SoFi

If you’re wondering, ‘Can you reopen a closed credit card?,’ the answer is that it depends. More specifically, the reason why your credit card account was closed in the first place will make a difference, as well as whether your specific credit card issuer allows the reopening of closed accounts.

Though your request may get denied, it’s still worth asking to reopen a closed credit card account if you really want to do so. Let’s take a look at why your account may be closed and how to reopen a closed credit card account.

Can You Reopen a Closed Credit Card?

Whether or not you can reopen a closed credit card will depend on several factors, including:

•   The reason why your credit card is closed

•   Whether your credit card issuer allows cardholders to reopen accounts

•   How long ago the credit card account was closed

For instance, if the issuer closed your credit card account due to nonpayment, you most likely won’t be able to reopen it, given what a credit card is and the risk a lender assumes. However, if you chose to close the account yourself and now regret the decision, you may be able to get the credit card reinstated.

Why Your Credit Card May Be Closed

There are several reasons why your credit card may be closed, such as:

•   Your account was inactive: If you haven’t used your credit card in a number of months or years, your issuer may decide to close a credit card due to inactivity.

•   Your account was considered delinquent: Most issuers will close your account if you haven’t been paying your bills, or are in default. Although the account is closed, you’ll still owe the amount borrowed when closing a credit card with a balance.

•   Your credit score dropped: Though not always the case, if a credit card issuer notices red flags, such as a sharp drop in your credit score or major negative remarks on your credit report, it may choose to revoke your card.

•   You didn’t agree to the new terms: Sometimes credit card issuers update their terms and conditions and need you to agree to them before continuing to use the new card. If you don’t agree to the terms, your card may be closed.

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

Reopening a Closed Credit Card Account

If you decide you want to reopen a closed credit card, here’s how you do it.

Review the Reason for the Account Closure

Assuming you didn’t contact the credit card company to cancel a credit card yourself, you’ll need to determine the reason why the issuer did. It’s most likely due to one of the five reasons mentioned above.

Consider when you last used the credit card, whether you’ve had to agree to new terms, or if you were behind on payments. Credit card issuers may not notify you when the account is closed, so if you’re unsure of the exact reason why, it’s best to contact them.

Gather Relevant Documentation

Before asking the credit card issuer to reopen your account, it’s best to be as prepared as possible so you’re as efficient as you can be. For one, you’ll need to ensure that you have the credit card account number — you can find it on your physical credit card or a previous credit card statement.

If you were delinquent on your account, you may need to provide other forms of proof, like that you’ve paid back the credit card balance you’d owed. Your card issuer may also want other information like your full name, address, and Social Security number.

Contact Your Card Issuer

Finding the best number to call can be as simple as checking the back of your physical credit card or looking up the issuer’s phone number on their website. Otherwise, you can try calling your credit card issuer’s general customer service number and asking to be transferred to the relevant department.

When you request to reopen the account, you may be asked to provide a reason why you want to do so. Additionally, you may need to address any concerns or issues that caused your account to get closed. For instance, if your card was closed because you didn’t agree to new terms, then you’ll need to do so.

If your request is approved, you should receive information about the account, such as whether the account number is the same and if you can keep any rewards you’d earned before the account closure. Some issuers may conduct a hard credit inquiry to make sure you can still qualify for the credit card in question.

Things to Know When Reopening a Closed Credit Card

If you’re reopening an account you held previously, you might find some differences in how a credit card works. Here’s what to look out for specifically if you reopen a closed credit card.

Fees and Interest Rates May Be Different

The annual percentage rate (APR) and fees for the credit card may have gone up or down. Before you reopen your account, it’s best to check all of the card’s terms and conditions to determine whether you want to proceed.

Recommended: How to Avoid Interest On a Credit Card

Your Credit Limit Might Be Lower

Depending on the issuer and other factors like your credit score, your credit limit may be lower than the original amount you were approved for. You may have to wait a few months or demonstrate that you can adhere to key credit card rules, like consistently make on-time payments, before you’re approved for a larger credit line.

Recommended: What is the Average Credit Card Limit

You May Lose Out on Previously Unused Rewards

If you’d racked up rewards before closing your credit card account, you may not be able to access any unused points or miles after your credit card gets reopened. However, it doesn’t hurt to ask the credit card issuer if it can reinstate the rewards — though remember there’s no guarantee it will happen. This is why checking your credit card balance and your rewards balance is important to do before closing out a credit card account.

