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If you’re young and looking to access and build credit, opening a credit card can be a great step. However, you need to be at least 18 years old to open your own account. If you’re under the age of 18, you can’t open your own credit card, but you can be an authorized user on someone else’s account.

Even if you’re old enough to get a credit card, when you’re under the age of 21, you may face additional requirements when applying. Read on for tips on getting a credit card when you’re young and options you might consider to be able to start building your credit.

At What Age Can You Get a Credit Card?

To open your own credit card, you must be at least 18 years old.

However, if you’re between the ages of 18 and 20, you may encounter stricter verification requirements, including showing proof of ability to repay, such as through income, or getting a cosigner. This is due to regulations from the Credit CARD Act of 2009, which is intended to protect young consumers from taking on more debt than they can handle.

After age 21, these regulations won’t apply to you, but card issuers may still review your income as part of your application. It’s also important to pay attention to the terms and conditions of the credit card, such as the annual percentage rate, or APR on a credit card, as you consider your credit card options and apply.

If you’re younger and have a limited credit history, you may only get approved for a card with a higher APR. Do your research before applying to have an idea of what is a good APR on a credit card.

Tips for Getting a Credit Card When You’re Young

Once you understand what a credit card is and how credit cards work, you may see the appeal of a credit card and want to open one. If you’re under the age of 18, the best things you can do to work toward being able to get your own credit card are to start building credit and to learn the basics of financial management.

Start Building Credit

Building credit when you’re young may be hard, especially if you’re under 18 and not yet eligible for your own credit card. One way to do so, however, is by becoming an authorized user on a credit card account.

A responsible parent or guardian can add you as an authorized user for their account, even if you’re still under the age of 18. Being added to the primary cardholder’s credit history can help build your credit.

Learn the Basics of Financial Management

It’s also important for young people to learn the basics of financial management. Learning about things like budgeting, credit card interest, and credit scores before you even own a credit card can help put you on the path to financial success. That way, when you do eventually get your own credit card, you’ll know how to stay on top of credit card minimum payments and avoid debt.

This can also be a good time to familiarize yourself with common financial scams, such as credit card skimmers, so you’ll know what to be aware of when you do get your own card.

How to Get a Credit Card If You Are 18 to 20 Years Old

Many young people between the ages of 18 and 20 are attending college or trade school or working. They may not have a lot of income yet, and their credit history may be limited. Still, first-time cardholders do have options for getting a credit card, which can be an important step toward building their credit history and score.

Secured Credit Cards

One option is secured cards, which are a type of credit card that require the cardholder to make a refundable security deposit. The security deposit typically becomes the amount of the card’s credit limit.

Secured cards are often marketed toward people who want or need to build their credit, so they can be a great choice for young people who are age 20 and under. Once you make the initial minimum security deposit (which usually serves as your credit limit), you can use your secured credit card in the same way that you would use any other credit card. Like any other credit card, your credit card will have a credit card expiration date and a CVV number.

A few points to note:

•   Since your credit limit is often equal to the amount of your security deposit, secured credit cards often don’t have very high credit limits compared to the average credit card limit. However, having a lower credit limit can help prevent young people from overspending.

•   With a secured card, your money is tied up temporarily in the security deposit. While you get your security deposit back when you close or upgrade the account, that’s money you otherwise can’t use in the meantime.

Become an Authorized User

Young cardholders could also become an authorized user, which is someone who’s added to a credit card account with authorization to use that account. The authorized user typically has their own card and can use it to make payments as usual. However, only the primary account holder is held responsible for payments.

The authorized user benefits from this arrangement because the primary cardholder’s account history and activity are reported on the authorized user’s credit report, which can help build their credit history.

Apply for a Student Credit Card

Student credit cards are designed and marketed for students roughly between the ages of 18 and 22 years old. Students generally have different needs than other credit card customers, so it may make sense for them to get a credit card designed specifically for them.

