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Revolving credit and non-revolving lines of credit are two financial instruments that allow you to access a specific amount of money upfront.

With revolving credit, a borrower can continually access funds up to their credit limit and then, once they repay those funds, their available credit will get replenished. The line of credit remains open for use until either the borrower or lender closes it. On the other hand, a line of credit that’s non-revolving is a one-time arrangement — after the borrower spends the set credit limit and pays off the amount in full, their account will be closed.

Understanding Revolving Credit and How It Works

Revolving credit offers the ability to use a particular sum of money over and over again. You’re usually given a credit limit, and you can spend up to that limit. As you make payments to your account, your available credit increases once again.

One example of revolving credit is a credit card. You have an initial credit limit and can continue to make charges to your card as long as your total balance stays below your credit limit. As you make payments, you can continue to use your credit card each month.

Recommended: How to Avoid Interest on a Credit Card

Pros and Cons of Revolving Credit

The biggest upside of revolving credit is that you can use the money over and over again, as long as you continually pay down your balances. This setup can be helpful if you have short-term expenses to cover, as you’ll have a pool of money you can dip into and then quickly repay. Plus, you’ll only accrue interest charges and make payments on the amount you actually use. You can usually keep your interest at zero if you repay the full amount you borrowed every month.

There are a few cons to revolving credit though. For one, they may have higher interest rates compared to some other types of loans, such as traditional installment loans. High-interest credit cards have an average APR of about 20%–25%. In fact, in light of today’s high rates, a temporary 10% credit card interest cap was recently proposed, though the future of credit card caps is unclear. Non-revolving credit options typically have lower interest rates, however. Personal loans, for example, have an average APR of about 10-12%, as well as fixed rates.

In addition, your revolving credit may come with annual fees. There’s also the potential to negatively impact your credit if you don’t use revolving credit responsibly, as you could drive up your credit utilization rate by using too much of your available credit limit.

Understanding a Line of Credit and How It Works

A line of credit, such as a personal line of credit, can be either revolving or non-revolving. If it’s a non-revolving line of credit, you have access to the initial sum of money, but once you spend it, you won’t be able to access it any more. Otherwise, non-revolving lines of credit function similarly to revolving credit lines.

How Is a Credit Line Determined?

The credit line that you receive through a line of credit or a credit card is determined by the issuer. This determination is based on their evaluation of a number of different factors. Specifically, a lender may review your credit history as tracked by your credit report, employment and income, and any previous credit you’ve had with them. They may also use proprietary algorithms to determine how much credit to extend.

What Credit Score Is Needed for a Credit Line?

Generally speaking, the higher your credit score, the better the chance that you’ll be approved for a credit line. You will also often get a lower interest rate the higher your credit score. This is another reason why it’s a good financial practice to work toward maintaining and/or building your credit score.

Calculating Interest on a Credit Line

Most credit lines and forms of revolving credit (such as different types of credit cards) charge interest for any amount that remains outstanding after the statement due date.

The interest rate you’re charged is determined by the card issuer and the terms of your credit line. If you pay off your credit line in full by the statement due date, you may not owe any interest at all. But if you have an outstanding balance, you’ll likely be charged interest on the total balance that remains. Those interest rates can typically be quite high.

💡 Quick Tip: Credit card interest rates average 20%-25%, versus 12% for a personal loan. And with loan repayment terms of 2 to 7 years, you’ll pay down your debt faster. With a SoFi personal loan for credit card debt, who needs credit card rate caps?

Pros and Cons of Line of Credit

One pro of a line of credit is that you may be able to have multiple lines of credit. These may be with different banks or through different products that are issued by the same bank. Another upside is that non-revolving lines of credit tend to have lower interest rates, and they’re often for higher amounts compared to revolving credit.

However, a downside of a non-revolving line of credit is that you’re only able to access your credit line once. Even if you make payments toward your balance, you won’t be able to access your money again, like you would with revolving credit. If for whatever reason you decide you’d like to borrow additional funds, you’ll have to go through the hassle of another application and approval process.

Similarities Between Revolving Credit and Lines of Credit

It’s important to note that a line of credit may either be revolving debt or non-revolving. So it’s possible that a particular line of credit will also be revolving credit and share all of its similarities.

