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Credit cards are a convenient method of payment that let you make cashless purchases in-person or online. However, millions of Americans fall victim to credit card fraud, according to the Consumer Financial Protection Bureau.

Identifying fraudulent activity and knowing how to report credit card fraud can help protect identity and your finances. Here’s a closer look at the process of reporting credit card fraud.

What Is Credit Card Fraud?

Credit card fraud is a type of identity theft. When a perpetrator commits credit card fraud, they’re making unauthorized purchases or cash advances using a credit card account that isn’t theirs.

Types of Credit Card Fraud

Fraudsters have developed many types of credit card scams to infiltrate unsuspecting consumers’ credit card accounts.

Account Takeover

An account takeover involves the perpetrator contacting the credit card issuer to make fraudulent changes or requests to gain access to your account. For example, they might claim to be you and request a new credit card issued to their address.

Card-Not-Present (CNP)

Card-not-present, or CNP, credit card fraud occurs when an unauthorized charge is put onto a card account without the physical card being present during the transaction. This might occur during online purchases or other instances when a transaction is performed without the physical card in hand.

Credit Card Skimming

Credit card skimming occurs when a skimmer device is placed onto a legitimate credit card sales terminal. It’s designed to look seamless and authentic. Upon swiping your credit card through the skimmer, the device captures your account data, including your credit card number, PIN, CVV number on a credit card, and more. Perpetrators can then create a copy-cat credit card with your account information encoded into it.

Fraudulent Card Applications

This type of credit card fraud occurs when someone opens a new card account under your name without your consent and/or knowledge. Fraudulent applications might lead to newly opened credit card accounts through pre-approval mailers that are intercepted by fraudsters.

Lost or Stolen Cards

A lost or stolen credit card is another common method of credit card fraud. Unlike CNP, the perpetrator obtains possession of your physical credit card and makes unauthorized charges. If your card is lost or stolen and then used before you realize it’s missing, an unauthorized user can make fraudulent changes in person or online.

Recommended: What is a Charge Card

How to Detect Credit Card Fraud

A key way to uproot credit card fraud is by staying keenly aware of the activity on your existing credit card accounts. For example, with the convenience of automatic payments, it might be easy to ignore reviewing your monthly statement since autopay lets you pay your bills without much effort.

However, if you didn’t notice an unauthorized charge come through because you aren’t keeping track of your transaction activity, it can become that much harder to thwart further fraud. Additionally, routinely reviewing your credit reports can help you flag any new credit card accounts that you didn’t activate.

You might also consider setting up credit card alerts, which can notify you when purchases or cash advances are made using your card. You can set these up through your card issuer’s mobile app and opt to receive a text message, email, or push notification. These frequent updates can help you respond quickly if anything goes awry.

Recommended: Tips for Using a Credit Card Responsibly

How to Report Credit Card Fraud

If you’ve found fraudulent activity on your card account, there are steps you can take to minimize your liability for the unauthorized charges.

Contacting Your Credit Card Issuer

As soon as you notice a fraudulent charge, contact your card issuer’s fraud department immediately. Report the unauthorized charge and explain that it was made without your knowledge or consent.

Typically, the issuer will immediately deactivate the old credit card and reissue you a new card to avoid further unauthorized transactions. If you haven’t done so already, change your online password for the compromised credit card account. Also, change the PIN for your card.

Reaching Out to the Credit Bureaus

Contact one of the three credit bureaus to submit a fraud alert. Doing so requires businesses to verify your identity before opening a new credit account under your name. This fraud alert is free to request and remains active for one year.

The credit bureau you contacted is required to inform the other two bureaus of the fraud alert on your credit. Request a copy of your credit report from each bureau and review them for any other suspicious activity.

Notifying the Authorities

Report credit card fraud to the Federal Trade Commission through its website, IdentityTheft.gov , or by calling 1 (877) 438-4338. By reporting the fraud to FTC authorities, your rights in relation to the fraud are reserved. The FTC will file the report and come up with a recovery plan.

You can also choose to file a fraud report with your local police department. Request a copy of the police report for your records.

How to Protect Yourself From Credit Card Fraud

Following a few practical credit card rules can help you reduce your exposure to potential credit card fraud:

•   Review your credit card statements regularly.

•   Observe your credit card and bank transactions for anything that’s incorrect or potentially fraudulent.

•   Track changes on your credit report.