How Long Does a Closed Account Stay On Your Credit?

How long a closed account remains on your credit report will depend on whether it’s based on a negative remark. For accounts that were in good standing, the closed account can remain on a credit report for up to 10 years and will generally help your credit score. However, if the closure was due to an adverse remark, such as delinquency, it could remain on your report for up to seven years.

How Closing a Credit Card Can Hurt Your Credit

The decision to close a credit card can weigh negatively on your credit score. Specifically, here’s how closing a credit card affects your credit:

•   Increases your credit utilization: Once a credit card is closed, your overall credit limit is lowered. This increases your credit utilization ratio — the percentage of your total available credit that you’re currently using — even if your credit card balance remains the same.

•   Decreases your credit mix: Though it may not affect your credit score that much, closing a credit card means there may not be as many different types of credit in your credit history. If so, this could affect your score negatively depending on the other types of accounts you have.

•   Potentially lowers the average age of your credit accounts: If the closed credit card account was one of your oldest accounts, it could lower the age of your credit history. This can negatively affect your credit score.

Reopening a Closed Credit Card Account vs Getting a New Credit Card

Although there may be advantages to reopening a credit card, such as accessing a high credit limit or offered perks, you’ll have to open a new one if your issuer refuses your request. You might also look into getting a new card instead of going back to your old one if you think you could access better rewards or more favorable terms than your closed card offered.

Whatever your needs and credit score are, it’s best to do some research to find a card that you have a high chance of qualifying for and that offers features you want.

When Not to Reopen a Closed Account

Sometimes, it’s better to leave a closed credit card account closed. Instead, you could use the account closure as an opportunity to search for a better credit card that may have a lower interest rate or offer better rewards, for instance. You could even look into options offered by the same credit card issuer.

Plus, there are some valid reasons for when to cancel your credit card, like if it had an unnecessarily high annual fee. In those instances, it’s likely not worth second guessing your decision.

Alternatives to Consider If You Can’t Reopen Your Account

If you can’t reopen your account, you’re not out of luck. Here are some other options to consider in this scenario:

•   Consider applying for a different card with the issuer. One option is to see what other cards your issuer offers and open one of those instead. Before submitting an application, check to see what the terms and conditions are and whether it has the features you’ll want and need.

•   Take steps to improve your credit. If your account was closed due to delinquency, you can focus for a few months on making on-time payments or taking other steps to raise your score. Then, you could try again to reopen your card or simply apply for a different one.

•   Apply for easier-to-get funding sources. If you need funding, you can also consider applying for a secured credit card, which is backed by a security deposit that serves as collateral. Secured credit cards tend to be easier to qualify for due to the deposit you’ll make.

Using Your New Credit Card Responsibly

Whether you’re reopening a closed credit card or applying for a new one, using a credit card responsibly is critical. By doing so, you can ensure that you remain in good standing with your credit card issuer and continue to build your score over time. Here are some tips for responsible credit card usage:

•   Don’t spend more than you can afford to pay off each month.

•   Always try to pay off your balance in full to avoid incurring interest charges.

•   Make sure to submit payments on-time (setting up automatic payments can help).

•   Regularly review your credit card statements and credit report to check for any errors or indications of fraudulent activity.

Recommended: When Are Credit Card Payments Due

The Takeaway

Reopening a credit card is as simple as contacting your issuer. However, whether or not you’ll get your request fulfilled will depend on the reason your account was closed and how long it’s been since you last used the card.

FAQ

Can you reopen a closed credit card due to inactivity?

You may be able to reopen a credit card closed because of inactivity. However, whether you can do so will ultimately depend on your credit card issuer and their policies on reopening credit cards.

Can you reopen a closed credit card due to nonpayment?

In most cases, you probably won’t be permitted to reopen a card that got closed due to nonpayment. You may be able to if you can demonstrate to your credit card issuer that you’ve paid back the balance due and can be responsible with payments.

Will I get back my rewards if I reopen a closed credit card?

You most likely won’t be able to get your rewards back. Still, it doesn’t hurt to ask your credit card issuer just to make sure.

Do all credit card issuers allow you to reopen closed credit card accounts?