As an added bonus, some students may qualify for credit cards with rewards, such as cashback on categories that students may spend more on, like restaurants and grocery stores.

Consider Credit Builder Credit Cards

There are also some credit cards that are available to applicants with poor credit who are looking to build their credit. Responsible use of a credit card can be a great way to positively impact credit, as your payment history will be reported to all three major consumer credit bureaus. Just keep in mind that these cards can have higher than average credit card interest rates and more fees due to their availability to those with lower credit scores.

Get a Cosigner

Another option for young applicants is to get a cosigner for a credit card. Indeed, applicants within the 18 to 20 age range must get a cosigner if they can’t provide proof of employment or income when applying. Also, people in this age may not have much of a credit history, if any, which can be a downside.

A cosigner can be a parent, guardian, or other family member who assumes legal and financial responsibility for the applicant if they are unable to pay off the balance of the card. Ideally, the cosigner should have a solid credit history to improve the chances of the credit card application getting approved. If the cardholder fails to repay a card or falls in debt, it will negatively affect the credit score of both the cardholder and the cosigner, so this is an important responsibility.

Check with your bank or credit card issuer before using a cosigner, since not all banks allow cosigners on credit cards.

The Takeaway

Once you reach the age of 18, you will likely be able to get a credit card of your own. You can make sure you’re ready for this responsibility by building your credit history, getting down the financial basics, and knowing how to apply for a credit card when the time comes. You’ll have options as a young credit card applicant, from secured credit cards to student credit cards to credit builder cards and more. Learning how to use a credit card responsibly is an important part of your financial life.

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

Can I get a joint card?

Some card issuers allow cosigners on credit cards. If you’re not able to qualify for a credit card on your own, you could also explore becoming an authorized user on someone else’s credit card account.

Does a student credit card affect credit score?

Yes, a student credit card affects your credit score. A student credit card is a regular credit card that’s just designed with students’ unique needs in mind. Activity is reported to the credit bureaus, so it will affect your credit like any other credit card would.

What is the limit on a student credit card?

Credit limits on student credit cards vary by issuer and card. However, credit limits on student cards are often lower than the average credit card limit due to the fact that students generally have more limited credit histories and lower incomes.

Do you need credit for a secured credit card?

Most secured credit cards have less restrictive requirements for an applicant’s credit. In fact, many secured credit cards consider applicants with very poor or limited credit.

Photo credit: iStock/RgStudio

SoFi Credit Cards are 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.

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

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

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOCC-Q425-003

Life is expensive. And unfortunately, with a wide array of funeral-related costs, so is death. So much so, in fact, that some people turn to funeral loans to pay for it.

While you may be able to use a loan to pay for the casket, headstone, flowers, and other expenses, there are other ways to make this challenging part of life more affordable.

Read on to learn more about funeral loans and alternatives worth considering.

What Are Funeral Loans?

Funeral loans are basically personal loans marketed towards people who are facing funeral costs. That is to say, they’re a form of unsecured debt. This means they may be harder to qualify for — and come with higher interest rates — than debt that carries collateral, like a mortgage or an auto loan.

Although it may be marketed as a funeral loan, chances are you’re just getting a personal loan, which means you will probably be able to use the funds for just about anything you want. That said, it’s always worth checking with the bank or lender to ensure there aren’t any stipulations as to how the money gets spent.

Recommended: Requirements for Personal Loans

How Does a Funeral Loan Work?

A funeral loan works much like other types of unsecured debt: You simply apply for the loan amount you need and, if you qualify, the lender will deposit the amount in your bank account (or cut you a check).

You then pay back the balance, plus interest, over the course of a set term, or loan lifespan, usually somewhere between two and seven years or longer.

You’ll pay the loan in monthly installments, like most other bills. Depending on your lender’s policies, you may be able to pay off the loan in full earlier. But always check to ensure you won’t get penalized for doing so.