•   Keep your credit card information private.

•   Set up mobile alerts on transactions through your card issuer.

How Credit Card Fraud Can Impact Your Credit

Credit card fraud can do incredible harm to your creditworthiness if it goes undetected. It can result in a sudden uptick in outstanding balances, which impacts your credit utilization ratio and can adversely affect your score.

It can also be problematic to your credit if new credit card accounts were activated under your name without your knowledge. In this scenario, the unauthorized account and charges incurred go unpaid, which can negatively affect your payment history.

Recommended: When Are Credit Card Payments Due

The Takeaway

Reporting credit card fraud is essential to avoid being liable for unauthorized charges or changes to your account. Stay apprised of your credit card activity by reviewing your credit card transactions at regular intervals and routinely checking your credit report for suspicious issues.

If you’re looking for a fuss-free credit card, SoFi has a solution.

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 happens when you report credit card fraud?

Upon reporting credit card fraud on your account, the card issuer initiates an investigation into the unauthorized charge or fraudulent claim. It might reissue you a new card to use while it conducts its investigation. It if confirms that fraud occurred, your maximum liability for an unauthorized charge is $50, depending on when you reported the fraud and/or lost or stolen card.

What do I do if I suspect a fraud card?

If you suspect that you were a victim of credit card fraud, immediately contact your card issuer to notify them of the unauthorized activity. Request a copy of your credit report to confirm that no other suspicious activity is associated with your credit. Finally, file an identity theft report through IdentityTheft.gov or with local authorities.

Can the bank find out who used my credit card?

The bank can trace the details of the unauthorized activity. These details include the merchant where the card was fraudulently used as payment; the transaction date, time, and amount; and the buyer’s IP address.

How do I claim credit fraud?

To claim credit card fraud, contact your credit card issuer. You can call the phone number listed on the back of your card or call the issuer’s fraud department directly to report the unauthorized activity and request an investigation.

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Photo credit: iStock/Moon Safari

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.

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.

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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With average credit card annual percentage rates (APR) topping 15% as of the second quarter of 2022, according to the Federal Reserve, savvy cardholders are looking for ways to reduce the cost of using a card. Some ways consumers achieve this is through a cash-back rewards credit card or a low-interest credit card.

The distinction between a cash-back vs. low interest credit card is that cash-back cards help you earn a small percentage of your spending back. Conversely, a low-interest credit card tends to charge less interest each month than a high-interest card, which is helpful for cardholders who roll a balance into the next month.

Recommended: Can You Buy Crypto With a Credit Card

What Are Cash-Back Credit Cards?

Credit cards that offer cash-back rewards are designed as an incentive to encourage spending on the card. For every eligible purchase you charge to your card, you’ll receive a small percentage of cash back. Some cards offer 1% cash back, while others offer as much as 8% or more, depending on the program’s rules. You might earn a flat rate across all purchases, or you might earn more in certain spending categories, such as groceries or gas.

You then can redeem your earned cash-back rewards. Redemption options may include a cash payment or a statement credit toward your next bill, or you may be able to redeem the rewards for travel, merchandise, gift cards, and more.

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

What Are Low-Interest Credit Cards?

Low-interest credit cards incur a lower borrowing cost compared to a high-interest credit card. A credit card that charges low interest allows you to pay less for using the card if you carry a balance. This card feature is beneficial for cardholders who repay their monthly balance in increments over time, instead of in full.

The interest rate you qualify for highly depends on your creditworthiness, including your past borrowing habits and credit score. Consumers with strong credit might qualify for promotional no-interest credit cards that charge 0% APR for a limited period. After this period is over, the card’s interest rate increases, based on the cardholder’s credit and qualifications. As such, there are both advantages and disadvantages of no-interest credit cards.

Recommended: How to Avoid Interest On a Credit Card

Differences Between Cash-Back and Low-Interest Credit Cards

Below are the key differences between low-interest vs. cash-back credit cards to keep in mind when choosing a card:

Cash-Back Credit Cards	Low-Interest Credit Cards
You’ll generally need good credit to qualify.	Cash-back rewards offer an incentive for spending.
Cash-back rates vary by issuer.	Advantageous for those who don’t carry a balance.
Savings may be negated when a balance carries over.	Lowest APR offers are reserved for those with strong credit.
Advantageous for those who carry a balance.	Some cards offer a promotional 0% APR for a limited period.
Lowers the borrowing cost for carried-over balances.	Perks may be inconsequential when monthly balances are paid in full.