Many credit card issuers won’t allow account reopening, though some do. To find out if yours does, you’ll need to contact them directly.

---

Photo credit: iStock/insta_photos

¹Members earn 2 rewards points for every dollar spent on purchases. No points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points as cash deposited into your SoFi Checking and Savings account, as a statement credit to a SoFi Credit Card account, as fractional shares into your SoFi Invest account, or as a payment toward your SoFi Personal Loan or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per 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.

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 .

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.

SOCC0722023

Read more

For millennia, people have used precious metals like gold and silver to store their wealth. And while there are other options in the modern world, investing in gold is still quite popular. If you’re wondering, ‘Can you buy gold with a credit card?,’ the answer is yes — but it may not be the best choice.

One of the biggest drawbacks to doing so are the credit card charges for gold purchase on credit cards. If you buy gold with a credit card, you’ll likely owe a processing fee on top of your purchase price. This can make investing in gold with a credit card a less desirable option, and it may make it worth considering alternatives.

Can You Buy Gold With a Credit Card?

It is possible to buy precious metals with a credit card, but it may not be the best investment option for you.

Part of what a credit card is includes processing fees, which are charged to merchants and often get passed down to the consumer. These fees typically range from around 3% to 4% of the purchase amount. If you have to pay processing fees in order to buy gold with a credit card, you may want to consider other investment options.

Guide to Buying Gold With a Credit Card

If you decide to buy gold with a credit card, here are a few steps to help guide your journey.

Searching for Reliable Dealers

First, you’ll want to look around for reliable gold dealers. There are many different websites where you can buy gold online with a credit card, and each site has its own pros and cons. Whether investing in gold or bitcoin — or anything really — it’s smart to read up on the company to help ensure you’re choosing a reliable dealer.

Comparing Prices and Reviews

Once you’ve found a few dealers appear reliable, you can start comparing prices and reviews. Reading reviews from other investors can give you a sense of what you’re likely to go through with this particular dealer. You’ll also want to compare gold prices at different sites, since the price may vary from dealer to dealer.

Completing the Checkout Form

Once you’ve settled on a dealer, you can go through their checkout process. Before you enter your credit card or other financial details, you may need to enter in additional information. This will likely include your name and address or other identifying information.

Submitting Your Credit Card Details

You’ll then likely be taken to the checkout screen to complete your purchase. If you are using a credit card, you’ll enter your credit card information. Make sure to read the terms and conditions for your purchase, as some dealers charge a market loss fee if you cancel your order.

Recommended: What is a Charge Card

Completing the Purchase

Once you complete the purchase, you can await the delivery of your gold. If you’re taking physical hold of your gold, it will be shipped to your address on file. If you have made other arrangements, your gold will get delivered per the instructions you entered during the purchase process.

After the purchase is added to your credit card balance, make sure to follow essential credit card rules. This includes making on-time payments and attempting to pay off your balance in full each month to avoid paying interest.

Recommended: How to Avoid Interest On a Credit Card

Other Ways to Buy Gold

Besides investing in gold with a credit card, there are a few other ways to buy gold.

Debit Card

You may be able to buy gold with a debit card, depending on the dealer that you choose. Investing in gold with a debit card may also come with processing fees. However, it’s common that debit card fees are less than those associated with using a credit card, given how credit cards work compared to debit cards.

ACH or Wire Transfer

Another option to consider is sending the money electronically through your bank. You may be able to fund your purchase using ACH or a wire transfer. Just make sure you understand any fees associated with buying gold in this manner.

Money Order

You also may be able to use a money order to invest in gold. How to do this will depend on the dealer you use. Generally, you’ll need to mail a money order to the dealer. Once your funds are deposited, you’ll be able to use them to make a gold purchase.

Cash Deposit

If you live near the physical establishment of a gold dealer, you may also be able to use cash to invest in gold. You can deposit your cash funds and then use that amount to purchase gold.

P2P Apps

Peer-to-peer (P2P) payment apps like Cash App, Venmo, and Zelle may serve as additional ways to invest in gold. Check with your dealer to see if these (or any other) P2P apps are options to fund your investment. Also make sure you look at the terms and conditions to understand any additional fees that you may owe.