Recommended: What Is a Short-Term Loan? The Ultimate Guide

Average Funeral Cost

So why are people going into debt just to send off their dearly departed? Funerals are expensive, that’s why.

According to data from the National Funeral Directors Association (NFDA), the median cost of a traditional funeral burial is currently $8,300 — and about $2,000 less for funerals with cremations.

Caskets alone can cost thousands of dollars. What’s more, most funeral homes still require them to be placed in a concrete burial vault to make landscaping easier — to the tune of another couple of thousand dollars or so.

That might explain why people are becoming more interested in green, or natural, burials, which can cost significantly less. Depending on the specific services and location, the total bill currently averages $2,600.

Still, it makes sense that some bereaved people end up turning to funeral loans to get through this time, which is tough both emotionally and financially.

Pros and Cons of Funeral Loans

Like any other financial product or decision, funeral loans have both drawbacks and benefits to consider. Here’s a quick look with a chart, and then a deeper dive into the specifics.

Pros of Using a Loan to Pay for a Funeral

Here’s a closer look at some of the benefits of using a funeral loan.

Convenience and Payment Time Frame

When you apply for a funeral loan, there’s a good chance you’ll have the money in your hands quickly. In some cases, you could get the money on the same day, though the vast majority of lenders will have the funds to you within five business days or so.

Afford Quality Funeral Services

As discussed, funerals are expensive, and for some families, skimping on a casket or service simply isn’t an option. If funds are tight, a funeral loan may be able to help you pay for a more robust celebration of a loved one’s life.

May Be Better Than Credit

Although personal loans tend not to have the cheapest interest rates, they often have lower interest rates than credit cards do. If you’ll need time to pay off the debt, a funeral loan may be a better option than a credit card from a financial perspective.

Cons of a Funeral Loan

As discussed, there are drawbacks to funeral loans, too. Here are some of those to keep in mind.

Interest Rate

Borrowing money isn’t free, and since funeral loans are a form of unsecured debt, they tend to have higher interest rates than, say, a mortgage.

When considering a funeral loan, ask the company to provide documentation that shows how much you’ll pay in total, including interest and fees, over the entire lifetime of the loan. Even at a relatively low interest rate, it can add up faster than you think.

For example, if you took out a $10,000 funeral loan at a 10% interest rate, with a five-year term, you’d end up paying more than $2,700 in interest. That much might pay for the entire cost of the casket today.

Potential Impact on Credit Score

LIke any other type of loan or line of credit, taking out a funeral loan will show up on your credit report. Depending on your other factors, it may decrease your score. (That said, in some cases, it might also help build your score, since having a mix of different credit types and timely payments have a positive impact.)

Financial Commitment

A funeral loan is a financial commitment that you’ll likely be repaying over a long period of time — between two and up to 10 years or even more in some cases. As important as properly memorializing passed loved ones is, it’s also critical to ensure that paying off a funeral loan won’t substantially impact your financial life in the long run.

Who Is Eligible for an Emergency Loan for a Funeral?

While anyone can apply for a funeral loan, your credit history will determine whether or not you’re eligible. Again, since unsecured debt is riskier for banks, they may carry higher minimum credit scores for funeral loans than other types of products.

However, depending on the lender you choose and the rest of your credit profile, you may be able to qualify with a score anywhere from the high 500s to the high 600s. Expect to pay a higher interest rate if your score is lower.

Recommended: Financial Hardship Loans: What Are They and How Can You Apply?

Can You Get Funeral Loans With Bad Credit?

Again, a bad credit score can make it more challenging to qualify for a funeral loan, but you may still be eligible depending on the rest of your financial profile.

How Much Can You Borrow for a Funeral Loan?

Many personal loan companies offer large amounts of up to $50,000 or $100,000. But it’s usually a good idea not to borrow more than you actually need to pay for funeral expenses. After all, whatever money you borrow will need to be repaid, along with interest.