Factors to Consider When Choosing Between Rates and Rewards

Your unique financial situation, borrowing habits, and the features and benefits of a particular card are what you should consider when comparing your options.

Average Balance You’ll Be Carrying Monthly

How credit cards work is that they give you purchasing power up to a limited amount, even when you don’t have the cash upfront. You can choose to repay the debt in one lump payment by your statement due date, which allows you to avoid paying interest charges. Alternatively, you can make installment payments over multiple months, in which case you’ll accrue interest charges.

Not carrying a monthly balance is one of the common credit card rules to try to stick to, but it’s not always possible. For example, you might have had an unexpected injury that resulted in a medical bill that exceeded your cash savings. In this scenario, putting some of that cost on your credit card and making small, monthly payments to repay it might be necessary.

If you don’t have sufficient cash savings or income to confidently repay your monthly balance in full each month, a low-interest card might offer an advantage over a cash-back card.

Recommended: When Are Credit Card Payments Due

Your Average Monthly Spending

Look back at your monthly expenses and think about the total amount you’ll likely put on your credit card each month. For example, you might choose use a credit card to cover everyday expenses, like dining, groceries, and gas. Cardholders who rack up high monthly balances can benefit from a cash-back credit card that offers money back from purchases you’re already making.

The caveat, however, is if you charge more expenses to your card than you can realistically pay back in full by the statement due date. If you roll over any portion of your outstanding balance into the next month, you’ll get charged interest on that amount, which cancels out any cash-back rewards you may have earned.

Recommended: Tips for Using a Credit Card Responsibly

Annual Fees

Some cards — particularly rewards cards that extend high-value benefits and incentives — might charge an annual fee. For example, a cash-back card might offer an annual $300 travel credit and 5% cash back on flight purchases, but charge an annual fee of $550.

If you don’t travel enough to use up the credits and earn more cash back than the annual fee costs, that card might not be the best fit for your lifestyle. You’ll need to assess the total potential dollar value that a card’s benefits, credits, and other incentives offer in comparison to the upfront cost of the card’s annual fee.

Recommended: What is a Charge Card

Interest Rate Difference Between Cards

Although all credit card issuers check your credit to determine your interest rate, each card company has its own underwriting criteria. You might receive an interest rate offer for 13.99% APR for one card, and an offer from another card issuer at 11.99% APR, for example. To gauge interest rates, it can be helpful to look at the current average credit card interest rates for a point of comparison.

Regardless of whether you end up with a cash-back credit card vs. low interest credit card, it’s always a good idea to shop around for the lowest interest rate you can get. That way, if you ever need to carry a balance, you can minimize the amount of interest you end up paying.

Guide to Lowering Your Credit Card Interest Rate

Whether you’re shopping around for a new credit card or have an existing card with a high APR, here are some ways to lower your interest rate:

•   Contact your card issuer. If you’ve been a loyal customer and have kept your account in good standing, or if your credit score has improved since you opened the account, your credit card issuer may be willing to reduce your rate.

•   Raise your credit score. Even if you already have good credit, strengthening your credit score can help you secure the most competitive interest rate in the future. Good borrowing habits — like making on-time payments and keeping your credit utilization low — are just some ways that may help your score.

•   Consider a low-interest balance transfer card. If you have a high-interest card with a balance on it, and you have strong credit, a balance transfer card can allow you to move your original balance onto a low-interest card. Before proceeding, always compare the balance transfer fee against your potential savings to confirm that it’s worth it.

Remember, what’s considered a good APR for a credit card is subjective, based on your creditworthiness and other factors. Securing the lowest APR that you qualify for can help you avoid heavy interest charges if you roll over a monthly balance.

Explore SoFi’s Credit Card With Rewards

Ultimately, whether you opt for a cash-back credit card or a low-interest card depends on how you plan to use the card and whether you practice responsible credit card habits. But why choose one or the other when you can explore credit cards with low interest rates and cash-back rewards?

A SoFi Credit Card offers the advantages of a cash-back rewards credit card with the opportunity to lower your APR through responsible credit usage.

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

When is a lower annual interest rate better than a low annual fee?