Recommended: Can You Buy Crypto With a Credit Card

The Takeaway

While it is possible to invest in gold with a credit card, it may not be the best investment option. Not all dealers allow you to buy gold with a credit card, and many that do charge processing fees of 3% to 4%. These additional fees mean that you may be better off with another type of investment or a different funding source.

If you’re looking to earn rewards with a credit card, you might consider a cash-back rewards credit card like 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

Does it still pay to invest in gold?

If you’re wanting to invest in gold, it can still make sense, depending on your individual financial priorities. The price of gold varies from day to day (and even within the same day), so just like any other type of investment, you’ll want to make sure you understand the underlying value and if or when buying gold makes sense for you.

Can you buy precious metals with a credit card?

You can buy precious metals like gold with a credit card, but it may not be the wisest investment option. Many credit card processors charge a fee to merchants using a credit card, and in many cases, that fee is passed down to consumers. This additional cost can mean it may not be worth it to buy gold with a credit card.

What are the charges for gold purchases on a credit card?

The exact list of fees and charges for buying gold with a credit card will depend on the exact dealer you use to make your purchase. It’s common for dealers to charge a processing fee of 3%-4% if you use a credit card to buy gold.

---

Photo credit: iStock/Talaj

¹Members earn 2 rewards points for every dollar spent on purchases. No points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points as cash deposited into your SoFi Checking and Savings account, as a statement credit to a SoFi Credit Card account, as fractional shares into your SoFi Invest account, or as a payment toward your SoFi Personal Loan or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per 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.

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 .

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.

Members earn 2 rewards points for every dollar spent on purchases. No points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points as cash deposited into your SoFi Checking and Savings account, as a statement credit to a SoFi Credit Card account, as fractional shares into your SoFi Invest account, or as a payment toward your SoFi Personal Loan or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per 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.

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.

SOCC0822011

Read more

When making a cashless payment at checkout, you might be prompted to select whether you want the purchase processed as a credit or debit card transaction. Some debit cards with a credit card network logo can be processed as a credit payment, but the reverse — processing a credit card as a debit transaction — isn’t possible.

Still, it can make sense to use credit cards like a debit card. Understanding the difference between a credit card and debit card can help you to make strategic purchasing decisions with your credit card.

Recommended: What is a Charge Card

Can You Use a Credit Card Like a Debit Card?

In terms of being a convenient, cashless payment method, a credit card can be used in-person or online in a similar way as a debit card. Credit cards require you to insert, swipe, or tap the card on a payment processing device to initiate a transaction. If used online, you can enter your credit card information into the payment field at checkout in the same way you would with a debit card payment.

However, there are also significant differences between a credit card and debit card. The most notable distinction is where the funds come from. When you use a credit card, the money is drawn from your card’s available credit line, and you might get charged additional fees and interest on your purchase.

In contrast, a debit card draws the funds you already have in an associated checking or savings account. Also, in certain situations where the final total amount might vary, such as at the gas pump, the processor might request that your card issuer place a temporary hold on your debit card funds to ensure you have enough funds to cover the transaction.

Recommended: How to Avoid Interest On a Credit Card

Reasons You May Want to Use a Credit Card Like a Debit Card

Although credit cards offer numerous advantages when used responsibly, there are valid reasons to prefer using a credit card as a debit card. This may include:

•   To avoid overspending. Debit cards, particularly when you’ve opted out of overdraft protection, help you to avoid spending more than you can afford to pay back. With a debit card, you can only use the funds already in your associated account, which is a tactic you could try with a credit card as well.

•   To avoid finance charges or extra fees. Debit cards generally incur few charges. Additionally, they do not accrue interest since debit transactions are immediately pulled from your deposit account, in contrast to how credit cards work.

•   To amass rewards without debt. The potential to earn rewards is an appealing part of what credit cards are, but “chasing points” can be a risky game if you overspend. The ability to use a credit card like a debit card can help keep your spending in check while earning rewards.

Recommended: Tips for Using a Credit Card Responsibly

Tips for Using a Credit Card as a Debit Card

You can’t technically process a credit card payment as a debit card purchase. But if your purchasing strategy is to use a credit card as your go-to payment method instead of a debit card, remember the following tips and credit card rules:

•   Don’t spend more than you can afford.

•   Do pay your monthly credit card statement in full.

•   Don’t be late or skip a payment.

•   Do explore credit card rewards programs to earn incentives on purchases you already make.