Alternatives to Help Pay for Funeral Costs

While a funeral loan is one option for funding funeral costs, there are alternatives that may be less expensive and more accessible for you and your loved ones. Here are a few to consider:

•   Ask for what you need. If you speak to the funeral director at the funeral home you’re working with, you may be able to work out a payment plan or use multiple different types of payment—such as cash, checks, and credit cards—in order to avoid taking out a funeral loan.

•   Use the loved one’s life insurance. If the person who’s passed away has life insurance, the death benefit might be used to help pay for their funeral costs.

•   Consider different types of services. As discussed above, a green or natural burial is often less costly than traditional burials. Cremation can also be more affordable than traditional burial.

•   Consider using a home equity loan. Borrowing against the value of your home still entails going into debt. However, because it’s a secured loan (your home is used as collateral), you may score a lower interest rate than you would on a funeral loan.

The Takeaway

Funeral loans are essentially personal loans used to pay for funeral costs. While they are one way to pay for the goods and services associated with death, other alternatives, like setting up a payment plan with the funeral director, may be more beneficial for the living in the long run.

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.

FAQ

How can I get money for an unexpected funeral?

While using a funeral loan is one way to access funds for an unexpected funeral, there are other options to consider. Examples include the deceased’s life insurance, prepaid funeral plans, funeral assistance programs, and even crowdfunding.

How much is a home equity loan for a funeral?

A home equity loan allows you to borrow against the value of your home that you already own — that is, its equity — to pay for expenses, including funeral expenses, in cash. However, this type of arrangement will only work if you own substantial equity in your home, and it does come with its own costs from the lender.

What credit card will pay for a funeral?

While you could technically use just about any credit card to pay for a funeral, if you’re looking to avoid paying interest, it might be a smart move to take out a new card with a promotional 0% interest period. That way, you’d have that time period — likely a year or a year and a half — to pay back the funeral expenses without being subject to high interest. Beware, though: When the promotional period runs out, you’ll still be on the hook for interest if any of the balance is left over.

Photo credit: iStock/shapecharge

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.

SOPL-Q425-047

Book now, pay later vacations are on the rise. As more people set off on adventures around the world, they’re realizing that travel can be expensive. However, there are a growing number of options to pay for those getaways, including travel payment plans.

Here’s what would-be travelers need to know about this travel hack and payment option and how to decide if it’s right for them before they take off in a plane, train, or automobile.

What a Payment Plan Vacation Really Means

Buy now, pay later vacation plans work in a similar way to traditional layaway options at stores. Travelers pay a little upfront and pay off the rest over an agreed-upon timeline. However, unlike traditional layaway, where a person can pick up their item only when payments are complete, travelers get their item — their trip — upfront.

There are several book now, pay later payment options on the market including Afterpay, Affirm, and Klarna. When booking a vacation using a payment plan option, you’re actually paying the financing company rather than the travel company itself.

For example, if you book a Carnival cruise (one of the companies offering this as an option), you’ll pay via Flex Pay, which provides this service. Flex Pay will then pay Carnival directly for the vacation in full. When you make payments, you’ll be paying Flex Pay, not Carnival.

Payments can be made over weeks or months, depending on the trip you’re taking, how much it costs, and which payment option you choose. Before signing on the dotted line, you’ll be assigned an interest rate based on data including your credit score, much like you would when applying for a credit card or loan. The rate will always be displayed before you click “book,” but reading the fine print is important so you are aware of all the terms of the agreement, not just the interest rate.

Recommended: Personal Loan Calculator

Companies That Offer Buy Now, Pay Later Vacations

The love for vacation payment plans is growing across the travel industry. Here are a few of the major players that are in the game.

Expedia: Expedia offers book now, pay later vacations through Affirm. At checkout, travelers can choose whether to make four interest-free payments every two weeks or monthly installments.

Priceline: Like Expedia, Priceline also offers book now, pay later vacation payment plan options with Affirm, with similar payment options.

