credit card Archives | Page 34 of 40

Oct

2022

How Credit Card Frauds Are Investigated and Caught

Even if you’ve never been a victim of credit card fraud yourself, you probably know someone who has — and you may have wondered how credit card frauds are caught. Credit card companies and merchants frequently update the security measures they use to prevent credit card fraud, and their investigators will check into issues as they occur. Law enforcement also may get involved, depending on the type of fraud and the amount.

That being said, it’s still important for you to protect yourself against credit card fraud. Read on to learn about the different types of credit card fraud you might encounter, what to do if you suspect your account has been compromised, and steps to take to safeguard your account going forward.

What Is Credit Card Fraud?

Credit card fraud is the unauthorized use of a person’s credit card information to purchase goods and services or get cash from an account. According to data the Federal Trade Commission (FTC) has collected over the past four years, credit card fraud is the most reported form of identity theft.

Luckily, federal law can limit your responsibility if you move quickly to report a lost or stolen card or dispute unauthorized charges. Still, it can be a real hassle to clear up the mess and keep inaccurate information caused by identity theft off your credit reports.

What Types of Credit Card Fraud Are There?

You can become a victim of credit card fraud whether someone physically takes your card, virtually hacks into your account, or uses your information to create a new account. Here’s how fraudsters can obtain and use your account information through various credit card scams.

Card-Present Fraud

EMV® chips, PINs, and other security measures have made “card-present” fraud less of a factor than it used to be. But there are still some criminals who are willing to risk using a lost, stolen, or counterfeit card to make an in-person purchase — and they’ll likely move quickly to do so.

Even if you think you’ve simply misplaced a card, you may want to use your card’s “on/off” feature, if there’s one available, to temporarily suspend the card until you can locate it or report that it’s missing.

Card-Not-Present Fraud

Even if your cards are safely tucked away in your wallet, you may find unauthorized charges on your statement. These days, it’s far more common for a thief to work behind the scenes to get your account information and use it to commit fraud online or over the phone.

Card Skimming

You’ve probably seen warnings in the news about thieves placing skimming devices on gas pumps, but credit card skimmers can be used to steal information just about anywhere there’s a card-reading device. This can include on ATMs and at stores and restaurants.

When you swipe a card, the skimmer reads the magnetic strip and stores the credit card number, expiration date, and cardholder’s name. There are also devices (cameras or false keypads) that can record a PIN number.

The captured information can then be used to make fraudulent charges online or over the phone. The hacker could also sell the collected data or use it to create counterfeit cards.

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False Application Fraud

If identity thieves can get access to your personal information (through a data breach or some other method), they might be able to use it to apply for a new credit card, loan, or line of credit in your name. Or, they might blend information from several victims to create a false identity.

“Card Never Arrived” Fraud

This type of fraud can happen when someone intercepts a new or replacement card before you receive it in the mail. If a new card doesn’t come when you think it should have arrived, you may want to check with your credit card issuer to make sure it hasn’t been taken.

Phishing

Sometimes identity thieves will try to get the personal information they need using a phishing email, text, or phone call that appears like it’s from a bank or some other familiar contact or business. The message might ask you to click on a link or go to a website where you’ll be asked for your password, the CVV number on your credit card, or other details that may be used to access your accounts.

Hacking

Your personal details also could be at risk if your bank, credit card company, or some other business that stores your info is involved in a data breach. If this were to happen, a hacker could get ahold of your credit card information.

Account Takeover

Once a person’s identifying information is stolen (through a data breach, phishing, or another method), a thief may contact credit card companies directly. They could impersonate the cardholder and change their PINs and passwords to take over the account.

How Are Credit Card Frauds Typically Caught?

Early detection is critical when it comes to catching credit card fraud and minimizing the damage thieves can do. Unfortunately, unless you notice your card is lost or stolen, or you see unusual activity on your account statement, you and your credit card company might not know someone is making unauthorized charges for days or even weeks.

How Often Do Credit Card Frauds Get Caught?

It’s difficult to say how often credit card frauds get caught. A heads-up clerk might notice someone using a stolen credit card and call it in to the police. Or, an investigator might be able to trace a criminal who uses a stolen credit card number online. But unless you know the person involved in committing the fraud, you may not find out if there’s actually been an arrest.

The good news for credit card fraud victims is that if you quickly report the fraudulent use of your account, you won’t be held responsible for the charges. The Fair Credit Billing Act protects credit card users from being held liable for more than $50 in the event of fraud. Even better, major card networks have their own “zero liability” policies to ensure you won’t pay for unauthorized charges made with your credit card or account information.