A lower APR is better if you typically carry a balance from one billing cycle to the next. When you roll over a balance, old and new balances accrue daily interest charges that can cost you more money out of pocket. A low annual fee is something to look for when you’re using a card to earn incentives, like credit card rewards.

Are there credit cards with low interest and cash back?

Yes, there are credit card options that offer a low interest rate to qualified applicants, as well as cash-back rewards. However, you’ll generally need to have good credit in order to qualify for the most competitive rates offered by low-interest rewards credit cards.

How can I choose between low APR and rewards?

Consider your credit history and score to determine whether you meet the minimum qualifications for a credit card’s lowest APR. Also, examine your general credit card habits, like whether you often roll over a balance and what your monthly spending habits are like. Compare those details against the costs of carrying a card, like annual fees and the APR you’re offered.

Is it better to find a credit card with low or high interest?

Finding a credit card that offers a low interest rate is always the better move. The lower your APR, the less you’ll pay for borrowing on credit if you decide to carry a balance month to month.

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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.

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.

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When it comes to improving your credit score, the term credit utilization should be on your radar. That’s because it’s one of the major factors that can affect your overall score. The lower your credit utilization — meaning the less of your total available credit you’re using — the higher your credit score could be.

Here’s a closer look at how credit utilization affects credit score, from how much lowering your credit utilization will affect your score to how long credit utilization affects a score.

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

What Is Credit Utilization and Why Does It Matter?

Credit utilization is the percentage of your overall credit limit that you use on your revolving credit accounts — most commonly, credit cards. In other words, it’s how much of your available credit you’re using.

Credit utilization is one of the most important factors that scoring models look at when calculating your credit score, since it suggests the risk you could pose as a borrower. The lower your credit utilization, the more it will appear that you can handle debt or use a credit card responsibly. Thus, a lower utilization rate is reflected in a higher credit score.

To calculate your credit utilization, add up all of your credit card balances and then divide that amount by your overall credit limit across your credit cards. For example, let’s say you have three credit cards, with an overall credit limit of $15,000. You’re carrying a balance of $4,000 across all of those cards. Using the previously explained equation, your credit utilization would be around 26%.

Recommended: What is the Average Credit Card Limit

Factors That Affect Your Credit Score

Aside from your credit utilization, there are other factors that affect your credit score. These include:

•   Payment history: Another major factor aside from credit utilization is whether you pay your credit and debt accounts on time. If you consistently make on-time payments, the more creditworthy you’ll appear, and this will reflect on your score.

•   Credit history length: Credit scoring models typically take into account how long your current accounts have been open. They may even consider how long it’s been since you’ve used certain kinds of accounts. Generally, a longer credit history is a positive thing for your credit score.

•   Credit mix: Having different types of accounts may demonstrate to lenders how you handle different kinds of debt.

•   New credit: Opening multiple credit accounts or having a series of hard inquiries could signal to lenders that you pose a greater risk as a borrower. As such, it may negatively impact your credit score.

Recommended: When Are Credit Card Payments Due

How Credit Utilization Affects Your Credit Score

Your credit card utilization accounts for 30% of your FICO credit score, which is the scoring model used by the majority of lenders.

Since lenders look at your credit score to assess your creditworthiness, having a low credit utilization is key. That’s because if you’re using most of your available credit, it suggests to lenders that you could be a greater risk. A high utilization rate could signal to lenders that you may be stretched too thin financially and need to rely too much on credit, and therefore could have a hard time paying back what you borrow.

Your credit score is also dependent on other factors, such as the number of credit cards you have. For example, if you have one credit card with a low limit, having a high credit utilization may affect your score more compared to someone with multiple credit cards and high credit limits. Same goes for someone with a lengthy credit history that’s been mostly excellent, compared to someone who has no or a limited credit history.

All this to say: Credit utilization is an important factor in determining your credit score, but there are other aspects as well, such as your payment history.

Tips for Managing Your Credit Utilization and Credit Score

By managing your credit utilization, you can improve or maintain a better credit score. The following are a few effective tactics to do so.

Keeping Your Credit Utilization Rate Under 10%

Though keeping your credit utilization under 30% can help to improve or maintain your credit score, the lower it is, the better.

While you may be tempted to keep it at zero, that may not be as helpful as you think. A 0% credit utilization could signal that you’re not using your credit regularly. Since lenders want to see how you currently manage accounts, it will be hard to approve you for a loan if they see you’re not using any.