Hotels.com: Hotels.com is offering payment plan options with buy now, pay later services like Affirm, Klarna, Sezzle, and Zip. Customers can split their payments into installments over time.

VRBO: VRBO is also getting in on the book now, pay later vacation option with Affirm. Customers can pay the total cost of the trip in installments, which accrue simple vs. compound interest, with rates ranging from 0% to 36% APR based on your credit profile.

Airlines: Airlines are also offering a book now, pay later option for those looking to fly to their destination. American Airlines, Delta, United, and Southwest are among the airlines offering this option through such providers as Affirm and Klarna.

Cruise lines: Cruise lines are also getting into the act. Carnival, Disney, Norwegian, and Royal Caribbean are all offering vacation payment plan options to cruise lovers looking to stretch their vacation budgets out over months.

Recommended: Guide to Unsecured Personal Loans

The Pros and Cons of Book Now, Pay Later Vacations

There are benefits to the book now, pay later vacations. Most obviously, you can book a vacation now and pay for it later. That could allow you to lock in your plans — and maybe even take advantage of a good deal or favorable rate — instead of having to wait until you’ve saved enough cash.

But there are potential drawbacks, too.

For starters, travelers may run the risk of overextending themselves financially if they book a vacation but can’t make the payments on it. According to a report by the Consumer Financial Protection Bureau, book now, pay later travelers are more likely to be highly indebted and juggle multiple loans simultaneously.

There’s also the potential impact on your credit score. Though not all companies run a credit check when you choose the book now, pay later option, some do. And this could affect your credit score. Likewise, the service may report late payments to the national credit bureaus, which could also negatively impact your score. To find out if a credit check will be run before booking, reach out to the service directly.

Personal Loan as an Alternative to Buy Now, Pay Later

If you want to take a vacation without having to save the money to pay for it first, you may want to consider a personal loan.

Taking out a personal loan is still taking on debt. But an unsecured personal loan allows a borrower to take out the amount needed to pay for a vacation with fixed interest rates that are generally lower than credit card rates and possibly lower rates than those offered by buy now, pay later financing options. Shop around and compare rates and terms to see what makes the most sense for your financial situation.

The Takeaway

Many travel retailers, airlines, and cruise companies are now allowing travelers to book their vacations upfront and then pay them off over time. While this could allow travelers to lock in a good deal, there are possible drawbacks to consider, including potentially high interest rates upon repayment. Travelers should look at all their payment options when deciding how to finance a trip.

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.

FAQ

How can I book a vacation and pay later?

One way to book a buy now, pay later vacation is to navigate to a company or travel site that offers this payment option. After you choose your trip, you can opt for a pay by installment option such as Affirm or Klarna and complete the application. If you are approved, you can then pay for the vacation over time.

What are good sites for buy now pay later services?

There are a variety of buy now, pay later sites such as Affirm, Afterpay, Klarna, PayPal, and Zip. Which one is the best choice will depend upon your needs, such as the purchase you want to make, and your financial profile and situation.

Can you pay for a vacation with Affirm and similar services?

Yes, you can pay for a vacation with a buy now, pay later service like Affirm. You can opt for that payment option at many travel booking sites and then pay over time (provided your are approved). Then, you can pay for your getaway in installments over a set period of time.

Photo credit: iStock/hudiemm

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.

SOPL-Q425-008

Credit counseling services can be a smart way to access professional financial advice at a low cost — or, in some cases, even for free. Usually nonprofits, credit counseling organizations can offer educational materials, workshops, and one-on-one counseling with trained financial professionals to help you make an achievable plan to repay your debts, set up a sustainable budget, and more.

It’s important to understand, however, the difference between credit counseling organizations and debt settlement agencies. The latter are usually for-profit companies that may not always be acting with your best interests in mind.

Here’s what you need to know about credit counseling, including how to tell when you might need it.

What Is Credit Counseling?