Recommended: Complete Guide to How Credit Cards Work

How Do Credit Card Companies Investigate Fraud?

The best way to start an investigation into fraudulent transactions on your credit card is to notify the credit card issuer, either by phone or online chat. The card issuer will likely deactivate your card and send you a replacement. It also may refund your money at this point, or it may want to wait until the case is investigated.

The issuer then has 30 days to respond to your report and begin its investigation. The investigation can take up to 90 days to be completed.

As for how credit card companies investigate fraud, the issuer’s internal investigation team will begin by gathering evidence about any disputed transactions. It may check for things like transaction timestamps, the IP address of the person who made the disputed purchase, and the purchaser’s geographic location. If the crime appears to be part of a larger pattern or organization, the card issuer might alert the FBI or other law enforcement officials.

You may be able to help the investigation if you also report the crime to local law enforcement — especially if you believe the theft was committed by someone you know, or by someone local who stole personal information from your computer or mailbox. The FTC’s identity theft website can take you through the steps of filing an identity theft report.

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What Should You Do If You Suspect Credit Card Fraud?

Besides reporting credit card fraud as soon as you suspect there’s an issue, there are other steps you can take to further safeguard your finances.

Send a Follow-Up Letter

The FTC recommends following up immediately with a letter to the card issuer that confirms you reported unauthorized activity on your account. You should note the date and time you reported the loss, and include any relevant documents (such as your police report and/or your report to the FTC).

Send the letter to the credit card company’s address for billing inquiries (not the address where you make payments). Consider sending it by certified mail so you have a receipt.

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Change Your Passwords

It’s a good idea to change your password occasionally anyway. But if you suspect you’ve been the victim of identity theft, you may want to review all of your accounts and change your passwords and PINs.

Contact the Credit Bureaus

You also should contact the three major credit bureaus to report your problem, and you may want to request a credit freeze, credit lock, and/or fraud alert. What’s the difference?

• A credit freeze, also known as a security freeze, limits access to your credit report without your permission. This can make it harder for an identity thief to open a new credit account or loan in your name. A credit freeze is free, but you must request a separate freeze from each credit bureau. And when you want to unfreeze your file, you must do that separately as well, usually by using a PIN or password provided by each credit bureau.

• A credit lock is pretty much the same thing as a credit freeze, but it may be more convenient. Once you set it up, you can lock and unlock your credit reports using an app or secure website. Plus, you don’t have to keep track of a PIN or password to change your status.

• A fraud alert doesn’t put an all-out block on your credit report the way a freeze or lock can, but it still can be a useful tool. It puts a notice on your credit reports that cautions creditors that you may be a fraud victim. Additionally, it encourages them to take extra steps to verify your identity before opening a new account or changing something on a current account. Fraud alerts are free, and once you place a fraud alert with one of the credit bureaus, it will send a request to the other two bureaus to set up alerts on their reports.

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Watch Your Credit Card and Banking Statements

Don’t assume you’re out of the woods because you haven’t seen any unauthorized charges for a while. It may take weeks or even months before charges show up on your accounts if you’re the victim of identity theft. Checking your bank account, credit card, and other statements regularly for unusual charges (and to track your own spending) is a healthy financial habit to develop.

Track Your Credit Reports and Credit Score

It also can be helpful to track your credit reports to make sure the unauthorized charges you reported were blocked or removed, and that nothing new has turned up. Lenders, credit card issuers, and others use these reports to determine your creditworthiness, so you’ll want them to accurately reflect your finances.

You also can check your credit score to be sure it’s where it should be. Consumers can get a free credit report once a year from each of the three credit bureaus, and many financial institutions and credit card companies provide free credit scores to their customers. Even if you’re not a victim of identity theft, this can be a good credit card rule to follow.

Protecting Yourself From Credit Card Fraud

Unfortunately, identity theft and fraud can happen to even the most vigilant credit cardholders. To improve your chances of spotting and tracking unusual transactions, you may want to:

• Set up transaction alerts: If your credit card issuer offers fraud notifications, it could help you react more quickly to unauthorized charges on your account. You may be able to set up alerts for specific transaction types, amounts, or locations. If an alert is triggered, you’ll be notified (usually by text, push notification, or email), so you can let the card issuer know as soon as possible if there’s a problem.

• Track charges online or with an app: The days of waiting for your monthly credit card statement to arrive in the mail are long gone. You can check your current credit card balance and other details any time you like, by logging into your account regularly (at least once a week) or using a mobile app.