Instead, consider charging smaller amounts on your credit card and trying to keep your utilization rate to under 10%, which is a benchmark for achieving a high score. That way, you should be able to afford to pay the balance and show creditors you’re using credit regularly.

In addition to keeping your overall utilization below 10%, you’ll want to make sure that your utilization on each of your credit cards is also below that percentage. In many cases, credit utilization may refer to your per-card utilization.

Your best bet would be to look at your current credit card spending limit for each card and then aim to keep each card’s balance to no more than 10% of that amount. So if you have two credit cards with limits of $3,000 and $5,000, respectively, you wouldn’t want to charge more than $300 to the first card and $500 to the second.

Recommended: What is a Charge Card

Asking for a Higher Credit Limit

Getting a higher credit limit can lower your credit utilization even if you maintain the same balance on your cards. It also gives you more wiggle room — if you need to carry a balance on a credit card, you won’t have to worry as much about a big increase in your credit utilization.

When it comes to asking for a credit limit increase, issuers tend to look more favorably to those who have maintained good credit history, whose income went up, and even those who have less debt. If you do make a request, some credit card companies may conduct a hard credit inquiry, which could temporarily affect your credit score.

Making Payments Twice in a Month

By paying your credit card twice a month, your balance will remain lower. It will also increase the chances of your credit card issuer reporting that lower amount to the credit bureaus.

This could mean that your calculated credit utilization is lower, therefore increasing your chances of seeing a positive effect on your credit score. Plus, it will help you avoid racking up excessive credit card debt, which can have a negative impact on your score.

Recommended: How to Avoid Interest On a Credit Card

Keeping Your Credit Cards Active

It may be tempting to close a credit card that you don’t use anymore. However, if you do so — or if you don’t use a credit card for a while and the card is closed automatically — your credit utilization will automatically go up. This is true even if your balance is still the same, as your overall credit limit is now lower.

Instead, consider keeping that card open, even if you make a small purchase on it every few months.

Recommended: Can You Buy Crypto With a Credit Card

The Takeaway

Credit cards are useful tools, helping you make purchases, earn rewards, and build your credit. In order to reap the positive benefits, make sure to use your credit cards responsibly — including by keeping your credit utilization low. Given how credit utilization affects credit score, it may be worth exploring ways to manage your current utilization in order to lower it.

One way to lower your credit utilization is to increase your overall credit limit, which you can do when you get a credit card. If you’re looking for a credit card that suits your needs, consider SoFi’s 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 is a good credit utilization ratio?

A good credit utilization ratio is 30% or lower. Ideally, you should aim to maintain a credit utilization ratio of around 10% to show lenders you’re responsible with credit.

How long does credit utilization affect credit score?

Your credit utilization won’t affect your credit score forever. As long as you take the steps to lower it, you can see improvements within a short amount of time.

How much will lowering my credit utilization affect my credit score?

Lowering your credit utilization can have a major impact on your credit score. That’s because credit utilization makes up around 30% of your credit score calculation with most scoring models.

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Photo credit: iStock/Ridofranz

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.

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.

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Your credit utilization is the percentage of your overall credit limit that you’re using, and it can have a major effect on your credit score. As your credit usage decreases, it can positively affect your score since it shows you’re responsible with credit. On the flipside, high credit utilization can ding your score as it suggests you’re overspending

If you’re wondering how to lower credit card utilization, there are some steps you can take to do so and help your credit score bounce back.

What Is Credit Card Utilization?

Credit card utilization, or simply credit utilization, is how much of your credit limit you’re using on your revolving credit accounts. You can calculate this percentage by taking the total of your credit card balances and dividing it by your total credit limit.

For instance, let’s say you have two credit cards with limits of $3,000 and $5,000. You have a balance of $600 on the first card and $1,000 on the second card. By taking the total of your balances — $1,600 — and dividing it by your overall credit limit — $8,000 — you’d end up with a credit utilization rate of 20%.

Why Does Your Credit Utilization Matter?

When it comes to your credit score, scoring models look at various factors, including your credit utilization on both individual accounts and overall. In other words, if your overall credit utilization is high, or one of your revolving accounts has a high balance, your score could be negatively affected.

Considering that credit utilization determines 30% of your FICO score, which is the scoring model used by most lenders, it’s a major factor that affects your credit score.

What Is a Good Credit Card Utilization Rate?

