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If you unintentionally overpay your credit card bill, you may see a negative balance on your account. Although overpaying a credit card isn’t ideal — that cash flow could’ve been used toward another expense, after all — it’s usually not cause for concern.

If you overpaid your credit card, interest isn’t charged on the amount; in fact, that amount is owed back to you. What you do next, whether that’s requesting a refund or applying the overpayment to next month’s bill, is your choice.

How Credit Card Overpayments Happen

Since credit cards work by providing you with revolving purchasing power up to your limit, any activity on the account can change your available balance — even after you’re issued a monthly billing statement. This includes new purchases on the account that increase your credit card balance, but also payments or credited amounts that lower the outstanding amount you owe.

If you end up making a payment to your credit card issuer for a higher amount than you owe, for instance, it results in an overpayment. This is also called a negative balance.

Recommended: When Are Credit Card Payments Due

How You Could Have Overpaid Your Credit Card

There are a few circumstances that might result in an overpaid credit card.

Manual Payments

Submitting a manual credit card payment for an amount that’s higher than your actual outstanding balance will push your account into a negative balance. This might happen if you’ve been repaying a large purchase in equal increments each month, but make a math error or have an oversight.

For example, say you used your new 0% APR credit card to purchase a laptop for $2,150 and plan to make manual monthly payments of $500. By month five, you’d only need to make a $150 payment to pay off your card balance. But if you forget what your current balance is, you might accidentally make another $500 payment. The $350 difference would be an overpayment on your account.

Paying attention to your outstanding balance on the day you plan on making a manual payment can help you avoid overpayment.

Additional Payments on Top of Automatic Payments

You might also overpay credit card balances if you made a payment to avoid credit card interest charges, but didn’t realize that you already had autopay enabled on your account.

The scheduled automatic payment will still be processed, regardless of any manual payments, unless you cancel it for the month. For this reason, a double payment can result in an overpaid credit card.

Before making an extra payment, double-check whether you’ve enacted autopay and see how another payment might affect your outstanding balance.

Recommended: How to Avoid Interest On a Credit Card

Receiving Refunds

Another common scenario resulting in an overpaid credit card is if you return a purchase to a merchant or get a refund for a service. If the amount of the purchase was credited back to your credit card and you make a payment based on what’s shown on your statement balance that arrived before this transaction, you’ll overpay your credit card bill.

If you returned an item and received a refund back on your card, remember to adjust your manual payment or autopay to reflect your new balance due.

Guide to Rectify Overpaying Your Credit Card

Now that you know what happens if you overpay your credit card, you may be wondering if there’s anything you can do to fix it. If your credit card balance is under $0, and you’re owed money back, there are a few ways to move forward.

Request a Refund

The Fair Credit Billing Act (FCBA) protects your rights when it comes to how your credit card account is handled. It states that you have the right to request a refund if you overpay your credit card by more than $1.

The credit card rules state that the issuer must give you a refund in the payment method of your choosing within seven business days of receiving your request. Additionally, it must, in good faith, make attempts to return unapplied overpayments that have been on the account for over six months.

When requesting a refund by mail, make sure to send your request through certified mail so you have proof of the date it was received by the bank.

Allow the Negative Balance to Roll Over Next Month

Another way to address a negative balance on a credit card is simply to do nothing. If you don’t explicitly request a refund, the bank will automatically roll over the unapplied credit toward your next statement balance.

If you have a larger statement balance than your credit during the following month, the overpayment credit will be applied and the remaining balance you owe is reduced. However, if your credit is greater than your new statement balance, your adjusted credit amount will roll over again.

It will continue this way until you’ve effectively used all of your account’s overpayment credit or you ask for a refund.

Enable Autopay on Your Credit Card

If you’re not already enrolled in automatic payments, enabling autopay for your credit card bill can help prevent overpayments due to manual payment errors. Leveraging your card’s autopay feature is a responsible way to use a credit card since it ensures you pay the correct amount on your account on time.

If you set up autopay to always pay your statement balance or outstanding account balance, it also helps you avoid credit card debt that’s getting increasingly harder to pay off.

Does an Overpaid Balance Affect Your Credit Score?

Having an overpaid credit card balance is better than having a positive balance on your account. Credit card companies report negative balances as a “zero balance” when forwarding your card activity to the credit bureaus.