• Sign up for credit monitoring: A credit monitoring program is another way to find out quickly (generally within 24 hours or less) if there’s been some type of unusual activity on an account. The service can notify you of major changes to your credit report, including large purchases or inquiries from lenders or credit card companies. If you didn’t make any big purchases or apply for a new credit card or loan, you can quickly take steps to inform your card issuer and the credit bureaus.

The Takeaway

Detecting and reporting credit card fraud as soon as possible is critical if you hope to limit the stress and cost of clearing it up. Even though issuers are on top of credit card fraud investigation, It’s also important to take steps to proactively protect your accounts.

Carefully choosing which credit cards you use is one way you can help safeguard yourself. The SoFi Credit Card, for example, offers chip technology, ID theft protection, and other security features. It also can make monitoring all your accounts easier, because you can manage your credit card, loans, banking, and investing all in one place on SoFi’s app or website.

Check out how the SoFi Credit Card can help protect your financial future.

FAQ

Can you trace credit card fraud?

Yes. If you notice suspicious activity on your credit card account, you can notify your credit card issuer immediately. The card issuer will then take steps to investigate any fraudulent transactions. You also should contact the three major credit card bureaus, and you may want to make a police report.

How long does it take to investigate a credit card fraud?

The card issuer must send a letter confirming it received your fraud report within 30 days. It then has 90 days to complete its investigation.

What evidence can a card issuer use to investigate a credit card fraud?

The card issuer will use any information you provide in the course of its investigation. It also may gather further evidence by talking to the merchant who was involved, looking at transaction timestamps, or checking the IP address of the device used to make an online transaction.

What fraud protection measures do credit card issuers provide?

Credit card issuers have developed several features to stop criminals from committing fraud. Those measures range from chip technology and PIN and password protections, to real-time risk assessments that allow merchants to decide whether to approve or deny a transaction.

Photo credit: iStock/Galetos

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.

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

SoFi cardholders earn 2% unlimited cash back rewards when redeemed to save, invest, a statement credit, or pay down eligible SoFi debt.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Oct

2022

Guide to Credit Card Foreign Transaction Fees

If you’ve used your credit card outside of the U.S. — or simply made a purchase online through a merchant that wasn’t U.S.-based — you may have noticed an extra cost get added onto your purchase. Called a foreign transaction fee, these costs can add up quickly.

Luckily, it is possible to steer clear of credit card fees for international transactions. Let’s take a closer look at what a foreign transaction fee on a credit card is, how much they typically run, and how you can avoid them.

What Is a Credit Card Foreign Transaction Fee?

A credit card foreign transaction fee is a surcharge, or an additional charge, that some credit cards add to transactions that are processed outside of the U.S. Said another way, it’s a cost that applies for credit card processing when certain conditions are met.

Credit card foreign transaction fees may apply when you make an online purchase from a merchant that’s located outside of the U.S. Additionally, they may apply when you’re using a credit card in another country.

While broadly referred to as a foreign transaction fee, this fee is actually comprised of two different charges. One part comes from the credit card issuers and the other is from the credit card network (think Visa or Mastercard, for example).

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How Are Credit Card Foreign Transaction Fees Calculated?

To find out how international credit card fees are calculated for your particular credit card, check your card’s terms and conditions. You’ll likely find information on foreign transaction fees in a section titled “Rates and Fees” or “Pricing and Terms.”

In general, however, the amount of your credit card’s international fees is calculated based on a set percentage of the transaction amount.

For example, let’s say your credit card charges a 3% foreign transaction fee, and you’re paying about $50 for souvenirs you bought at a merchant abroad. In this instance, the credit card network may take 1% of the transaction, while the credit card issuer would deduct 1%. That would result in a total foreign transaction fee of $1.50 for that particular purchase.

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How Much Do Credit Card Foreign Transaction Fees Cost?

Some cards don’t come with credit card international fees, meaning you don’t have to worry about this credit card cost. For cards that do charge foreign transaction fees, this fee can range from 1% to 4% per transaction, with 3% being the average rate.

When this credit card fee for international transactions is charged once, it may not seem like a big deal. But if you make a lot of overseas purchases, it can really add up. If you have a 3% foreign fee credit card, for example, that will tack on $3 for every $100 you put on the card.

Foreign Transaction Fees vs Currency Conversion Fees

A foreign transaction fee isn’t the same thing as a currency conversion fee. Rather, a currency conversion fee is generally one portion of the overall foreign transaction fee you may be charged.