As a credit card rule, you should aim to keep credit utilization under 30%. While this is the baseline, the lower your credit utilization is, the better.

A lower credit utilization rate demonstrates to lenders that you are responsible with your credit and don’t appear to rely on credit too heavily.

Tips for Lowering Your Credit Card Utilization

The good news is that you can raise your credit score relatively quickly just by lowering your credit utilization. Here’s how to lower credit utilization.

Paying Down Your Balance

Making payments before the due date arrives or the billing cycle ends could mean your balance goes down before your credit card issuer reports the amount to the credit bureaus. You could even make a payment right after your purchase goes through.

Having a lower credit card balance lowers your credit utilization, even if your credit limit remains the same.

Recommended: When Are Credit Card Payments Due

Cutting Down on Spending

Budgeting carefully and reducing your spending could prevent you from racking up excessive credit card debt and getting stretched too thin financially.

However, that’s not to say you can’t use your credit card. Rather, limit your spending to what you can afford to pay off in full that billing cycle. Additionally, if you find your debt starting to balloon, consider pausing your credit card usage until you’ve gotten your balance under control so your credit utilization isn’t pushed higher.

Paying off Credit Card Balances With Personal Loans

If you’re carrying a balance on a credit card, one option to pay it off is taking out a personal loan. You could qualify for a lower interest rate, which can make the debt easier to get a handle on paying off. Plus, a personal loan is an installment loan, which means it won’t count toward your credit utilization.

However, you need to make sure you can still afford the payments and can qualify for competitive rates and terms. Some lenders may charge an application or origination fee — take this amount into consideration when deciding whether it’s worth going this route.

Recommended: How to Avoid Interest On a Credit Card

Requesting a Credit Limit Increase

Increasing your credit card limit can lower your credit utilization even if your outstanding balance remains the same. To get a credit limit increase, contact your credit card issuer to request one, either by calling the number listed on the back of your card or logging onto your online account.

Keep in mind that your credit card issuer may not approve your request. You may have to meet certain criteria to qualify, such as having a history of on-time payments and responsible credit usage.

Opening a New Credit Card

Opening a new credit card can increase your overall credit limit, and therefore potentially lower your credit utilization. Keep in mind that you most likely won’t know what your credit limit will be until you’ve been approved for the card. Plus, submitting an application generally triggers a hard credit inquiry, which could have an effect on your credit score.

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

Avoiding Closing Unused Cards

It might sound logical to close credit cards that you haven’t been using, but doing so could have negative consequences. More specifically, closing a credit card lowers your overall credit limit, which could increase your credit card utilization even if your credit card balance remains the same.

Recommended: What is the Average Credit Card Limit

Becoming an Authorized User

You could ask your spouse, family member, or close friend to add you on their credit card as an authorized user. If the primary cardholder maintains a low balance and has a high credit limit, it could lower your overall credit utilization.

Before going this route, however, speak with the primary cardholder to determine whether becoming an authorized user will help your credit score. You’ll also want to be clear on how you plan on using the card, or if you’d rather be a cardholder in name only.

Finding Out Whether Your Issuer Reports to Credit Bureaus

Most credit card issuers will report your payment activity and account balance every 30 days to the credit bureaus, though the reporting date might not coincide with your payment due date. If your card issuer reports your payment activity before you make a payment, it could look like you have a high balance, which could increase your credit utilization rate.

To remedy this, contact your card issuer to determine when it reports to the credit bureaus. Aim to pay off as much of your balance as you can before that, or request a new due date that’s ahead of when your issuer reports to the bureaus.

How Will Lowering Credit Utilization Affect Your Credit Score?

The lower your credit utilization, the higher your credit score could be. Remember, your credit utilization is one of the major factors that affects your credit score. Aim to keep your credit utilization well below 30% — try using any of the methods mentioned above to do so — in order to help your score.

Recommended: Can You Buy Crypto With a Credit Card

The Takeaway

Credit utilization — the percentage of your overall credit limit you use — has a major effect on your credit score. It’s best to keep your utilization as low as possible, but the benchmark generally recommended is that it should reach no higher than 30%. If your credit utilization rate has crept up, there are some tactics you can try to lower it, from paying down your balance to getting a new card.

If you’re looking to open a new credit card to try and lower your utilization, consider applying for a credit card with SoFi. The SoFi credit card is designed to help you save, invest, and pay down debt. Plus, it offers generous cash-back rewards.