A zero balance lowers your credit utilization, which impacts your credit score calculation. Although it can build your credit compared to carrying an outstanding balance, the effect of an overpayment is the same as making a payment for the correct amount to reflect that you owe $0. In other words, it won’t help you build your credit score.

The Takeaway

Although overpaying credit card balances is a common occurrence, following the tips above can help you avoid a negative balance. Paying attention to this can help prevent your discretionary cash flow from getting tied up with your card issuer unnecessarily — a key to smart credit card habits.

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

What happens if I overpay my credit card?

If you overpay your credit card, the amount is reflected as a negative balance on your account balance. You can request a refund or let the bank apply it to your next statement.

Does a negative balance have an effect on my credit score?

No, a negative balance doesn’t affect your credit score. Your bank reports it as a zero balance.

How long do you have to dispute a credit card charge?

You have 60 days to dispute a credit card charge, starting from the date it appears on your statement. The bank is legally required to acknowledge your dispute within 30 days of receiving it. A resolution must be enacted within two billing cycles or a maximum of 90 days from your dispute date.

How can I request a refund after overpaying my credit card?

Send a notification to your bank requesting a refund and specifying the method in which you’d like to receive it, such as a check or other method. Check with your bank about how to submit it. The bank is required to provide your refund within seven business days of your request.

Photo credit: iStock/Really Design

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 .

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Credit card points are a common incentive for cardholders to actively make purchases on a rewards credit card. Once earned, cardholders can use credit card points toward a redemption option they find worthwhile. This can include travel or a purchase credit toward a good or service.

Read on to learn more about how credit card points work, including how to get and how to use credit card points.

What Are Credit Card Points?

Credit card points are one of many different credit card rewards that card issuers offer to consumers through a rewards program like SoFi Plus. For instance, a program might offer you two points for every dollar you spend on the card, which you could then redeem for use once you’ve accumulated a certain amount of points.

Points act as a form of currency within a credit card rewards program, designed to entice cardholders into maintaining spending activity on the card. Some reward programs for credit cards are also co-branded to encourage loyalty to a particular brand.

How Do Credit Card Points Work?

Understanding how credit card points work ultimately comes down to knowing how to earn points on credit cards — and then how to redeem them.

Earning Points on Credit Cards

There are a number of ways to earn points on your rewards credit card account:

•   Everyday purchases: Using a card as your primary payment method for your routine expenses is one way to earn points. Depending on your preferences and the features of other rewards cards in your wallet, you might choose to put purchases, like your morning coffee, groceries, rideshare expenses, and more on the card.

You might also choose to dedicate certain spending categories to a rewards card that offers bonus points toward that purchase. For example, if your rewards card offers 5X points when using your card at the supermarket, you might decide to use the card for grocery costs only.

•   Shopping with credit card partners: Part of finding the right card for you is researching whether the credit card partners with brands and services that you already shop with. For example, some cards partner with ride-sharing services, like Lyft, and offer bonus points for every Lyft purchase put on the card.

Note that some card issuers require you to pre-register for this type of bonus point incentive. You might have to link your rewards card to your Lyft account in order to receive bonus point credit for ride costs, for instance.

•   Sign-up bonuses: If you’re expecting a costly upcoming expense, like a medical bill or home repair, a common strategy to earn credit card points quickly is finding a competitive credit card bonus offer. Sign-up bonuses typically offer a promotional bulk quantity of points after you spend a minimum amount on the card within the first few months of opening the account.

Putting your large purchase on a new card accelerates your point earnings, but make sure you can pay your monthly statements in full to avoid interest charges — one of the important credit card rules to abide by in general. If you allow your balance to roll over into the next month, it can cut into the value of a sign-up points bonus.

•   Referral points: When you refer a friend to your rewards credit card program, some card issuers offer a referral bonus. Typically, you’ll receive a referral bonus reward, and your friend also receives bonus points if they meet certain spending requirements on their new card. Referral points vary by credit card, but it’s another option for cardholders who want to earn points on credit cards while giving friends a bonus perk, too.