A currency conversion fee is the cost charged by the credit card network to cover the cost of converting funds into the currency of the merchant. So, if you were making a purchase in Spain, the currency would get converted from U.S. dollars to the Euro.

Visa and Mastercard charge a 1% currency conversion fee to card issuers. It’s up to the card issuer whether to pass along that fee to the cardholder as part of the overall foreign transaction fee charged — an example of how credit card companies make money.

Spotting Credit Card Foreign Transaction Fees

Aside from looking at the terms and conditions you were provided when you received your credit card, you can look at your card issuer’s website to learn more about any foreign transaction fees. Information is typically listed in the “fees” section. You also could use the search function on that webpage to find any mentions of foreign transaction fees.

Another option is to look at your credit card statement, as issuers must list fees separately on your monthly bill. By reviewing this section of your statement, you’ll see what you’re actually being charged for purchases you’ve made that trigger this fee. Besides, routinely reviewing your credit card statement is a good credit card rule to follow anyways, as it can help you track your spending and notice any potentially fraudulent activity.

When Are Credit Card Foreign Transaction Fees Charged?

Just like every credit card doesn’t charge a credit card annual fee, not all credit cards charge a foreign transaction fee. If yours does, then the credit card issuer will charge them when you’re using your card for purchases made outside of the U.S. This can include when you’re traveling in a foreign country and buying goods and services, or if you shop online with a merchant located abroad.

Tips for Avoiding Credit Card Foreign Transaction Fees

Hoping to steer clear of a foreign fee on credit cards? Here are some ways you may be able to do so.

Find a Card With No Foreign Transaction Fees

The most straightforward way to avoid foreign transaction fees is to simply choose a credit card that doesn’t charge them. Some travel reward cards, for example, list zero foreign transaction fees as a benefit for card holders.

This isn’t limited to travel reward cards, however, and it doesn’t apply to all of them. In other words, you’ll want to make sure to shop around before committing to a card.

Consider an International Credit Card

If you’re a frequent traveler or have a big trip coming up, you may decide to get an international credit card. This will allow you to make purchases and use ATMs in many (but not all) countries around the world. An international credit card also can be helpful if you don’t want to convert U.S. dollars to that country’s currency or use traveler’s checks for your expenditures.

However, some international credit cards do have foreign transaction fees, so check carefully before signing up for one.

Exchange Your Money Before Traveling

You can also avoid foreign transaction fees by exchanging U.S. currency into the native currency for the place(s) you plan to travel. Then, you can simply pay cash for purchases.

Most major banks in the United States will exchange U.S. dollars for the appropriate foreign currency before you travel. They may not have less commonly used currencies available though, so double check before you head to the bank.

You may be able to directly exchange cash at a local bank, or you may need to place an order with a bank online or over the phone. Exchanges may occur the same day, or they may take a couple of days to complete.

If you run out of time, airports will likely have currency exchange services available, either in-person or through a kiosk. Although convenient, the exchange rates are usually less favorable to you than what your bank can offer.

Open a Bank Account With No Foreign Transaction Fees

Another possibility is to open a bank account that allows you to use ATMs without foreign transaction fees or out-of-network fees. Or, you might check to see if your local bank already offers this feature. Some banks have partnerships with banks abroad that can allow you to withdraw funds without paying fees, while others simply reimburse any incurred costs.

Before taking out too much cash, however, keep in mind the potential safety risks of carrying around a large amount of money.

Recommended: When Are Credit Card Payments Due

The Takeaway

Once you know what a foreign transaction fee on a credit card is, you can figure out how to avoid them. At its simplest, a foreign transaction fee is an expense charged by many credit card companies when transactions are made with a merchant outside of the U.S. Not all credit cards charge this fee, so it can make sense to shop around for one that doesn’t if you know you’ll be making these kinds of purchases.

FAQ

Are credit card foreign transaction fees tax-deductible?

In general, businesses (but not individuals) can deduct credit card fees as long as the business can demonstrate that the card was used for business expenses. Check with your accountant for any specific questions.

Do foreign transaction fees apply to online purchases?

Yes. If you’re using a credit card that charges foreign transaction fees, then those fees will apply to online purchases if the merchant is not located in the United States.

Do all credit cards have foreign transaction fees?

No, they don’t. A number of travel cards don’t charge foreign transaction fees, though they’re not necessarily the only type of credit card that doesn’t levy this fee.

Are foreign transaction fees affected by exchange rates?

Typically, foreign transaction fees are based on a predetermined percentage of each transaction. That percentage doesn’t fluctuate when the exchange rate changes.