Another similarity between revolving credit and a line of credit is that they both allow you to access a specific amount of money (your credit limit) upfront.

Differences Between Revolving Credit and Lines of Credit

The biggest difference between revolving credit and a non-revolving line of credit lies in how often you can access it. With revolving credit, you can access the money in your credit line as often as you need, as long as your total balance remains below your available credit limit. With a non-revolving line of credit, however, you can only access your available credit one time.

Recommended: Difference Between a Personal Line of Credit and a Credit Card

Lines of Credit vs Traditional Loans

Lines of credit differ from traditional loans in a few key areas, and it’s important to understand the differences.

With a line of credit, you have control over when and how you access your money — you don’t have to take it all at once. If your line of credit is a revolving line, you can even access your money repeatedly, as long as your total balance is below your credit limit.

Meanwhile, with a traditional installment loan, you get all of your money in one lump sum, usually at or near the date of closing. You’ll then pay a fixed amount each month until your loan is completely paid off. Mortgages and many personal loans are often considered traditional loans.

The Takeaway

Both revolving credit and non-revolving lines of credit offer access to funds, though there are key differences between revolving credit and a line of credit. With a non-revolving line of credit, you can only access the total amount of money once. In contrast, revolving credit allows you to access the money multiple times, as long as the outstanding amount is less than your total available credit amount. A credit card is considered one form of revolving credit.

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.

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’s the difference between an installment loan and a revolving line of credit?

A revolving line of credit and an installment loan are different ways to access money. With an installment loan, you get all your money upfront and then make fixed monthly payments for the term of the loan. With a revolving line of credit, you’re given a credit limit and can then choose to access however much of that limit you need, only paying interest on your outstanding balance.

Can mismanagement of my revolving credit damage my credit score?

Yes, it is possible to damage your credit if you don’t manage your revolving credit responsibly. For example, missing payments or keeping a high balance on a revolving line of credit can both have negative effects.

What is the duration of a revolving line of credit?

Your revolving line of credit typically will remain open until either you or the lender decides to close it. There are several reasons a lender may close a revolving line of credit without a borrower’s permission, including a prolonged period of inactivity, a history of late or missed payments, breached terms of the agreement, or repeated spending over the credit limit.

How does interest work for revolving credit?

Typically, borrowers will only pay interest on the amount they’ve accessed from their line of credit. Interest charges generally only apply to any balance that remains after the statement due date.

Photo credit: iStock/GCShutter

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.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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®

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.

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One important way that some types of loans or financial products differ is in whether they’re revolving or non-revolving credit. Revolving credit refers to a line of credit that you can access over and over again, subject to a total credit limit. Credit cards are one type of revolving credit.

Non-revolving credit, however, allows you to access a specific amount of money upfront and then pay down your balance. Once it’s paid off, you can no longer access the money. Student loans, auto loans, and mortgages are all examples of non-revolving credit.

Understanding the differences in revolving vs. non-revolving credit can allow you to better choose which financial product is right for your situation and understand how each can impact your credit.

Understanding Revolving Credit and How It Works

Revolving credit is a type of credit that you can access over an extended period of time. As mentioned, the way a credit card works is one example of revolving credit — you’re given a maximum credit limit, and as long as your outstanding balance remains below that limit, you can continue to use the card. As you pay down your balance, the amount of your revolving credit that you can use increases.

Another example is a personal line of credit. It works similarly to a credit card, with a maximum credit limit and a minimum payment required each month, but there is no physical card included. Instead, you can access the funds with a check, a transfer, or at an ATM. A popular line of credit option is a home equity line of credit (HELOC). In this case, the home serves as collateral, though not all lines of credit are secured.

Recommended: When Are Credit Card Payments Due?

How Does Revolving Credit Impact Your Credit Score?

Many forms of revolving debt are reported to the major credit bureaus and will show up on your credit report. This means that how you use your revolving credit will impact your credit score.

If you reliably pay off your credit balances each and every month, that will generally have a positive impact on your credit score. However, if you miss payments or carry a high balance, your credit score may go down. When you have a high balance vs. your credit limit, that creates a high credit utilization ratio, which can negatively impact your credit score.

💡 Quick Tip: Everyone’s talking about capping credit card interest rates. But it’s easy to swap high-interest debt for a lower-interest personal loan. SoFi credit card consolidation loans are so popular because they’re cheaper, safer, and more transparent.