Redeeming Points on Credit Cards

You can redeem credit card points in various ways. Common options to redeem credit card rewards points, depending on your card’s redemption choices, include:

•   Flights

•   Hotel stays

•   Car rentals

•   Statement credits

•   Cash back

•   Gift cards

•   Merchandise

•   Online retailers

•   Special experiences

•   Charitable donations

Redemption typically takes place through the card issuer’s app or website, or through the issuer’s dedicated rewards program website.

Types of Credit Card Rewards

Credit cards offer different types of rewards options. The common “currencies” are points, miles, and cash back.

Reward Points

You can earn credit card points by making purchases on your rewards card. Some credit card products offer a flat rate per dollar spent on your card, while others offer bonus points toward a spending category.

For example, a card might offer tiered bonus points at a rate of 5 points per dollar at restaurants, 3 points per dollar toward every gasoline purchase, and 1 point per dollar on everything else.

Miles

Miles are a common reward unit that’s typically used among travel credit cards and airline-branded rewards cards. Depending on the mileage rewards program, you’ll typically earn bonus miles when charging travel-related expenses on your rewards credit card. Some credit cards also let you earn miles on non-travel purchases at a lower mile-per-dollar rate.

This type of credit card reward is ideal for regular travelers who often fly to their destination and are interested in using credit card rewards to travel for less. If you prefer flying on a specific airline, a branded rewards credit card can help you earn miles toward a future flight, in addition to other redemption options, like hotel stays or goods. General rewards mileage cards can be redeemed in a similar way, but it’s not restricted to a particular carrier.

Cash Back

Credit cards that offer cash back rewards let you earn a percentage of cash back based on the amount you spend. This can typically be redeemed as statement credit to reduce how much you owe on your monthly credit card bill, which can be part of using credit cards responsibly. Or it can be redeemed as cash sent directly to you. Some cash back credit cards let you redeem cash back rewards as credit toward a purchase through one of the issuer’s partners.

If you’re not an avid traveler, a cash back card can be a straightforward option to earn and redeem rewards. Many card issuers offer a flat-rate rewards model that offers an easy-to-remember cash-back percentage on all card purchases.

How Much Are Credit Card Points Worth?

The value of each credit card point is generally worth 1 cent. However, reward valuations vary between credit card reward programs and can also differ based on how you choose to redeem them.

For example, your credit card points could be worth 1 cent when you redeem them for cash or gift cards, but worth 1.25 cents when you redeem them for travel-related options, such as flights or dining. Keep in mind that these amounts can vary widely, so it’s important to understand the terms and conditions of your credit card.

Recommended: Tips for Using a Credit Card Responsibly

Getting the Most of Your Credit Card Points

Below are a few helpful ways to maximize your credit card points:

•   Stay on top of bonus categories. Some rewards credit cards offer rotating bonus spending categories that temporarily increase the points you can earn per dollar spent on the card. These types of cards often require you to “enroll” in the bonus category, so familiarize yourself with your card’s bonus calendar.

•   Be aware of bonus limits. Read the rules of your rewards program, including thresholds on the maximum dollar amount that’s eligible for bonus rewards.

•   Calculate if the annual fee is worth it. Before signing up for a rewards credit card, review your spending habits over the last year. Note the spending categories and amounts you’ve spent. Based on this information, calculate whether the card’s rewards program and benefits — like TSA PreCheck credit and other perks — exceed the annual fee you’d spend each year.

The Takeaway

Accruing credit card points, miles, or cash back can be worthwhile as long as you use your card responsibly and select a rewards card that fits your lifestyle. Before putting your earned rewards toward a high-dollar purchase, or applying earned cash rewards to your monthly statement, keep your objective in mind.

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

Do credit card points expire?

Typically, credit card points don’t expire. However, your points might expire if your credit card account is closed, falls into bad standing, or after a period of inactivity. Different cards have varying rewards program terms and conditions, so check with your card issuer to see if your credit card points have an expiration timeline.

Do credit cards with rewards have higher interest rates?

Rewards credit cards tend to have higher interest rates compared to regular credit cards. Cardholders with a positive credit history and strong credit score generally qualify for lower interest rates compared to those with a low credit score.

What is the use of earning reward points on my credit card?

Earning rewards points on your credit card allows you to get something in exchange for the spending you do with your credit card. For example, depending on your rewards program, you can redeem credit card points as a cash back reward or put them toward future travel or other purchases.