Photo credit: iStock/Vera Shestak

Oct

2022

Guide to Credit Card Cell Phone Protection

By Sarah Li Cain | Credit, credit card, Family Finances | Comments Off

Owning a cell phone can get expensive, especially if you have to replace or fix a stolen or damaged one. Luckily, you may have cell phone protection from your credit card.

By taking advantage of credit cards with cell phone protection, you could save on a separate cell phone insurance plan. But before signing up for a new credit card or foregoing insurance, it’s best to understand exactly what is and isn’t covered under credit card phone insurance.

What Is Credit Card Cell Phone Protection?

Credit card cell phone protection is a type of insurance protection, where your credit card issuer pays for you to replace a stolen cell phone or make repairs to a damaged one. In most cases, you’ll need to pay for your cell phone bill with that card in order to get the protection.

Depending on the terms and conditions listed on your credit card, you’ll be protected from certain types of damage, and up to a certain coverage amount.

How Does Credit Card Cell Phone Protection Work?

When you pay for your cell phone bill with a credit card that offers cell phone protection, you can file a claim if you experienced a type of covered loss.

Keep in mind that the coverage provided by your cell phone may not be primary. This means you may need to exhaust your other options, such as by filing a claim with your home, car, or separate cell phone insurance first. It’s best to check the terms of your credit card phone insurance to see when you’re able to file a claim.

If you are able to file a claim with the credit card issuer, you may need to pay a deductible per claim (in many cases it’s around $25 or $50) before insurance kicks in. Plus, you may have limitations as to how many claims you can make per year, as well as the amount you’ll be covered for. The specifics will ultimately depend on how your credit card works.

Who Does Credit Card Cell Phone Protection Cover?

In most cases, your credit card issuer will provide protection for cell phones that you pay your monthly service bills for. As in, any phone numbers listed on the monthly bill that you pay for using an eligible credit card will most likely be covered. That means if you have more than one phone on your plan, the credit card protection will extend to all of them.

However, some credit card companies may limit the number of cell phones that are covered. It bears repeating that it’s important to check the coverage limitations listed in the terms and conditions for your credit card.

What Does Credit Card Cell Phone Protection Cover?

Typically, credit card cell phone protection will pay to replace an eligible phone that’s stolen or to make repairs to an eligible phone that’s damaged. What’s typically covered includes damage to your phone that makes it non-functional or not operate optimally. Different credit card companies will have various definitions for covered damages, which can range from cracked screens to hardware failures.

What Isn’t Covered by Credit Card Cell Phone Protection?

Remember, cell phone protection only provides coverage for the actual phone. Here’s what usually is not covered by your eligible credit card:

• Accessories like a phone case or screen protector

• Cell phones for purchased for resale, or commercial or professional use

• Cell phones that are lost or that disappeared under mysterious circumstances (i.e. there wasn’t evidence of any wrongdoing)

• Phones stolen from a common carrier (like the U.S. Postal Service or another delivery service) or your baggage

• Phones from pay-as-you-go plans

• Cosmetic damage

• Damage or theft from fraud, illegal activities, normal wear and tear, certain natural disasters, and intentional acts

• Taxes or fees such as delivery charges

• Losses that are covered under your cell phone manufacturer warranty

• Replacement of a phone that wasn’t purchased from a cell phone retail store with the ability to activate phone with your cell phone service provider

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Factors to Consider Before Getting a Cell Phone Insurance Policy With Your Issuer

Trying to decide whether to take advantage of cell phone insurance through a credit card? Here are some considerations to make before deciding.

The Deductible

Though the deductible may not cost you a lot, it’s important to check exactly how much you’ll have to pay out of pocket before your insurance will cover the rest. It’s also smart to check how much it will cost for the repair beforehand, especially if you believe the cost could be close to the amount of your deductible.

The Number of Claims You Can File

Some credit card issuers limit the amount of claims you can make. For instance, you may only be able to make two separate claims a year up to the coverage limit.

You’ll also want to check to see whether the allowable coverage amount would be enough to replace your current phone if it’s stolen. If not, you may want to consider other alternatives.

Your Card’s Annual Fee

If you’re signing up for a credit card solely for the cell phone protection feature, make sure the annual fee is worth it, assuming there is one. In some cases, it may be better money-wise to stick with your homeowners or renters insurance, or to purchase a separate cell phone insurance plan.

At the end of the day, you don’t want the costs to outweigh the benefits of a credit card.