•   Don’t forget to review annual percentage rates (APR) and fees associated with your card.

•   Do use a credit card for online payments for greater fraud protection.

Recommended: When Are Credit Card Payments Due

Pros and Cons of Using a Credit Card Like a Debit Card

The benefits of credit cards in comparison to debit cards vary since they’re two distinct banking products. However, each payment option has its own pros and cons.

	Pros	Cons
Credit Card	•   Offers greater purchasing power •   Can buy items now and pay for them later •   Helps build your credit •   Potentially zero liability for unauthorized charges	•   Can accumulate burdensome debt •   Late and missed payments adversely affect your credit score •   Can incur interest charges and fees
Debit Card	•   Avoids debt by using cash you already have •   No additional interest charges on purchases •   Can request cash back at checkout	•   Buying power is limited to the funds you have •   Insufficient funds may lead to overdraft fees •   Doesn’t help build credit •   Fewer protections with fraudulent charges

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

Alternatives to Using a Credit Card Like a Debit Card

If you’re averse to using a credit card in a traditional sense, there are a few alternatives payment options that are akin to a debit-style transaction:

•   Prepaid credit card. A prepaid credit card requires you to “load” the card with funds, which then becomes your card’s available credit line. It gives you the convenience of a credit card, but taps into cash you already have, which is similar to a debit card. Note that prepaid cards often incur fees for various types of activity.

•   Cash-back rewards debit cards. If you want the perks of a credit card, like cash-back incentives, but in the form of a debit card, a cash-back debit card might be an option. These limit you to spending the funds you already have on deposit, but let you earn cash back when you use the card.

Recommended: Can You Buy Crypto With a Credit Card

The Takeaway

Using a credit card like a debit card ultimately boils down to only spending on your card with funds you already have. Since a credit card is essentially a loan, it’s easy to accumulate overwhelming debt, plus interest charges, if you’re overspending. If you can comfortably afford to repay your credit card transactions in full each month, using your credit card in lieu of a debit card can provide access to valuable benefits, like earning rewards, enhancing fraud protection, and positively impacting your credit.

A great place to start is using a credit card that lets you earn rewards, like 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

Can I transfer money from my credit card to my bank account?

No, you can’t transfer money from your credit card to your bank account. A bank account is a deposit vehicle for your available cash; this cash can be accessed using a debit card. Conversely, a credit card is a financial tool that lets you access a credit line that you need to repay.

Can I use my credit card like a debit card at an ATM?

Yes, you can use your credit card like a debit card to get a cash advance at an ATM. Be warned that this is a costly option. Credit card cash advances typically have a different limit compared to your purchase limit, and charge a higher APR with no grace period. Plus, you’ll owe a cash advance fee.

Can I use a credit card as a debit card with no interest?

Possibly. You might be able to use a credit card like a debit card for everyday transactions without incurring interest, if you pay every billing statement in full each month. Rolling over a balance month to month, however, will cause you to incur interest charges.

Is it better to use a debit or credit card?

Whether using a debit or credit card is a better option depends on the types of purchases you’re making and your borrowing habits. For example, credit cards are generally safer when shopping online, but buying on credit can get out of control quickly, if you’re not careful.

---

Photo credit: iStock/filadendron

¹Members earn 2 rewards points for every dollar spent on purchases. No points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points as cash deposited into your SoFi Checking and Savings account, as a statement credit to a SoFi Credit Card account, as fractional shares into your SoFi Invest account, or as a payment toward your SoFi Personal Loan or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per 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.

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 .

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.

SOCC0822019

Read more

The term amortization is usually used to refer to the process in which debt is paid off on a set schedule, with fixed payments each month. An amortization schedule can show you the amount of your payment that goes toward the principal and interest each month. Because credit cards are considered revolving loans, amortization is not often used with credit cards.

However, a credit card amortization schedule can be helpful if you’re trying to pay down your balance. Understanding credit card amortization can help you decide how big your payments should be each month, as well as what the impact of additional credit card payments would be.

Recommended: When Are Credit Card Payments Due

What Is Amortization?

Amortization is the process where debt is paid down on a set schedule, usually with fixed monthly payments. One common example is a 30-year mortgage — each month, you make a mortgage payment for the same amount.