Photo credit: iStock/stefanamer

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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A secured credit card can help you establish credit for the first time or build your credit if you’ve damaged yours with missed payments, defaults, or bankruptcy. While secured credit cards offer many of the same advantages as traditional credit cards, they do have some limitations.

Eventually, those who start out with a secured card may want to switch to a traditional credit card. Here’s a closer look at how to transition from a secured credit card to an unsecured card.

What Is A Secured Credit Card?

A secured credit card requires that you put down a cash deposit, which serves as collateral for the charges you make with the card. Usually, the amount of the deposit is the same as your credit limit. So if you deposit $1,000, you’ll be able to borrow up to that amount.

If you miss payments, the bank can cover their losses by drawing on money from the deposit. That said, making on-time payments is just as important with secured credit cards as it is with traditional cards, especially if you are using the secured card to build credit.

As with traditional credit cards, secured cards require that you make a minimum monthly payment. Beyond that, you can carry a balance from month to month, but you will be charged interest on that balance. Pay your balance off in full each month to avoid interest payments.

Recommended: Differences Between a Secured and Unsecured Credit Card

Benefits of Secured Credit Cards

Secured credit cards offer users and banks a number of advantages.

Easier to Qualify

Because secured cards require users to put down a deposit, banks are taking on relatively little risk. As a result, it can be much easier to qualify for a secured card than it would be a traditional credit card.

Can Help Build Credit

If you have no credit or poor credit, it can be difficult to get approved for credit cards or loans. Making small purchases regularly with a secured card and paying off your bill in full and on time can help you establish credit or rebuild your credit.

If you’re looking to build credit, you may also consider becoming an authorized user on a credit card.

Convenience

You can use secured credit cards anywhere traditional cards are accepted. Secured credit cards allow you to shop in person or online without carrying cash around with you. It’s also difficult to accrue too much debt because you’re limited by the amount of your deposit.

Drawbacks of Secured Credit Cards

Alongside the benefits offered by secured cards, there are limitations to be aware of.

Coming Up With the Deposit

In order to get a secured card, you will have to come up with the cash that will serve as your deposit. That may require you to save for a period of time before you apply.

Once you deposit that cash, you can’t access it while your secured card is in use. That said, your deposit is refundable when you close the account or convert your secured credit card to an unsecured card.

Higher APR

The annual percentage rate (APR) is the interest rate you’re charged when you carry a balance on your card. Secured credit cards may offer higher interest rates than traditional cards, which can end up costing you more money if you carry a balance.

Spending Is Limited

Most credit cards, whether they’re secured or unsecured, have spending limits. For a secured credit card, your limit will depend on the size of the deposit you make, which will typically range from $200 to $2,000. If you’ve only deposited $1,000 and need to replace your transmission for $1,800, you won’t be able to put the repair on your card.

In comparison, the average credit limit across all cards is upwards of $30,000, according to a recent report from the credit reporting bureau Experian®.

What Is an Unsecured Credit Card?

An unsecured credit card is a traditional credit card that does not require a deposit as collateral. Instead, your credit limit is determined based on your creditworthiness. If you fail to pay off your credit card, your card company can send your bill to a collections agency, and your credit score will take a hit.

There are a variety of types of credit cards to choose from when it comes to unsecured cards, including rewards cards and balance transfer cards.

When You Might Keep Your Secured Credit Card Open

The biggest reasons to keep your secured credit card open have to do with the potential implications closing the account can have for your credit score.

For one, closing an account may result in a dip in your credit score. Additionally, closing the account may decrease the age of your credit history, another factor that goes into determining your credit score.

When You Might Upgrade to an Unsecured Credit Card

You may consider upgrading to a traditional, unsecured card if you’re able to manage a secured card responsibly and are looking for a lower APR or a higher credit limit. Ultimately, making the move requires that your credit is in decent shape.

To do so, it’s important that you stick to credit card rules. That includes being sure that you’re not in the habit of overspending, you’re able to pay your bills on time and in full, and you can keep your total purchases lower than your available credit. Experts suggest keeping your total balance at 30% or less of your available credit.

However, whether you can change a secured credit card to unsecured will also depend on your credit card issuer. Not all card companies offer unsecured options that you can upgrade to. In those cases, you’ll need to apply for a new card.