Credit counseling is a free or low-cost service offered by what are usually nonprofit organizations. Credit counselors can work with you one-on-one to offer fiscal advice and get your finances in order. For example, a credit counselor might help you:

•   Plan a debt repayment strategy

•   Create an overall debt management roadmap

•   Set up or retool your budget

•   Learn how to get a free and accurate copy of your credit report and scores

Many credit counseling services also offer educational resources, like flyers or online information, and workshops or classes that can help many people learn more about how to manage their money at once.

In some cases, credit counselors may offer to reach out to your creditors directly to negotiate with them, which could help you save money. Counselors may be able to get late fees waived, attain a longer repayment period, or ask for lower interest rates.

However, this is not the primary or sole function of credit counseling agencies, and not all credit counselors offer this service.

How Does Credit Counseling Work?

Every individual credit counseling agency is different, and they each have their own process that they can walk you through. But in most cases, you’ll be offered an initial consultation with a credit counselor, which may take place online, in person, or over the phone.

During this meeting, the counselor will likely ask a series of questions about your financial standing, and may help you develop a budget or create a debt repayment plan on the spot. Depending on your needs, follow-up appointments may be offered, and you may also get invitations or access to free classes, workshops, educational resources, and more.

In all cases, a credit counseling agency should have your best interests at heart, and should be willing to offer you free information about their services. If a credit counseling agency requests you to pay high fees or pay up front, or refuses to work with you if you can’t afford to pay, you should look for a different organization.

Credit Counselors vs Debt Settlement Agencies

It’s easy to get credit counseling organizations mixed up with debt settlement agencies, but the two are very different — and the difference is critical. Whereas credit counselors are usually non-profit organizations that offer free or low-cost help, debt settlement agencies are very much for-profit companies.

Furthermore, debt settlement agencies charge for the service of negotiating debt settlements with your creditors or collections agencies, rather than offering a more holistic financial education or plan.

Unfortunately, many creditors refuse to negotiate with debt settlement agencies, so hiring one is often a waste of your time. If you do choose to work with a debt settlement agency, remember that under Federal Trade Commission rules , you can’t be charged for their services until they are rendered successfully. Because, again, many creditors simply won’t talk to these companies. If you pay up front, you could be out of luck). In other words, if a debt settlement agency attempts to charge you up front, take your money and run.

Alternative Options for Managing Credit Card Debt

While working with a credit counseling organization can be a great way to access low-cost help in many different financial areas, it’s not the only way to eliminate credit card debt. There are plenty of self-directed strategies that can help you get your money right, right from home.

For instance, debt consolidation is one tactic that may help you get a handle on your credit card debt. Here’s how it works.

To consolidate credit card debt, you’d take out a new loan or a new credit card that allows balance transfers at a 0% interest rate. Yes, it sounds counterintuitive to fix credit card debt by taking out another loan or line of credit, but consider the details. You then pay off all of your credit card debts with the personal loan, or transfer all of your balances onto the new credit card. In either case, you’ll now be left with a single monthly payment rather than multiple payments, which can be hard to keep up with and easy to forget about.

Both tactics can also help you save money on interest, too, which can help you get out of debt faster and more efficiently. Different types of personal loans often have lower interest rates than credit cards do, and if you go the balance transfer route and choose a card with a 0% rate, you may save yourself from paying any additional interest at all.

Beware, though: Those 0% balance transfer rates are usually only promotional, and wear off after a certain period of time, like a year. At that point, if you hadn’t paid off the balance in full, you’d likely be stuck paying double-digit interest on whatever was left over once again.

Recommended: Debt Consolidation Calculator

The Takeaway

If you’re struggling with credit card debt or simply looking for professional financial help from a budget-friendly source, pursuing credit counseling can be a smart step to take. These nonprofit organizations offer a variety of different workshops, services, and materials that can help you fashion a more sustainable financial future.

While SoFi is not a credit counseling organization, we do offer options for managing debt, like debt consolidation loans.