Advantages of a Revolving Line of Credit

The biggest advantage of a revolving line of credit is that you’re able to access the funds as you need them. Instead of taking out a large lump sum, you can borrow just the money you need right now. This may help you save money on interest charges if you pay off your balance each month, since you only pay interest on your outstanding balance. Leaving a balance on a credit card, however, could expose you to high interest charges that could quickly compound.

Whichever of the different types of credit cards you choose, it typically represents one of the most popular forms of revolving credit. With a credit card, you’re initially given a credit limit that represents the highest amount of money that you can borrow. As you make purchases, your amount of available credit decreases, but you can raise that amount by making payments to your account.

Recommended: Understanding Purchase Interest Charges on Credit Cards

What Is Non-Revolving Credit?

Non-revolving credit is another type of debt that you’ll want to be aware of. Some popular examples of non-revolving credit are auto loans, student loans, mortgages, and personal loans.

With non-revolving credit, you receive all of your money upfront. As you make payments, your balance decreases, but you are not able to access any additional funds.

How Does Non-Revolving Credit Work?

If you have a non-revolving credit account, you will receive all of the funds you apply for upfront. One example of a non-revolving credit account is an auto loan. If you take out an auto loan, you get the total amount to buy your car at the outset. Then, you’ll make regular monthly payments, which decreases your outstanding balance.

But with a non-revolving credit account like an auto loan, you won’t be able to access any additional money without reapplying and requalifying with your lender.

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

Benefits of Non-Revolving Credit

One benefit of a non-revolving credit account is that you may be able to qualify for a higher amount and/or lower interest rates. Banks may be more willing to extend you additional credit (meaning a higher sum) on a non-revolving credit line, specifically because you won’t be able to continue to revolve the debt amount over time.

To illustrate this point, consider the difference in the amount and interest rate between a typical mortgage (non-revolving) and credit card (revolving). According to Bankrate, in January 2025, the average fixed-rate interest on a 30-year conventional mortgage was 7.11% while the rate for a credit card was 20.15%.

Another benefit of non-revolving credit is that it doesn’t leave borrowers vulnerable to rate hikes, as credit cards might do. In fact, proposed credit card interest rate caps have been getting national attention, with the United States leading the world in outstanding credit card debt, at $1.23 trillion in total. When faced with crippling credit card debt, however, a personal loan may offer a cheaper, faster, and predictable way to pay off debt.

Recommended: How to Avoid Interest on a Credit Card

Revolving Credit vs Non-Revolving Credit

Here’s a quick look at some of the differences between revolving credit vs. non-revolving credit:

The Takeaway

Credit and debt accounts can be either revolving or non-revolving, and there’s an important difference between the two. With a non-revolving credit account, you receive all of the money at once, pay interest on the full amount borrowed, and you’re not able to access any additional funds without reapplying with your lender. With a revolving credit account (such as credit cards), you are only charged interest on the amount that you choose to borrow at any one time, and you can pay down your balance and access additional funds at any time.

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.

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 major difference between revolving and non-revolving credit?

One of the biggest differences between revolving vs. non-revolving credit is how often you are able to access the money from your credit account. With a non-revolving credit account, you access the total amount upfront and then are not able to access any additional funds without reapplying. If you have a revolving credit account, you can continue to pay down your balance and access additional money, as long as your balance is below your maximum credit limit.

When should I use revolving credit?

A revolving credit account, such as a credit card, can be a great choice if you don’t have a fixed amount that you’re looking to borrow. If you have a revolving credit line, you’re able to borrow (and pay interest) only on what you need at any one time. And if you later find that you need to borrow additional funds, you can do so with a revolving line, as long as your outstanding balance remains below your total credit limit.

When does a revolving line of credit become mature?

Some revolving letters of credit come with a maturity date. Before the maturity date, you can access the line of credit, pay down the balance, and continue to access additional funds. This is often known as a “draw period.” After the maturity date when this draw period ends, the line of credit converts to non-revolving, and you are no longer able to access additional funds. Make sure to check the terms of your line of credit to understand how this may affect you.

Photo credit: iStock/staticnak1983

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.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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 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.

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

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.