Every time you make the mortgage payment, part of your payment is an interest payment, and part of the payment goes toward paying down your mortgage principal. Each month, as the principal balance goes down, more and more of your monthly payment goes toward the principal, until the mortgage is completely paid off.

What Is Credit Card Amortization?

Because credit cards are considered revolving debt — meaning you can continually borrow and repay your debt — they don’t have amortization in the same way that a mortgage or car loan does. However, one area where a credit card amortization schedule may apply is if you’re trying to pay down a credit card balance.

In this instance, understanding the amortization schedule for your credit card can help you decide how making additional payments to your credit card issuer will impact your overall balance.

Recommended: How to Avoid Interest On a Credit Card

How Does Credit Card Amortization Work?

One of the credit card rules is that the higher your balance is, the more interest you’ll owe each month. By only making the credit card minimum payment, it could take you many years to pay off your debt. If you’ve decided to rein in your credit card spending and pay down your balance, you can use a credit card amortization schedule to determine how long it will take.

Specifically, looking at credit card amortization will allow you to see how much less you’ll owe with each subsequent payment — assuming you’re no longer actively using your credit card. This schedule will take into account your current balance, your card’s annual percentage rate (APR), and how much you can afford to pay off each month. Then, you can determine how many months it will take until your balance is paid off in full.

Factors That Affect Credit Card Amortization

One of the biggest factors that affects a credit card amortization schedule is the interest rate on your credit card. The higher your credit card interest rate, the more of each monthly payment that will go toward interest. That will mean your amortization schedule will last longer.

Another factor to consider is the consequences of credit card late payments. If you delay credit card payments and incur late fees, that will increase your overall balance. That will also increase your amortization schedule and extend the length of time it will take to pay down your total credit card balance.

Guide to Calculating Credit Card Amortization Period

Since credit cards are considered revolving debt, it can make it difficult to calculate a credit card amortization period. If you continue to use your credit card for new purchases, you won’t be able to calculate an amortization period because your total balance will change each month.

One way you can calculate a credit card amortization period is if you decide to stop making any purchases on your card. If you have a $5,000 balance on your credit card, you can use any online amortization calculator and input the credit card payment amount you want to make each month. The resulting amortization schedule will show how long it will take to completely pay off your credit card, assuming you make payments by your credit card payment due date.

Debt Consolidation and Credit Card Amortization: What to Know

If you’re looking to lower your credit card debt, one option is credit card debt forgiveness. But because this isn’t always easy to get, another is to consolidate your debt by taking out a personal loan.

Unlike revolving loans like what a credit card is, a personal loan is a type of fixed loan that has an amortization schedule. Following that amortization schedule lets you know when you’ll completely satisfy your debt obligation.

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

The Takeaway

An amortization schedule shows how much of each loan payment goes toward interest and how much goes to principal. Because credit cards are considered revolving debt, they don’t have amortization schedules in the same way that fixed loans do. Still, you can use a credit card amortization schedule as a tool if you’re trying to eliminate your credit card balance.

If you’re looking for a credit card that offers the possibility of earning unlimited cash-back rewards, consider 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

What does credit card amortization payment mean?

If you’re looking to pay down or eliminate your debt, one strategy is to stop making any new purchases with your card. That way, you can concentrate on lowering your total payment. If you only make the credit card minimum payment each month, it could take years before you pay off your balance. Following a credit card amortization schedule can help pay off your debt sooner.

How can I calculate my credit card amortization period?

A credit card amortization period mostly makes sense if you stop making any new purchases on the card. If you’re still regularly using your credit card, your total balance will change with each purchase and payment. On the other hand, if you aren’t regularly using your card for new purchases, you can calculate your credit card amortization period using your total balance, interest rate, and monthly payment amount.

What is a credit card amortization term?

An amortization term is how long it takes to completely pay off a loan. If you’re making regular payments on the credit card payment due date each month, you’ll gradually lower your total credit card balance. A credit card amortization term can make sense if you are no longer actively using your card and focusing on eliminating your debt. You can use your total balance, interest rate, and the amount you’re paying each month to figure out how long it will take to eliminate your balance.

---

Photo credit: iStock/AmnajKhetsamtip

¹Members earn 2 rewards points for every dollar spent on purchases. No points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points as cash deposited into your SoFi Checking and Savings account, as a statement credit to a SoFi Credit Card account, as fractional shares into your SoFi Invest account, or as a payment toward your SoFi Personal Loan or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per 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.