How to Know If Your Credit Card Has Cell Phone Protection

The best way to find out if your credit card offers cell phone protection is to check your card agreement. It should detail what features are offered — and you could even learn about additional perks, such as credit card rental insurance or credit card travel insurance.

Granted, the fine print can sometimes feel overwhelming or difficult to wade through. Another option is to call your credit card company and ask whether your card has cell phone protection and if so, how you can qualify.

Filing a Cell Phone Protection Claim

If you need to file a claim, most credit card issuers require that you file a report within a certain amount of time, such as within 90 days of your loss. Contact your credit card issuer, and it will provide the next steps you’ll need to take.

Your issuer may direct you to forms you’ll need to fill out with information like details around the loss and any proof you can provide. Your credit card company will then keep you informed with any updates related to your claim.

Alternatives to Credit Card Cell Phone Protection

If you aren’t using a credit card to pay your cell phone bill or just aren’t sure whether credit card cell phone protection is the right choice for you, there are other options. You might consider these alternatives:

• Homeowners or renters insurance: Many homeowners or renters insurance policies offer coverage for personal belongings. However, it typically covers theft and not damage or loss. Plus, you may face a higher deductible compared to what a credit card company may charge.

• Purchase a separate cell phone protection policy: Your phone’s manufacturer or service provider may offer policies. Before signing on the dotted line, read the fine print carefully to see what the coverage limit and deductible are, as well as what losses are included.

Recommended: When Are Credit Card Payments Due

The Takeaway

Getting cell phone coverage from a credit card can be a great way to protect an item you use often. Plus, it could save you from purchasing a separate policy. Before moving forward with credit card cell phone protection, check to see whether the credit card is worth signing up for.

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

Can a cell phone be used to steal credit card details?

For the most part, the digital wallets used to store credit card information on your cell phone are safe. Still, you’ll want to do your research to ensure you’re choosing an app that has in place adequate protections. Also follow basic safety practices, like locking your phone, avoiding using digital payment devices over unsecured WiFi networks, and regularly reviewing your account for any fraudulent activity.

Is it safe to put your credit card details on your phone?

Generally yes, it’s safe to put your credit card details on your phone if you’re using e-wallet apps, such as Apple Pay and Samsung Pay. However, any type of credit card transaction can be vulnerable to fraud.

Is credit card cell phone protection worth it?

Credit card cell phone protection can be worth it if you want to guard against loss or theft for your phone that may cost you a lot of money to replace. You’ll want to weigh the card’s annual fee against the protection offered in order to determine if it’s truly worthwhile.

Photo credit: iStock/nunawwoofy

Sep

2022

What Does Unlimited Cash Back Mean? Is It Worth It?

By Sarah Li Cain | Credit, credit card, Financial Independence | Comments Off

There are lots of different credit card types to choose from, especially if you have a high credit score. In an attempt to earn your business, many card issuers offer rewards every time you use their card, including unlimited cash back for qualifying purchases.

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

What Is Cash Back?

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

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

What Is Unlimited Cash Back?

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

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

How Unlimited Cash Back Credit Cards Work

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

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

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

Pros and Cons of Unlimited Cash Back

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

Pros	Cons
Can earn money back on purchases, with no caps on earnable rewards	Generally need at least good credit to qualify for top rewards programs
Don’t have to worry about hitting spending thresholds or other caps	May need to pay an annual fee
Simple and straightforward to earn and redeem rewards	Like other rewards credit cards, may have a higher APR than standard credit cards
Can help to build credit with responsible usage	Not as lucrative of a rewards option for frequent travelers

Is Unlimited Cash Back Worth It?

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

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

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

Recommended: How to Avoid Interest On a Credit Card

Categories of Unlimited Cash Back Credit Cards You Can Choose From

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

Flat Rate

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

Rotating Categories

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

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

Fixed Spending Categories

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

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

Maximizing Unlimited Cash Back Earnings

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

Select the Right Card

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

Time Your Spending

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

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

Note Spending Categories

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

Review Credit Card Terms

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

The Takeaway

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

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

Looking for an easy way to earn cash back? Check out the SoFi credit card.

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

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

FAQ

How does unlimited cash back work?

If you have a credit card with unlimited cash back, that means there are no limits on the amount of rewards you can earn through qualifying purchases.

Is unlimited cash back better than points?

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

Photo credit: iStock/AsiaVision

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

SoFi cardholders earn 2% unlimited cash back rewards when redeemed to save, invest, a statement credit, or pay down eligible SoFi debt.

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

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

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.

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Sep

2022

Can You Pay Rent With a Credit Card?