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Renting a car with a debit card is possible at certain car rental agencies, but you may have to jump through a few additional hoops, such as paying a large deposit or undergoing a credit check. Agencies may also impose certain restrictions, such as being over age 25 and having a debit card with a Visa or Mastercard logo.

Here are key things to know about renting a car with a debit card, including which companies accept debit cards, the pros and cons of using debit vs. credit, and alternatives ways to pay for a rental car.

Is It Possible to Rent a Car With a Debit Card?

So, can you use a debit card to rent a car? Yes! You’ve just got to find rental car agencies that accept debit cards. Though company policies can change, and also vary by location, these are among the agencies that typically allow drivers to rent a car without a credit card:

•   Alamo

•   Avis

•   Budget

•   Dollar

•   Enterprise

•   Hertz

•   Thrifty

Keep in mind that rental car companies that accept debit cards often have additional requirements and restrictions for customers who choose to pay this way.

For example, the company might require a large security deposit and run a credit check on you. You may also have to provide multiple forms of identification, be at least 25 years old, and/or have a debit card with a common logo, like Mastercard, Visa, American Express, or Discover. Airport rental agencies may have additional requirements for renting a car with a debit card, such as proof of return travel.

In addition, the rental company will likely place a debit card hold (equivalent to the total estimated cost of the rental, plus some extra funds for security), which will limit the funds available in your checking account. The hold on the account will be removed after the car is returned and all fees are paid.

It’s a good idea to call the specific location where you hope to rent a car using a debit card. You can then make sure you understand what requirements must be met in order to reserve and pay for the car. In some cases, a rental agency will allow you to use your debit card to pay your final rental bill after you return the car, but require a credit card to make the car reservation.

Recommended: Cheapest Ways to Rent a Car

Why Do Many Car Rental Companies Require a Credit Card?

While many rental car companies will let you rent a car with a debit card, they generally prefer that you use a credit card. The reason is that credit cards offer multiple types of assurances to a rental car agency. For starters, a credit card signals to them that you are trustworthy and responsible — two traits that a company might value before lending you a $25,000+ piece of heavy machinery.

Credit cards also enable rental car companies to collect money for any repairs, tickets, tolls, and other fees. Because of the open line of credit on the card, the rental agency knows it can charge you for incidentals as necessary — without requiring a large security deposit from you up front.

Recommended: Can You Use a Debit Card Online?

Pros of Renting a Car With a Debit Card

Renting a car with a credit card certainly seems easier, but are there advantages to using a debit card? Definitely. Here are some of the pros of using a debit card to rent a car:

•   No credit card necessary: The biggest advantage is also the most obvious. If you can’t qualify for a credit card or simply don’t want one, using a debit card allows you to rent a car without needing a line of credit.

•   No credit card interest: If you pay your credit card off in full each month, you probably aren’t worried about credit card interest. But if you suddenly have a major charge for a car rental, you might be tempted to just make your minimum payment on your credit card — and rack up interest. By paying with a debit card, you don’t risk accruing credit card interest.

•   No impact on credit utilization: High credit utilization can drive down your credit score. By using a debit card, you won’t tap into any of your available credit. However, if the agency runs a credit check for debit card users, the hard inquiry could impact your credit score temporarily.

Cons of Renting a Car With a Debit Card

Though it’s possible to rent a car with a debit card, this payment method can have drawbacks. Here are some of the biggest downsides of renting a car with a debit card:

•   Fewer perks: By swiping your debit card, you may be missing out on credit card travel insurance offered to cardmembers. If you have a rewards credit card that earns cash back or points for every purchase, you may also be leaving money on the table by using a debit card.

•   Security deposit: When using a debit card, you’ll often have to pay the full cost of the rental up front. On top of that, an agency may hold additional funds as a security deposit. This could reduce the cash you have available to spend while on your travels.

•   Credit check: Without a credit card, the rental car agency may perform a credit check before handing over the keys. This can result in a hard inquiry on your credit report.

•   More hoops to jump through: In addition, rental agencies may require multiple forms of ID, might have age requirements, and may even need to see proof of scheduled return travel to allow you to pay with a debit card.

Is It Better to Rent a Car With a Debit or Credit Card?

Do you need a credit card to rent a car? Not necessarily. If you cannot qualify for a credit card or do not want one, renting with a debit card may be the right choice for you.