Guide to Upgrading from a Secured Card to Unsecured Credit Card

If you’re looking to upgrade to an unsecured card, make sure you’re following these steps.

Monitor Your Credit Score

Many credit cards require that you have at least a good credit score to qualify. That means, you’ll need a FICO® score of 670 or higher. Not only are you more likely to qualify for a card with a higher score, you’ll also be more likely to secure more favorable terms and lower interest rates.

If you’re considering trying to convert a secured credit card to an unsecured card, monitor your credit score regularly. You might check with your card issuer to see if they offer you free access to your credit score.

Making the Minimum Monthly Payment

Getting approved for a change from a secured credit card to an unsecured credit card requires displaying responsible credit card behavior. Ideally, you’d avoid interest payments by paying off your credit card in full every month. But if that’s not possible, be sure you are making at least your minimum monthly payment, as payment history is one of the biggest determinants of your credit score. On-time payments are a big part of using a credit card responsibly.

Managing All Your Accounts Responsibly

Before opening an unsecured credit card, make sure you’re able to make other debt payments on time as well. This includes student loans, car payments, or a mortgage. If you’re not displaying good credit behavior elsewhere, that will show up on your credit report and potentially hurt your chances of qualifying for an unsecured credit card.

Limiting the Number of Credit Accounts You Open

Opening new accounts requires a hard inquiry, which will result in a temporary dip in your credit score. Additionally, if you open too many new accounts in a short period of time, it can lower the average age of your credit accounts, which is another factor that influences your credit score.

Ideally, you’ll avoid activities that will cause your credit score to drop as you’re trying to work toward being able to qualify for a secured credit card. A better score will improve your chances of getting approved.

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

The Takeaway

A secured card is an important tool for building or rebuilding credit. However, once you’ve established healthy credit card habits and good credit score, it may serve you to switch from a secured to unsecured 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 I upgrade my secured credit card to unsecured?

Some lenders will allow you to change a secured credit card to an unsecured card. However, others will require that you apply for a new card.

How long does it take to convert a secured credit card to an unsecured one?

To move from a secured credit card to an unsecured one can take anywhere from several months to a couple of years. How long it takes will depend on the credit card issuer’s policies as well as what your credit score was when you opened the account.

Does converting a secured credit card to an unsecured card hurt your credit score?

Closing your secured card to open a traditional credit card may cause your credit score to take a temporary dip. However, you shouldn’t notice a huge impact.

Do all credit card issuers allow the conversion from a secured to unsecured card?

Not all credit card issuers will convert a secured card to an unsecured card. More often than not, you’ll have to close your secured account and open a brand new card.

Photo credit: iStock/Ridofranz

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

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

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

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A bump-up certificate of deposit (CD), also known as a step-up CD or raise-your-rate CD, is a type of savings account that allows the account owner to “bump up” or increase the interest rate they earn if rates rise during the CD term. Typically, one bump up is allowed, and the other terms of the CD remain the same after that.

The initial interest rate of a bump-up CD is lower than other types of CDs, but it comes with the potential opportunity to earn a higher rate.

What Is a Bump-Up CD?

A bump-up certificate of deposit is a type of savings account that is similar to an ordinary CD in many ways.

If an investor opens a bump-up CD account, it will start out with a certain interest rate. The investor will be required to deposit a certain amount of money to open the account and agree to keep it there for a specified period. The major difference between a bump-up CD and a traditional CD is that the account owner can potentially increase the interest rate they earn if rates go up during the term of the CD. This bump up is typically allowed only once during the CD term.

How a Bump-Up CD Works

If, during the term of a CD, the issuer’s interest rates increase, the CD account owner can ask the issuing bank to raise the interest rate they earn on their CD. This is quite different from a standard savings account, where the account owner has no control over the interest rate. So if the initial rate on a bump-up CD is 4.00%, and during the maturity term the rate increases to 5.00%, the account holder can request a bump up to 5.00%.

If the interest rate drops to 4.50% sometime after that, the investor is protected and keeps their bump up to 5.00%.

Usually, interest rates can only be increased one time during a CD term, but some banks do offer multiple bump-ups if the term of the CD is long. Also important to note is that some banks may put a cap on how high the interest rate can be bumped on a CD. So if interest rates go up a lot, CD owners may not be able to fully take advantage. Generally, bump-up CDs have a two- to four-year term. Like a regular CD, these accounts are FDIC-insured.