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.

FAQ

What is the purpose of credit counseling?

Credit counseling exists to help people find better ways to manage their money and to create sustainable budgets and debt management strategies. Usually nonprofit organizations, credit counseling agencies may offer workshops, educational materials, and one-on-one counseling services at a low cost, or even for free, to people who need some help getting their money right.

What is the credit counseling process?

While each credit counseling organization is different, in most cases, you’ll be offered an initial credit counseling consultation appointment that may last about an hour and take place in person, on the phone, or through a video conferencing platform. You may be offered follow-up appointments as well as educational resources and workshops. While most credit counselors are part of nonprofit organizations, there still may be some fees associated with their services, though these are usually much lower than a professional financial advisor’s fees.

Do you need credit counseling?

Only you can decide if you need to pursue credit counseling, but if you’ve been struggling with credit card debt and found yourself unable to create or stick to a sustainable debt repayment strategy, credit counseling could help.

Photo credit: iStock/Rockaa

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.

SOPL-Q425-004

Earned wage access is an employer-provided benefit that allows employees to access a portion of their paycheck ahead of payday. This can be immensely helpful for employees living paycheck to paycheck who incur unexpected, emergency expenses.

On-demand access to money that employees have earned can keep them from relying on more risky and costly alternatives, like payday loans, cash advances, and even intentionally overdrafting their bank accounts. But earned wage access programs may also carry some fees, and they can inspire bad habits with budgeting and money management.

How Does Earned Wage Access Work?

Earned wage access (EWA) works similarly to a cash advance app, except that it’s an employer-provided benefit. Employees who work at a company offering this benefit can download the app of the third-party EWA provider that their company works with and then apply to access a portion of their paycheck.

Employers typically limit how much of a paycheck employees can access early. EWA providers charge a fee for this access. In some cases, the employee will have to pay the fee every time they use the service; in others, employers foot the bill as part of the benefit.

Recommended: Debt Consolidation Calculator

Earned Wage Access Example

Here’s an example of how earned wage access (also sometimes called early wage access) might work in the real world:

An hourly employee earns $20 an hour, after taxes and retirement contributions. Though she receives her paycheck every two weeks, the employee realizes she needs money now to cover an emergency vet bill. She has already worked six days, meaning there are four working days before the end of the pay period — and more time before payroll processes.

She uses the EWA app that her company has partnered with to apply for early access to her paycheck. There is a $5 fee, but her company covers the cost as part of the earned wage access benefit. The EWA benefit is limited to 50% of her total pay for the period, so the employee then receives $800 ahead of her paycheck.

On payday, the employee usually receives a check for $1,600. Because she’s accessed $800 early, however, her paycheck will only be $800.

How to Qualify for Earned Wage Access

Qualifying for earned wage access is easy. You just have to work at a company that offers it as a benefit. EWA is growing increasingly popular. Companies like Uber, McDonald’s, and Walmart have all adopted early wage access as an employee benefit.

Unlike personal loans or credit cards, there’s no credit check to access the money early. Instead, you’ll just need to download the app of the program that your company has partnered with and connect it to your bank account or debit card to have the money transfer go through.

Earned Wage Access Pros and Cons

Earned wage access offers tremendous benefits, especially to employees who are struggling financially. However, EWA also has its fair share of drawbacks to consider.

Pros

•   Fast access to money: The best way to handle unexpected expenses is to draw money from your emergency savings fund. In theory, the money will have been sitting there — in a high-yield savings account actively earning interest — so you don’t have to rely on credit cards, personal loans, cash advance apps, or payday loans. However, people who live paycheck to paycheck understandably can’t build an emergency savings fund. Earned wage access offers another path forward. You’ll be withdrawing money you’ve earned, just a little early. That means you aren’t taking on debt to cover life’s unexpected expenses.