That said, using a credit card can offer some perks. Doing so is likely the better approach for many drivers since it won’t require putting a large hold on the funds in your bank account, may have built-in car insurance, and won’t necessitate a credit check by the agency.

Is It Safer to Rent a Car With a Debit or Credit Card?

Renting a car with a credit card is generally safer than renting a car with a debit card. One reason is that it can be more challenging to dispute charges with a debit card compared to a credit card. In addition, your credit card may also offer rental car insurance as part of its perks, meaning extra protection on the road.

Alternatives to Car Rentals With Debit Cards

While you can use a debit card to rent a car, here are some alternative payment options you may want to consider:

•   Using a credit card: The main alternative is paying for a car rental with a credit card. In fact, this is usually the better option for the driver and the rental agency.

•   Riding with another driver: If someone else in your party has a credit or debit card and is willing to pay for the rental, let them get behind the wheel. Many companies allow customers to add additional drivers to the rental contract, though it may involve a fee.

•   Paying with a prepaid card or cash: While rental car agencies will likely require a credit or debit card to secure the rental, some agencies may allow you to pay with a prepaid card, money order, or even cash at the end of the rental agreement — once the car has successfully been returned.

Recommended: Common Misconceptions About Money

Ways to Protect Yourself While Renting a Car

Renting a car can be stressful, but it also enables you freedom to travel, allows you to put miles on a car that isn’t yours during road trips, and may come in handy when your vehicle is being worked on. Here’s how you can protect yourself when renting a car:

•   Research the car before driving it: Once you know the year, make, model, and trim of your rental, you can research it online to understand any nuances to how it works, especially if you aren’t accustomed to newer safety technologies. The owner’s manual should be in the glove compartment and is worth reviewing if you’re uncomfortable driving an unfamiliar vehicle.

•   Carry insurance: Before renting a car, it’s a good idea to check with your car insurance agent and your credit card company to see what coverage you have. If you don’t have coverage for the rental through any other means, make sure you opt in for the insurance offered by the rental agency.

•   Follow the rules of the road: You should always abide by traffic laws, but they’re especially important when you’re learning a new vehicle. If you’re traveling in a foreign country, it’s a good idea to study their laws and traffic signs at home before your trip.

The Takeaway

Renting a car with a debit card is possible, but you’ll miss out on some of the perks of paying with a credit card — like potential cashback rewards and car insurance. Plus, rental agencies may require you to fulfill more requirements to get behind the wheel, like paying a security deposit or agreeing to a credit check.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Which rental car companies allow you to use a debit card?

Alamo, Avis, Budget, Dollar, Enterprise, Hertz, and Thrifty are just some of the rental car companies that allow you to pay with a debit card. However, these and other rental car companies may have stricter rules and requirements for renting a car with a debit card vs. a credit card, such as requiring a credit check or a larger security deposit.

Are there any restrictions when renting a car with a debit card?

Each rental car company may have its own restrictions when you rent a car with your debit card. For example, they may require you to be 25 or older, pay a large security deposit, and/or agree to a credit check. It’s a good idea to call the specific agency before arriving to understand what you’ll need in order to rent a car with a debit card.

What is the process of renting a car with a debit card?

Rental agencies have varying processes for renting a car with a debit card. It’s a good idea to check online and even to call the specific agency to understand the process ahead of time. In general, companies may require full payment plus a security deposit up front, they may run a credit check, and they might want to see multiple forms of identification. If you’re renting at an airport, they may also require you to provide proof of a return plane ticket.

Photo credit: iStock/Khaosai Wongnatthakan

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.

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.
*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.

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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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Credit is often regarded as a Catch-22: You have to have credit to access credit products, particularly borrowing opportunities that are more competitive. For example, a positive credit history can help you access consumer loans at a lower interest rate and other benefits. But without an existing credit history, it might be hard to get approved for these opportunities.

However, everyone starts out without any credit history. Building a credit profile doesn’t happen overnight, but learning how to build credit when you have none can help you get as efficiently as possible.

What Is Established Credit?

Establishing credit means that you have a history of past and currently active credit accounts with which you borrowed money from an entity or financial institution to purchase goods or services.