Recommended: How to Invest in CDs

Example of a Bump-Up CD

Say an investor opens a bump-up CD with a two-year term and a rate of 4.00%. One year into the CD term, the issuing bank’s interest rates rise, and they now offer 5.00% on the same type of CD. The investor can request that the rate on their CD be increased to the new rate of 5.00% for the second year of its term.

In this example, if the investor deposited $10,000 into the CD when they opened it and earned 4.00% on their money for the full two-year term, by the end of the term they would have $10,816.00 at the maturity date. However, if they earned 4.00% for the first year and 5.00% for the second year, at the maturity date they would have $10,900.00, or about $84 more. That might not seem like a lot, but when you’re saving and investing for the future, every little bit helps.

Advantages of Bump-Up CDs

There are some benefits to bump-up CDs, including:

•   Ability to raise the CD’s interest rate during its maturity term instead of having to wait or open a new CD

•   The potential to get new, higher rates without any early withdrawal penalties

Disadvantages of Bump-Up CDs

Bump-up CDs come with some drawbacks as well. Here are some to consider.

•   Since bump-up CDs typically allow only one bump up, they are recommended for investors who have a deep understanding of the interest-rate system and what might happen during their investment term.

•   The initial interest rate on bump-up CDs tends to be lower than other types of CDs. So even though there is the ability to raise the rate later, a traditional certificate of deposit may still earn more interest since it likely starts at a higher rate.

•   Interest rates may not go up during the CD term, locking the investor into the initial lower rate.

•   If interest rates do start to increase, timing the bump-up on a CD can be challenging. By bumping up earlier you can take advantage of a higher interest rate for more time, but you could miss out on an even higher rate that might come later.

How to Open a Bump-Up CD

Banks and credit unions offer bump-up CDs just like they offer checking and savings accounts. To open a bump-up CD, an investor deposits a certain amount, and the CD has a particular starting interest rate and term. Once the bump-up CD is open, the account owner can contact the issuing bank or credit union to increase the rate if it rises during the CD term. As mentioned, bump-up CDs typically offer the account holder just one opportunity to request a rate increase.

Factors to consider when opening a CD include:

•   Maturity term of the CD: Bump-up CDs tend to have longer terms than traditional CDs, such as two years or more.

•   Bump-up frequency: Does the CD offer the opportunity to bump up more than once? Many don’t but some may.

•   Initial interest rate: If interest rates don’t rise, the initial rate will be the ongoing rate throughout the CD term. And bump-up CDs tend to have lower interest rates to begin with.

•   Minimum deposit to open the account: Some bump-up CDs may require higher minimum deposits than traditional CDs, depending on the issuer.

•   Early withdrawal rules and penalties: Inquire with the financial institution what the consequences might be for cashing in the CD before the term ends.

•   Fees: Typically, there aren’t fees involved with CDs, but that isn’t always the case. Find out if there are any fees and how much they are.

Alternatives to Bump-Up CDs

There are several other types of interest-bearing deposit accounts and CD investment strategies that investors may want to consider, such as:

Traditional CD

A traditional CD has a fixed interest rate over the course of its maturity term. Traditional CDs often earn higher rates than bump-up CDs. They also usually have shorter terms.

CD Laddering

Since it can be hard to predict what will happen with interest rates in the future, another investing strategy is to create a CD ladder.

A CD ladder is a portfolio of CDs that each have a different interest rate and maturity term. This strategy provides an investor with a range of interest rates, allowing them to take advantage of changes in the market. Each time one of their CDs matures they have some funds to put into a new CD or cash out. Usually, a longer-term CD will have a higher rate, but by opening some shorter-term CDs as well, investors can put their money into new ones if interest rates increase, rather than opening a bump-up CD.

Here is an example of how an individual might set up a CD ladder with five rungs if they have $10,000 to invest:

•   $2,000 in a one-year CD

•   $2,000 in two-year CD

•   $2,000 in a three-year CD

•   $2,000 in a four-year CD

•   $2,000 in a five-year CD

As each CD matures, they can reinvest the funds into a new CD if interest rates are rising.