Sign up for the SoFi credit card today.

FAQ

How can I fix high credit utilization?

You can decrease your credit utilization by paying off your balances early, asking for a credit limit increase, applying for a new credit card, and cutting down on spending.

How can I keep my credit utilization below 30%?

You can keep your credit utilization below 30% by watching your spending and balances across all your credit cards.

How low should I keep my credit utilization?

It’s best to keep your credit utilization below 30%. That being said, the lower your credit utilization rate, the better.

Does zero utilization hurt your credit score?

Zero utilization doesn’t hurt your credit score. However, 0% utilization doesn’t necessarily help your credit score either, as you can’t demonstrate on-time payments and other positive credit behavior.

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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.

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Pulling a metal credit card out of your wallet was once considered a status symbol. Today, however, more card issuers have added credit card metal options to their card offerings for customers who prefer a sleek — and heavier — plastic alternative.

But beyond being metal instead of plastic, you may wonder what is a metal credit card exactly and are they better? We delve into the similarities and differences between plastic and metal credit cards, as well as how to get a metal credit card if you’re looking to add some heft to your wallet.

What Is a Metal Credit Card?

A metal credit card functions much in the same way as its plastic cousin. You can swipe a metal card at a point-of-sale terminal, or if the card is chip- or RFID-enabled, you can insert or tap it for payment.

Additionally, cardholders who have a metal credit card but prefer to use their digital wallets, can use their digital metal card the same way as other credit cards in their digital wallet. To use a credit card in this manner, simply tap your device toward the card reader to activate the transaction.

A key distinction with metal credit cards, however, is the material that the physical card is made of. They’re typically composed of some type of hard, durable metal.

Recommended: When Are Credit Card Payments Due

A Brief History of Metal Credit Cards

The credit card issuer to spark buzz with its metal credit card was American Express. In 1999, it launched the Centurion Card — colloquially called the Black Card — which was the first metal card of the time.

The innovative, invite-only card was offered to the highest spenders of AmEx’s Platinum Card. Its exclusivity, coveted benefits, and unique credit card metal material set an impressive bar for the luxury credit card market moving forward.

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

What Are Metal Credit Cards Made Of?

The transition from traditional, lightweight plastic to various metals is why some credit cards are heavy. Specific materials that are used for metal credit cards vary across card issuers, with many companies keeping information about their credit card metal materials under lock and key.

As an example, the metal used for the Apple Card is titanium, while some cards use stainless steel, metal alloys, 24 karat gold, palladium and other metals, as well as hybrid cards that have a metal exterior with a plastic core.

Why Metal Credit Cards Are Popular

Since AmEx launched its metal Centurion Card, metal cards have oozed a sense of luxury and prestige. This premium metal card phenomenon went mainstream when Chase announced its metal Sapphire Reserve credit card in 2016.

The heavier material of metal credit cards has a noticeable in-hand feel that some cardholders prefer. Metal credit cards are also generally associated with elite status. For some, the perk of carrying a card that feels and looks special can be attractive.

Differences Between Metal and Plastic Credit Cards

Although metal credit cards have grown in popularity in the market, traditional credit cards made out of plastic are still commonly available. Below are the main differences to know between a metal versus plastic card:

Metal Credit Card	Plastic Credit Card
Made of various metal materials	Commonly made of PVC plastic
Weighs more (10.5 grams and up)	Weighs less (approximately 5 grams)
Some have a higher barrier of entry	Can be more accessible to consumers
Highly durable	Less durable
May need to mail back to the issuer for safe disposal	Can dispose of using commercial-grade tools

Similarities Between Metal and Plastic Credit Cards

As mentioned earlier, how a credit card works doesn’t vary whether it’s metal or plastic. You can add both metal and plastic cards into a digital wallet for convenience and use them in the same way to make purchases.

Further, both options offer the same bank-level security features you’ve come to expect from a credit card since encryption isn’t dependent on the material of the card. Rather, it’s contained within other features of the card, like the magnetic strip or chip-and-PIN technology.

Finally, despite the noticeable added weight of a metal credit card, their dimensions are roughly the same as those of a plastic credit card. Both a metal and plastic credit card fit into a standard wallet’s card slot, although metal cards might be slightly thicker.