Lenders and creditors review your established credit to decide whether to extend you new credit. It’s also evaluated by employers, utility companies, and landlords to help them decide whether to accept your application or offer you service.

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

5 Tips to Build Credit With No Credit History

It is possible to build credit even with no credit history. If you have no credit, build credit using one or more of the following strategies.

1. Become an Authorized User

One way to build credit with no credit is to ask a family member or friend who has good credit to add you as an authorized user on their credit card account. Some lenders report card activity to the credit bureaus for both the primary cardholder and any authorized users on the card, so the primary cardholder’s good credit behavior could reflect positively on your credit.

As an authorized user, you aren’t liable to repay the debt on the card. However, the reported data can still reflect on your credit history.

2. Get a Secured Credit Card

Getting a credit card for the first time can be challenging if you immediately apply for an unsecured card that isn’t tied to collateral. A secured card can be easier to obtain when building credit from no credit — just make sure the card issuer reports the account’s activity to the credit bureaus.

Secured cards typically require you to make a small initial deposit into a separate bank fund. The card issuer then gives you a credit card usually with a credit limit that matches your deposit amount. As you use the card and make prompt payments, you can build credit. Once you achieve at least a fair credit score, you may be able to get upgraded to an unsecured credit card.

3. Report Your Rent and Utility Payments to Credit Bureaus

To support your progress in building credit with no credit, you can have your on-time rent payments, cell phone payments, and everyday utility bills reported to the credit bureaus.

Third-party services, like Piñata and Rental Kharma, for example, can give you momentum to develop your credit history using your rental payment track record. Similarly, the credit bureau Experian® empowers consumers to establish their credit profile by reporting phone and utility bill payments via Experian Boost.

4. Apply for a Retail Card

Credit cards that you can only use at a specific merchant, like a gas card or department store card, are typically easier for consumers with no credit history to get approved for. Plus, retail cards’ lower credit limit and restricted use makes them a good option if you’re looking to build credit.

Recommended: When Are Credit Card Payments Due?

5. Take Out a Credit-Builder Loan

A credit-builder loan is an installment loan that’s typically for a small amount, like a few hundred dollars. The lender puts this amount into a separate savings account on your behalf, and you’ll make payments to repay that loan.

During this process, the lender will report your account activity to the credit bureaus. And once the loan’s term ends, you’ll get the money that accumulated from your regular payments.

How Long Does It Take to Build Credit for a Beginner?

Establishing your credit can usually take about six months, and it typically takes at least six months to develop a credit score. Once your credit account is active and there’s borrowing and repayment activity on the account, your lender or card issuer will report the new account and its activity to the credit bureaus.

As you build your credit, you may find you will be rewarded with more perks. For instance, if your score is in the higher ranges, you may qualify for a credit card with a rewards program or find that you are offered the most favorable mortgage rates.

What Credit Score Should You Start With?

A starting credit score doesn’t start at zero. The baseline, or lowest FICO® score you can have, is actually 300. If you are building credit from no credit, however, you simply wouldn’t have a credit profile to your name, meaning you’d have no credit score as opposed to a low credit score.

Recommended: How to Avoid Interest on a Credit Card

Tips for Using a Credit Score to Your Advantage Once You Have It

Once you’ve gone through the necessary motions to build credit, here’s how you can make the most of it:

•   Shop around before opening new credit accounts. Lenders and credit card issuers are competing for your business. Compare product features, interest rates, fees, and terms before moving forward with a new loan or credit card to ensure you get the most competitive option available to you.

•   Apply for credit cards with better rewards. Once you’ve established your credit and are confident that you can borrow responsibly, consider applying for a credit card that offers a rewards program. For example, look into cards that offer cash back, points, or miles so you get a little something back from purchases you’d already make.

•   Maintain responsible borrowing habits. After you’ve put in so much work to build your credit score, you don’t want to wreck it. So follow responsible borrowing habits, like not borrowing more than you can afford to pay back based on your monthly expenses and income.

•   Be aware of the factors affecting credit scores. Understand how paying off debt affects your credit score, as well as how your credit utilization, credit age, credit mix, and new accounts influence your score. By knowing what makes up your credit score, you’ll better know how to continue building it.