•   Easy to qualify: Taking out a personal loan for emergency expenses is often a smart idea if you don’t have the money in savings. But if your credit score is in poor shape, you might have trouble getting approved for a personal loan. Getting money through earned wage access may be easier. As long as your company offers this as a benefit, you don’t have to worry about credit checks and high-interest debt.

•   No fees (or at least low fees): Many employers cover the admin fee of earned wage access for their employees as part of the benefit. Other employers might have arrangements with EWA platforms that don’t charge fees when employees access their funds early. Even if the employee is responsible for a transaction fee for an EWA, the cost is usually low.

Cons

•   Smaller paycheck: When you need money in a pinch, earned wage access can be a great solution that doesn’t involve taking on debt. However, when payday arrives, your paycheck could be much smaller. Often, EWA platforms allow you to access up to 50% of your paycheck, meaning your payday will be cut in half. While you’ve covered the cost of the emergency expense, you’re now faced with paying your monthly bills on only half of your normal check. That could mean tightening your belt at the grocery store or making late payments on bills.

•   A bad habit: Like cash advance apps or even payday loans, EWAs can be a slippery slope. You may access a portion of your paycheck early during one pay period, get a smaller paycheck as a result, and then need to turn around and access the next paycheck early to make up for your reduced paycheck.

•   Potential fees: In some cases, employees do have to pay for earned wage access. These fees are usually nominal, especially when compared to alternatives — overdraft fees from spending more than they have in their bank account or exorbitantly high interest rates for payday loans — but EWA fees should still be a consideration for people on a budget. Maybe there’s another alternative, like borrowing money from a family member or a payment plan for whatever emergency expense the employee has incurred.

For instance, one 2024 study found that two-thirds of EWA users who had overdraft problems had more of these issues after they began to utilize EWA. It’s a difficult pattern to get out of — and could be even more detrimental if you change jobs and your new employer doesn’t offer EWA. In that case, you might be tempted to take out a predatory loan instead.

Recommended: How to Avoid Overdraft Fees

Earned Wage Access vs Cash Advance Apps

Cash advance apps, also referred to as early payday apps, share some similarities with earned wage access. Both are typically managed through mobile apps and help you access cash flow ahead of your next paycheck.

Earned wage access, however, is offered solely through an employer. The employer may cover fees for the employees, and the amount a person can access is related to their actual paycheck.

With a cash advance app, consumers are responsible for any associated fees. Some apps may advertise no fees (and no interest), but they may charge a fee for instant transfers. Otherwise, you’ll have to wait a few days to get the money, which often defeats the purpose. Other cash advance apps might have a monthly charge.

The amount you can borrow through a cash advance app varies and may be tied to the cash flow of your linked bank account. Repeat borrowers may get approved for higher funds. Repayment is due on the borrower’s next payday.

As referenced above, an alternative in an emergency solution could be a personal loan. It won’t affect your upcoming paycheck, you can use loan money for a variety of purposes, and it can give you the funds you need, at a low cost, to get through a financial hardship. However, you likely need a solid credit score to qualify.

Recommended: Is There a Minimum Credit Score for a Personal Loan?

The Takeaway

Earned wage access can be helpful in an emergency situation, if your employer offers this benefit. However, EWA may come with fees, can make it more challenging to budget on payday, and may even lead to a recurring habit. It can be wise to consider other options such as cash advance apps and personal loans.

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.

FAQ

Is earned wage access a loan?

Earned wage access is not a loan. It allows employees at participating companies to access money they’ve already earned, just ahead of schedule.

What are the benefits of earned wage access for employees?

Earned wage access offers employees several benefits, including fast access to money they’ve technically earned, no or low fees, and easy qualification requirements. (You’ve just got to work for a company that offers this benefit.)

What are the downsides of earned wage access?

Earned wage access can have some downsides. Employees may have to pay fees to get early access to their paycheck, the amount you can access is often capped at 50%, and it can lead to a bad habit wherein you regularly need money before your payday.

Photo credit: iStock/Ivan Pantic

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