up for an unlimited cash-back credit card, consider the advantages and disadvantages first.

Is Unlimited Cash Back Worth It?

Getting an unlimited cash-back credit card might be worth it if you’re confident you can maximize its rewards. For instance, if you continually make purchases in higher rewards categories, you can save some serious cash due to the rewards earnings. Ideally, you’d be able to earn enough rewards to entirely offset the annual fee, if your card has one.

An unlimited cash-back card may not be a great fit if you continually carry a balance on your credit card, given what a credit card is and how you’ll accrue interest. Your interest rate will likely be higher than the cash-back rate you’ll earn, which means carrying a balance could cancel out rewards earnings.

Another reason to think twice about an unlimited cash-back card is if you’re a frequent traveler. A travel rewards program may be a better choice since you can earn free flights, hotel rooms, and even cash back. Plus, you might earn more lucrative rewards on travel-related spending than a cash-back card would offer.

Recommended: How to Avoid Interest on A Credit Card

Categories of Unlimited Cash-Back Credit Cards You Can Choose From

There are several ways credit cards give you cash back, including a flat rate and through different spending categories.

Flat Rate

Flat-rate rewards allow you to earn the same cash-back rate across all purchases made using a credit card. For instance, you might earn 3% cash back on all purchases made with the card. Some may issue you a certain percentage cash back when you make a purchase and then another amount when you pay off your credit card bill. Regardless, your specific spending category won’t matter for earning with a flat-rate rewards card.

Rotating Categories

Your credit card may offer several spending categories each quarter that you can select from to earn cash back. For instance, you might be able to choose to get 5% cash back on purchases at gas stations or office supply stores for the first quarter. After the quarter is over, you can choose a different spending category.

While rotating categories can allow you to maximize your rewards-earning potential, this setup does require some strategizing. You’ll need to stay on top of choosing a new category each quarter. Plus, you’ll then have to make sure you adequately take advantage of spending within that category.

Fixed Spending Categories

Instead of choosing different categories every quarter, some credit cards offer fixed cash-back earnings for various spending categories. For instance, a card may allow you to earn 3% cash back for purchases at grocery stores and 1% cash back on all other purchases.

While fixed spending categories require much less planning, you’ll want to ensure the card you sign up for credit card rewards in a category you regularly spend in. Otherwise, you could end up forgoing valuable rewards.

Maximizing Unlimited Cash-Back Earnings

If you want to make the most of earning unlimited cash back, here are some general credit card rules to keep in mind.

Select the Right Card

It’s a good idea to do your research and find a card that matches your spending habits. For example, if you use your credit card a lot at gas stations, it might not be the ideal choice to sign up for a card that doesn’t offer cash-back rewards for this category.

Time Your Spending

If you sign up for a credit card with a sign-up bonus, consider timing your card opening with a major purchase you’d been planning. Doing so will help ensure that you meet the minimum spend requirements in order to earn the bonus.

Or, if your credit card is about to have extra earnings for a rotating category, you might think about waiting until that time to make a planned purchase.

Note Spending Categories

After signing up for a card, pay attention to how much cash back you’ll earn in different categories if it’s not a flat rate card. That way, you can be sure to use that card exclusively for certain spending categories or make sure you sign up for rotating categories well within the deadline.

Review Credit Card Terms

Looking over your credit card terms can help to ensure that you know what does and doesn’t count toward earnings. You might also discover through your card’s terms that you can earn enhanced rewards by taking certain actions, such as holding a certain amount of money in an associated bank account.

The Takeaway

A cash-back credit card is a great way to earn rewards that doesn’t necessarily require a complicated redemption process. Even better is when the card doesn’t place limits on the amount of cash-back rewards you can earn, which is the meaning of unlimited cash back.

Still, you’ll need to make sure you avoid carrying a balance and take steps to maximize your rewards to ensure you don’t negate your cash-back rewards earnings.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

FAQ

How does unlimited cash back work?

If you have a credit card with unlimited cash back, there are no limits on the amount of rewards you can earn through qualifying purchases. This means you can keep earning cash back without hitting a rewards cap.

Is unlimited cash back better than points?

Whether cash back or points is better really depends on your preferences. Cash back is straightforward to track and redeem, while points may translate to a greater range of redemption opportunities, including for travel-related purchases. However, the value of points can vary depending on the card and the way the points are redeemed.

What are the disadvantages of having an unlimited cash-back card?

Cash-back cards often carry high annual percentage rates, similar to most unsecured credit cards. The rewards offered by such cards can also nudge customers to spend more than they otherwise would.

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