The Takeaway

There are many ways to build your credit when you have no credit history, such as getting a retail card, becoming an authorized user on a relative or close friend’s account, or having rent payments reported to the credit bureaus. However, all of these strategies can take several months to get your credit record established. Once you have a credit score going, you can access other credit products, like rewards credit cards.

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

How fast can you build credit with no credit?

Generally, if you’re starting with no credit, it can take about six months to build your credit. The exact timeline depends on the credit scoring model that’s used and your lender’s timeframe for reporting new accounts to the credit bureaus.

What is the easiest way to establish a credit history?

One of the easiest ways to establish a credit history is by asking to become an authorized user on a family member or close friend’s credit card account. This approach bypasses having to personally submit your own credit card application. Instead, you’ll piggyback on the primary account holder’s positive borrowing and repayment practices to build your credit record.

What is my credit score if I have no credit?

If your credit profile is nonexistent — meaning you’ve never opened a credit-based account under your name — you won’t have a credit score at all. Having a credit score of 0 is actually a myth; instead of a number, you’re simply considered credit invisible.

How long does it take to build credit from 0 to 700?

The time it takes for consumers who are new to establishing their credit to reach a credit score of 700 varies. However, generally, if you have no credit you could potentially reach a 700 credit score after six months of a reported payment history.

Photo credit: iStock/fizkes

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 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.

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

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If you’re like many cardholders, you will likely want to take advantage of any opportunities to streamline your finances and keep your credit profile in good shape. A commonly used credit card feature that can make life more convenient is automated credit card payments, or credit card autopay. It’s a way to have your bill paid seamlessly on time so you don’t have to wonder when your credit card payment is due or risk making a late payment, which can negatively impact your credit.

In this guide, you’ll learn about credit card autopay, its pros and cons, and whether it’s is a good fit for you.

What Is an Automated Credit Card Payment and How Does It Work?

An automated credit card payment, or autopay, is a recurring payment that’s scheduled for the same day each month. The automatic payment is typically made on a date that’s either before or on the statement due date.

Autopay allows cardholders the convenience of making credit card payments on a periodic basis without having to manually set up payments. This also helps with avoiding late or missed payments.

When you enroll in automated credit card payments through your credit card issuer, you’re authorizing the issuer to request a certain payment amount on a specific date from your banking institution. When the autopay date arrives, your card issuer’s bank will send your bank an electronic request for the payment amount you’ve set up.

Your bank then will fulfill the payment request and send it to the merchant’s bank (i.e., your card issuer).

Credit Card Autopay Options

There are a few ways to approach automatic bill payments through your card issuer. Each has its benefits and caveats, so assess your own financial situation before choosing an autopay strategy for your credit card.

Paying the Minimum

One option is establishing automated credit card payments for the minimum amount that’s due on your billing statement. The minimum payment is the smaller amount due that’s shown on your statement or online account, and the amount varies based on your total charges at the close of your card’s billing cycle.

Selecting to pay the minimum can be useful if you don’t have enough money to repay the entire balance due in one fell swoop. By paying the minimum, you’ll fulfill the minimum payment charged by the credit card issuer and keep your account in good standing — which, in turn, helps keep your credit score in good standing.

However, this means you’ll roll over the remaining statement balance into the next billing period, which will lead to incurring interest charges. That’s one aspect of how credit cards work.

Recommended: What Is a Charge Card?

Paying the Full Balance

You also can choose to pay the full balance as shown on the billing statement for each recurring payment. Paying the full balance is beneficial, because it allows you to avoid rolling a balance into the next billing cycle. This, in turn, means you can avoid interest on a credit card.

However, since your balance will likely vary month to month, you need to be sure you have enough cash in your bank account to cover it. Otherwise, you could wind up overdrafting.

Paying a Fixed Amount

Another option is to set up automated credit card payments for a specific, fixed amount. For example, if you exclusively use your card to pay your fixed monthly cell phone bill of $50, you can establish an autopay for $50 toward your account on a recurring schedule. You can also use this option if you’d like to make extra credit card payments throughout the month.

Benefits of Automatic Credit Card Payments

Choosing a credit card that allows autopay can be helpful for various reasons. These are a few of the major upsides to enrolling in automated credit card payments:

•   You won’t risk forgetting about a credit card payment due date.

•   You’ll avoid penalty fees and penalty annual percentage rates (APRs) for making a late payment.