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.

Members earn 2 rewards points for every dollar spent on purchases. No points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points as cash deposited into your SoFi Checking and Savings account, as a statement credit to a SoFi Credit Card account, as fractional shares into your SoFi Invest account, or as a payment toward your SoFi Personal Loan or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per 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.

SOCC0822017

Read more

If you’re experiencing a temporary financial setback and have fallen behind on your credit card debt, you’re not alone. According to Federal Reserve Economic Data, credit card delinquency rates in 2022 have increased compared to the year prior.

Having to repay credit card bills when you’re struggling financially — whether due to an emergency expense or a job loss — can be a challenging burden. In this harrowing situation, it’s worth contacting your credit card company to see if it has a credit card hardship program.

What Is a Credit Card Hardship Program?

A credit card hardship program, sometimes referred to as a credit card assistance program, is a repayment plan that’s created based on your hardship circumstances. This type of modified repayment option was commonly offered by credit card issuers for customers who were financially affected by COVID-19, for example.

However, credit card issuers aren’t required by law to offer hardship assistance programs, and not all card companies provide this option. Those that do might offer a variety of ways to temporarily ease your repayment burden, if you’re eligible. For instance, it might adjust your credit card payment due date, waive late fees that have accrued, lower your interest rate, or reduce your minimum payment required over a period of time.

Again, these changes are temporary and only designed to get you caught up on your outstanding credit card balance. Once you’ve completed the program, your original terms will be enforced if your account is still active.

Who Is a Credit Card Hardship Program For?

Credit card hardship programs are for consumers who are experiencing an unexpected hardship. Generally, the hardship directly or indirectly impacts the consumer’s ability to make on-time credit card minimum payments.

For example, hardship assistance plans might be offered to those who are unexpectedly facing:

•   An income reduction

•   Job loss

•   Death of a primary earner

•   Natural disaster

•   Divorce

•   Severe illness

•   Other emergency

Eligibility for credit card hardship programs varies among credit card companies. Generally, at the very least you’ll need to provide proof of the hardship; however, credit issuers don’t publicly share much information about eligibility since it’s approved on a case-by-case basis.

How to Apply for a Credit Card Hardship Program

If your credit card company offers a hardship program, prepare for your conversation by taking a few steps.

1. Review Your Budget

For starters, evaluate where your finances stand today. Compare your non-negotiable bills, like rent or your mortgage payments, a child’s tuition, groceries, gas, etc., against your monthly income.

Determine how much you can comfortably put toward your credit card payments. Make sure the amount is realistic since you’ll want to make positive strides toward your hardship program, if it’s available to you.

Write out your budget and the amount you’ve determined that you can reasonably afford to make toward your credit card bill each month. Have this information ready for your phone call with your card issuer in the next step.

2. Call Your Issuer

Contact your credit card company by calling the phone number listed on the back of your card. Explain your hardship situation and note that it will impact your ability to repay your outstanding credit card balance. Ask them if they offer a temporary credit card assistance or hardship program.

3. Agree Only to Terms You Can Afford

If they offer this option, this next step is your opportunity to negotiate the terms of your hardship plan. Ultimately, the company would likely rather work alongside you to get repaid, rather than risk you delaying credit card payments and later defaulting on your debt.

Make sure that any terms they initially offer are what you can realistically manage financially. If it still feels too costly, tell them that those terms don’t work for you and ask for further relief. It’s important to make sure to only agree to what’s realistic, given the consequences of credit card late payment.

If you arrive at a credit card hardship plan that you can confidently complete, get all of the terms in writing and read the agreement carefully before signing.

Factors to Consider Before Agreeing to a Credit Card Hardship Plan

One significant impact that credit card assistance programs typically have is a freeze on your credit card activity — meaning using the credit card is no longer an option. Although a credit card freeze doesn’t negatively impact your credit score, that’s spending power that you’ll immediately lose. Though, given your financial hardship, it’s a practical requirement until you can regain your footing.

Some credit card companies might even require that you close your card account entirely while participating in the program. This is what can impact your credit score the most.

Further, closing your account reduces your credit utilization ratio, which is the percentage of credit you’ve used compared to your available credit line. According to the Consumer Financial Protection Bureau, it’s best to keep this ratio below 30%. However, if you suddenly have a reduced overall credit line due to a closed account, your credit utilization ratio will increase.