By Alyssa Schwartz | Credit, credit card, Family Finances | Comments Off

From everyday purchases to splurges, consumers often turn to credit cards. Some even reach for the plastic to pay the rent. But is paying rent by credit card a good idea? And can you pay rent with a credit card even? The answer to both questions: It depends.

Whether you can pay rent with a credit card largely depends on your landlord’s rules, though there are potential workarounds. But even if you can figure out how to pay rent with your credit card, there are pros and cons to paying rent with a credit card that you’ll want to consider.

Do Landlords Allow Payment by Credit Card?

For renters tempted to reach for the plastic, the first likely question is whether this mode of payment is even accepted. The answer to whether you can pay rent with a credit card will depend on the landlord, though many do not allow it.

The reason many landlords don’t allow it is because accepting credit card payments causes them to incur fees. Due to how credit cards work, credit card transactions are subject to fees that are set by the financial institution that issues the card, the companies that partner with the financial institution (like Visa and Mastercard), and the processor responsible for securing and carrying out the credit card transaction.

The amount of these fees depend on a number of things, including the merchant’s total sales volume and how credit cards are processed. Businesses that process between $10,000 and $250,000 in credit card payments annually pay between 2.87% and 4.35% per transaction, according to Square. This means that if a tenant were to charge $1,000 in rent, the landlord would net about $957 to $971 — unless the cost of credit card processing was extended to the renter in the form of a surcharge. To avoid that bite, some landlords do not permit credit card payments for rent.

Even when a landlord does not allow people to pay rent using a credit card, there may be workarounds via third-party apps. These apps effectively charge renters a fee to convert their credit card payment into a form of payment their landlord accepts. Fees can range from 2.75% to 3% of every rental payment. Additionally, the landlord often has to agree to the arrangement.

Pros of Paying Rent With a Credit Card

There’s a famous old saying: “Just because you can doesn’t mean you should.” But there are some scenarios when charging the rent might make sense. Here are some of the potential pros of paying rent with your credit card.

Flexibility

Rent schedules are typically fairly rigid, with payment due at the same time each month. Though this regular schedule can be a boon for budgeting, it can be challenging for gig workers or anyone else with irregular pay periods that don’t line up with when rent is due.But if a cardholder charges the rent, that money becomes due only when their credit card bill is due, providing greater flexibility on the actual payment date.

However, it’s important to stay strict about honoring your credit card due date. Making late credit card payments can result in credit card interest charges, late fees, and even a hit to one’s credit score.

As such, individuals may want to leverage credit cards for flexibility only if they are sure they’ll have the money available when their credit card payment becomes due. In other words, even if charging rent to your credit card offers more flexibility, it’s still necessary to budget for rent each month.

Earn Rewards

While there are many basic credit cards on the market, there are also cards that reward people for spending. Rewards can come in the form of cash back, points that can be redeemed toward travel and other perks, and airline miles. For those with reward credit cards, paying rent by credit card can represent a great opportunity to rack up spending and earn those perks.

However, it’s important to do the math. Third-party fees or credit card payment surcharges can cancel out any benefit a cardholder may earn, or even ultimately cost more if fees are greater than the reward offering.

Cover Immediate Expenses

If you’re short on cash, paying rent with a credit card can buy you some time. By putting what’s likely one of your largest expenditures on your credit card, you can free up funds for more immediate expenses. Then, you’ll have a bit of time to restock your bank account by the time your credit card bill comes due.

If you do this, however, you’ll want to make sure you’re ready to pay off your credit card balance in full by the end of the month, rather than just the credit card minimum payment. Otherwise, you’ll end up accruing interest on top of the money you’ll still owe for rent.

Also take notice if you regularly charge the rent out of necessity. If you do, this merits taking a closer look into the root causes. You’ll want to figure out how you might address those issues in your monthly budget instead of constantly relying on your credit card for backup.

Cons of Paying Rent With a Credit Card

Charging the rent can be a risky proposition, given what a credit card is. Here are additional reasons why paying rent with a credit card may not be a good idea.

There May Be Extra Fees

As discussed, some landlords and third-party payment companies may tack on a surcharge for credit card payments. Let’s say the surcharge is 3%, or an extra $30 on $1,000 in monthly rent. While that may not sound like much, it adds up to $360 a year — money some individuals may prefer to spend elsewhere.

Landlord surcharges aren’t the only cost that can make it more expensive to pay rent by credit card. Making a credit card payment even a day late can increase the total amount due, thanks to interest charges and late fees. And the later the debt — in this case, rent — is paid off in full, the more interest that will accrue.