•   Your positive payment history is maintained.

Drawbacks of Automatic Credit Card Payments

There are also some caveats to consider before you set up autopay. This includes the following:

•   You might face other fees if you have insufficient funds when using autopay.

•   You might slack off on reviewing your monthly credit card statement for red flags.

•   You might inadvertently overspend on your card because you feel as if you’ve got the payment covered.

Factors to Consider Before Setting Up Automatic Credit Card Payments

Before setting up automated credit card payments, honestly assess your finances and habits. Verify that you have sufficient deposits into your checking or savings account to cover the autopay amount you’ve set up.

And if you do set up automatic credit card payments, make sure you continue to check your monthly billing statements. Confirm that all transactions are yours and are accurate and that your total spending is still manageable.

Setting Up Automatic Credit Card Payments

The exact process for how to set up automatic credit card payments can vary somewhat from issuer to issuer, but in general, it’s pretty easy to do.

•   You will need to first log on to your credit card account either online or through the mobile app. It’s also possible to call the number listed on the back of your card to have someone talk you through the process.

•   Pull up the section labeled payments, and you should then be able to find an option to manage or set up autopay. You’ll need to connect a bank account where the payments will get pulled from and select the date and frequency at which you’d like the payment to occur.

•   You should also be able to select which payment option you’d like (minimum due on your credit card, the full balance, or another amount).

💡 Quick Tip: When using your credit card, make sure you’re spending within your means. Ideally, you won’t charge more to your card in any given month than you can afford to pay off that month.

Tips for Stopping Automatic Payments on Credit Card

What if you have credit card autopay activated on your account but need to halt automated payments moving forward? Federal law protects your right to rescind authorization for automatic payments. Here are a few ways to go about it:

•   Turn off autopay through your card issuer. Many credit card issuers give cardholders the ability to turn autopay on or off through the app or via their online account’s payment settings. Just make sure you do so before the next automated payment is processed.

•   Revoke authorization from your card issuer. Call your credit card issuer to revoke authorization for autopay. Then follow up the call with a written letter revoking authorization, and requesting a stop to automatic payments on your account.

•   Request a stop payment order from your bank. You can also contact your bank to place a stop payment order on any automated payment transactions requested by the card issuer.

Regardless of how you stop automated payments from occurring, continue reviewing your monthly statement and account activity to ensure that the autopay has ceased.

What Happens If You Overpay Your Credit Card Balance?

Say you accidentally set up autopay for an amount higher than the balance — what could you do then? Typically, credit card overpayments are processed as a negative balance. A credit for the overpaid amount should be reflected on the next billing statement, assuming your new transactions bring your account above a zero balance.

However, you do have the right to request a refund from the card issuer, instead of having it applied as a credit. The Federal Trade Commission (FTC) has in place regulatory credit card rules for card issuers when it comes to an overpayment on your card account. It states that upon receipt of a consumer’s written refund request for an overpayment, an issuer must provide the refund within seven business days.

The Takeaway

Automated credit card payments are a convenient option and can mean one less thing to remember. In addition to helping you keep your card account in good standing, autopay can provide peace of mind. By automating payments, you could avoid credit card late payments, penalty fees, and penalty APRs for late payments. But it’s important to weight the pros and cons of this process and determine if it’s right for you.

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

Is it a good idea to automate monthly credit card payments?

Whether enrolling in automated credit card payments is a good idea depends on your current financial situation. You must reliably have the payment amount in your checking or savings account each month and not be at risk of overdrawing or having insufficient funds. Also consider your other financial responsibilities and personal money management habits to decide if automated payments are right for you.

Do automatic payments affect your credit score?

Thirty-five percent of your FICO® credit score calculation is based on your payment history. Automatic payments can help you make on-time payments for at least the minimum balance due which can positively impact your score. As long as the deposit account that automatic payment is drawn from has adequate funds, the credit card autopay transaction can be advantageous to your credit profile.

Do banks charge for automated credit card payments?

No, banks and credit card issuers don’t typically charge an additional fee to make automated credit card payments. Autopay is intended as a payment convenience for cardholders. But ultimately, it helps card issuers and banks better secure repayment from customers, thereby lessening the risk of a late payment or delinquent account.

Photo credit: iStock/PeopleImages

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 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.

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

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