Additionally, a closed credit card can lower your score since you’re losing the benefits of a matured credit card account. For FICO credit scores, for example, the average age of all of your credit accounts makes up 15% of your score.

Finally, closing your account can also impact the mix of credit in your credit profile, especially if you’re losing your only revolving account, which is what a credit card is. Having a mix of installment (e.g. car loans, mortgages, etc.) and revolving credit (e.g. credit cards) comprises 10% of your FICO score.

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

Pros and Cons of Credit Card Hardship Program

There are a handful of benefits associated with a credit card hardship program. However, you should also consider the drawbacks before moving forward.

Advantages of a Credit Card Hardship Plan	Disadvantages of a Credit Card Hardship Plan
Might help credit long-term by potentially avoiding default	May end up losing access to your credit line
Positive hardships payments are reported to credit bureaus	Might adversely affect your score in the short-term
Allows you to rework repayment features so they’re manageable	Requires proof of hardship and possibly additional paperwork to get a plan
Offers temporary financial relief

Alternatives to Credit Card Hardship Programs

If a credit card assistance program isn’t right for you, there are a few other options for getting through financial hardship.

Balance Transfer Credit Card

If your credit is still in good standing and your account isn’t delinquent yet, consider a balance transfer card. It lets you transfer one or more credit card balances onto a low- or temporarily 0% APR card. A balance transfer fee might apply.

Debt Consolidation Loan

This option lets you combine multiple debts — installment and revolving — into a new installment loan. Ideally, the debt consolidation loan offers a much lower APR with one simple payment to help you chip away at payments. Fees might apply.

If you’re struggling with other payments as well, you could consider another type of loan — a hardship loan. While this could help you continue to make your rent or mortgage payments or stay on top of other necessary daily living expenses, be mindful before assuming additional debt.

Recommended: When Are Credit Card Payments Due

Debt Management Plan

Debt management plans are typically offered through credit counseling organizations. A credit counselor facilitates an agreement with your creditors on a payment plan.

Generally, a debt management plan requires you to make monthly payments to the counseling service, which will then make payments to your creditors on your behalf. It’s best to work with a nonprofit organization, such as the National Foundation for Credit Counseling.

Recommended: Credit Card Debt Forgiveness: What It Is and How It Works

The Takeaway

Don’t wait if you anticipate being late on your credit card payment. A credit card hardship program can help lift you out of spiraling debt and avoid future default. Remember, you still owe the debt, but it’s worth talking to your credit card issuer to see how it can help you through this difficult period.

After successfully completing a credit card hardship program — and regaining financial stability — your card issuer might offer to unfreeze your credit card account, based on your hardship agreement.

If your account was closed and you feel ready for a new card, look for a card with reward perks and low fees. The SoFi Credit Card, for example, doesn’t charge foreign transaction fees, plus you can earn up cash-back rewards for each dollar you spend. Learn more and weigh whether to get a credit card with SoFi today.

Apply for a SoFi credit card today!

FAQ

Do credit card hardship programs affect your credit?

Credit card hardship programs, in and of themselves, don’t directly affect your credit. However, the requirements to participate in a hardship program, like closing the impacted account during the hardship plan, or other credit reporting might have an adverse effect on your credit score.

Does credit card debt count as a hardship?

No, credit card debt doesn’t typically qualify as a hardship. Uncontrollable factors like a major illness or injury, disability, sudden unemployment, loss of your household’s primary earner due to divorce or death, or other high, unexpected expenses typically fall under hardship.

What are my options if I can’t pay my credit card?

If you can’t pay the minimum amount due on your credit card bill, contact your card issuer to learn more about your repayment options. Based on your unique situation, it might offer a manageable path forward to repay your debt, whether that’s simply changing your monthly due date or putting you on a credit card assistance program.

Can you ask for forgiveness of credit card debt?

You’ll unlikely be able to secure debt forgiveness on the total outstanding credit card debt that you owe through your card issuer. Some credit card companies might be willing to settle the debt at a lower amount, which you’ll need to pay in a lump sum. The remainder of the debt is then “written off.”

---

Photo credit: iStock/PeopleImages

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

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

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.

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.

SOCC0822018

Read more