Though interest rates vary by credit card, they are often higher than other lending products, like personal loans. The average credit card annual percentage rate is over 21%. Worse, the interest compounds, so each month that cardholders do not pay off the rent in full, they’ll incur interest on both the balance and the interest that has accrued.

It Can Affect Credit Score

If you put your rent on your credit card but then don’t handle your credit card debt responsibly, it could have negative implications for your credit. Behaviors like regularly missing credit card payments can lead you to have a bad credit score, which can have serious repercussions down the road.

Your credit score reflects your creditworthiness, or the risk you pose to lenders. The number (300 to 850 for the FICO® Score and VantageScore models) affects how likely it is for you to be approved for another credit card (or a mortgage or other loan) and the interest rate you’ll have to pay. You may also need to maintain a minimum credit score to rent an apartment.

Because rent tends to be a significant expenditure in most people’s budgets, you’ll want to ensure that you’ll have the funds on hand to pay the balance in full if you do choose to charge the rent.

It Can Increase Your Credit Utilization Rate

Even if you make your payments on time, paying rent with a credit card can still affect your credit score. That’s because scores are based in part on an individual’s credit utilization ratio, which is the proportion of credit being used relative to the total available amount.

When it comes to credit utilization, the lower the better. Individuals with high credit utilization are at risk of hitting their credit limit (which can also ding their credit score). With rent likely making up a large proportion of the average individual’s expenditures, such payments can significantly increase total credit utilization. The same principle applies to other major charges as well, such as if you were to buy a car with a credit card.

Should You Pay Your Rent With a Credit Card?

Whether to pay rent with your credit card ultimately depends on your financial situation. As discussed, there are some major downsides to paying rent with your credit card, such as paying extra fees and potentially harming your credit score. You could even get into a cycle of debt if you charge your rent and then aren’t able to pay off your credit card balance in full to avoid interest charges.

If you do decide to move forward with paying rent with a credit card, proceed with caution. Do the math to make sure the rewards you may earn will actually offset the cost of any fees you’ll incur. Also verify that you’ll have the funds available within your monthly budget to pay off your accumulated credit card balance, especially since a hefty charge like rent can drive up credit utilization.

Steps for Paying Rent With a Credit Card

How you’ll pay rent with a credit card depends on whether your landlord will directly accept credit card payments for rent or whether you’ll need to go through a third-party app.

• If your landlord does accept credit card payments: In this case, you’ll either pay your landlord directly or through an online payment portal. You’ll need to provide your credit card information, including your account number, expiration date, and CVV number. Make sure to verify the total amount. Also check to see whether there are any fees involved and if so, how much those will run.

• If you need to go through a third-party app: Renters who need to go through a third party in order to pay rent with a credit card will first need to set up an account with one of the apps that provides this service. Make sure to find out what fees are involved before proceeding. You’ll then complete your credit card transaction through the intermediary, which will then pass along the funds to your landlord, either with a check or directly to their bank account.

Alternatives to Paying Rent With a Credit Card

Paying rent with a credit card is more like a last resort than a go-to option. If you’re wondering how to pay rent when you’re in a bind, here are some alternatives to consider:

• Borrow money from family or friends: If you’re really in a pinch, consider asking a trusted family member or friend if they can lend you the funds. This will save you interest, and it will also save your credit score from the impact of a hard credit inquiry. Just make sure to reach an agreement about how and when you’ll pay back the money — otherwise, it could negatively affect your relationship.

• Talk to your landlord: If you’re really struggling to come up with rent for the month, consider reaching out to your landlord. Especially if you’ve been prompt with rent payments in the past, they may be sympathetic and offer a little breathing room. Just make sure to come up with a plan in the meantime, as a break on rent won’t last forever.

• Reach out to rental assistance resources: Another option for those who are having a hard time making rent payments is seeking out assistance. There might be local nonprofits, charities, or even government groups in your area that can offer help to those in need. You may also look into resources like 211.org or the CFPB.

The Takeaway

Can you pay rent with a credit card? Sometimes. But is it a good idea to pay rent with a credit card? If all of the numbers make sense, it could be. You’ll want to weigh both the potential pros of charging your rent to a credit card, like possibly earning rewards or gaining flexibility, against the downsides, such as possible repercussions for your credit score.

If paying with plastic is tempting, your choice of card can make a big difference in the ultimate benefits you receive. The SoFi Credit Card, for instance, allows you to earn generous cash-back rewards and possibly lower your APR through on-time payments.

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

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

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

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

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

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

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

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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