How to Get a Metal Credit Card

Various card companies offer credit card products that issue a metal card, if you qualify. A good credit card rule of thumb to find the right card — whether metal or otherwise — is to compare various features, such as annual fees, rewards programs, sign-up bonus incentives and minimum required spend, and other card benefits.

Here are some examples of where to get a metal credit card and its specific card product name(s):

•   Amazon: Amazon Prime Rewards Visa Signature Card

•   American Express: Gold Card, Platinum Card, Centurion Card

•   Apple: Apple Card

•   Capital One: Savor, Venture X

•   Chase: Sapphire Preferred, Sapphire Reserve

•   Citi: Citi / AAdvantage Executive World Elite MasterCard

•   HSBC: Elite World Elite Mastercard

•   JP Morgan: Reserve Credit Card

•   MasterCard: Gold Card, Titanium Card, Black Card

•   U.S. Bank: Altitude Reserve Visa Infinite Card

Factors to Consider Before Getting a Metal Credit Card

Flashing credit card metal when dining out might seem intriguing, but the bells and whistles of a premium metal card will also cost you. And, at the end of the day, a credit card’s material doesn’t affect what a credit card is and how it serves you.

Generally, credit card companies offer a metal credit card for its premium card products that charge steep annual fees. For example, for the privilege of using a swanky metal card, you might have to pay an annual fee of $95, with some cards charging up to a $550 annual fee.

If that’s within your budget, take a closer look at the benefits and incentives that the metal card offers, compared to non-metal cards. Whichever card you get next should serve your needs, whether that’s preference for high bonus reward categories in your top monthly spending categories or unique travel benefits and protections.

Also, consider that getting rid of your metal card takes a bit more effort than a standard plastic card. Whether you close your account or you’re issued a replacement for an expired card, you’ll usually have to mail your old metal card to the issuer for disposal. They’ll issue you a dedicated envelope to do so, but it’s an extra step that doesn’t exist with a plastic card.

Recommended: What is a Charge Card

Pros and Cons of Metal Credit Cards

As you can see, there are both upsides and downsides to metal credit cards. Here are the pros and cons to take into consideration before you get a metal credit card:

Pros	Cons
Sleek style	Slightly bulkier in wallet
Less prone to damage	May need to mail in for disposal
Typically offers premium card benefits	Typically has a high annual fee
Associated with luxury	Novelty is fading

How to Destroy a Metal Credit Card

If your existing metal credit card has passed its credit card expiration date, you won’t be able to destroy it using a standard pair of scissors, nor can you put it in a shredder that could typically handle your plastic cards.

To effectively destroy a metal credit card, you must either:

1.    Return it to your card issuer by mail. Your issuer will provide you with a prepaid mailing envelope.

2.    Drop it off at a local branch. If your issuer has a brick-and-mortar location, it might be able to dispose of it or mail it to the correct department.

Since the card is made of metal, it requires industrial-grade tools to dispose of securely. Additionally, shredding it yourself might result in injury. Consider relinquishing the metal card to your issuer for safe disposal.

The Takeaway

Metal credit cards might add panache to your credit card rotation, but their aesthetic appeal shouldn’t be the only reason to seek one out. A plastic card that has a generous rewards program might be more valuable in the long run than a metal credit card that has limited perks. Always consider your own credit card habits, the types of purchases you make, and the benefits that are most valuable to you when shopping for a new credit card.

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 anyone get a metal credit card?

Everyday consumers who meet a card issuer’s lending criteria can be eligible for a metal credit card. Unlike decades prior when metal credit cards were accessible to a select few by invitation only, today more card issuers offer their own metal credit card.

Are metal credit cards safe?

Yes, metal credit cards are safe to use. They have the same security features as their plastic credit card counterparts. The main difference is that the credit card metal material is more durable.

Can I request a metal credit card?

No, generally, a metal credit card is not a feature you can choose. Instead, metal credit cards are offered for specific credit card products that you can apply for.

Why are some metal credit cards heavy?

Credit card metal materials vary depending on the card. Some card companies use materials like stainless steel, aluminum, titanium, or a blended mix of metals to create the card. Different metals have different weights, some of which may feel heavier.

Are metal credit cards generally better?

No, metal credit cards aren’t better than plastic cards in terms of how the card functions or its features. Metal credit cards do have an edge when it comes to durability, however.

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Photo credit: iStock/VioletaStoimenova

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.

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