Step-Up CD

Similar to a bump-up CD, step-up CDs allow investors to take advantage of rising interest rates. The difference is, with a step-up CD, the issuer automatically raises the interest rates at certain intervals throughout the CD term. With a bump-up CD the rate is not automatically increased.

If you are looking for ways to bump up your savings, there are some other options in addition to CDs that you may want to consider. For instance, one way to potentially increase your savings is with a bank account with competitive rates, such as a high-yield savings account. You can shop around and explore the different savings options to see what might be right for you.

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

FAQ

What is an 18-month bump-up CD?

An 18-month bump-up CD is a certificate of deposit savings account that earns a certain amount of interest over the course of 18 months. If interest rates rise during that time, the account owner can request that the interest rate their CD earns be increased to the new rate.

When should I bump up my CD?

If you have a bump-up CD, you may want to consider a bump up when interest rates rise. However, remember that you are typically only allowed to bump up the rate once during the term of the CD. For this reason, bump-up CDs are generally best for investors who have a deep understanding of the interest-rate system and what might happen to rates during their CD term.

Who has bump-up CDs?

Bump-up CDs are typically offered by banks, online banks, and credit unions. You can explore bump-up CD options at different financial institutions to find one with the best rates and terms for you.

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3.30% APY
Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
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With so many options available, choosing a credit card isn’t as simple as signing up for whichever card happens to be popular at the moment. Instead, you should consider things like your credit score, preferred features, and spending habits.

After all, there are many different types of credit cards meant for different purposes. Making the best choice is about not only knowing your approval odds, but also how you intend to use the card after signing up. Using a step-by-step approach for how to choose a credit card will help you make the right decision for your situation.

Where To Begin When Choosing a Credit Card

Choosing a credit card is a matter of understanding which type of credit card works best for you. You’ll want to consider a number of factors, including:

•   Your credit score

•   How you plan to use your new credit card and which features you’ll need

•   How the card stacks up to other options

•   The card’s interest rates and fees

•   Which rewards you want

•   Any sign-up bonuses offered

Read on to learn more about each of these items and what specifically to look for.

Checking Your Credit Score

Checking your credit score should be one of the first steps you take before applying for a new credit card. One of the best ways to know your approval odds is to check your score.

One way to do so is to use AnnualCreditReport.com . This website allows you to request a copy of your credit report from each of the major credit reporting bureaus: Experian^®, Equifax^®, and TransUnion^®. Federal law allows you to request one copy of your credit report from each reporting bureau per year.

However, you may want to check your credit score more often than once per year, especially if you are in the process of building your credit. Fortunately, several big banks allow you to check your FICO^® score — the most widely used credit score — on a monthly basis.

There are several credit scoring models available, but most lenders use FICO, so getting this score can be a good way to gauge your chance of approval. These checks won’t guarantee you’ll get approved for a credit card, but they can help you get a better sense of where you stand. Plus, pulling your credit report won’t hurt your credit score.

Identifying the Features You Need

There are many different types of credit cards, each of which has its own set of features. Identifying the features you need can help you find the right credit card, as how credit cards work varies depending on the type.

Credit Builder Credit Cards

Some credit cards are meant for those who are working on building their credit. This could include college students, those trying to repair their credit, or anyone with little to no credit history.

In those cases, you might need a secured credit card or a student credit card. Secured credit credit cards require a security deposit, usually around a couple or a few hundred dollars, that is fully refundable. Your credit limit is usually equal to your security deposit, so the card issuer has little risk of losing money. Student credit cards, on the other hand, are usually unsecured and may have special perks for students.

Here are some features to look for in credit builder credit cards:

•   No annual fee: If you are working to build your credit, annual fees could make things more difficult.

•   Credit limit increases: Credit limits often start low with these cards; some offer credit limit increases if you use your card responsibly.

•   Free credit score: Some credit builder cards offer free credit score monitoring to let you know where you stand.

Balance Transfer Credit Cards

Balance transfer credit cards are ideal for consolidating and paying off debt. Thus, the key with this type of card is finding one that keeps fees as low as possible:

•   0% introductory APR: Balance transfer credit cards may come with low or 0% balance transfer APR for a specified introductory period, sometimes lasting a year or more. Some even have a separate 0% APR introductory period for purchases. This can allow you to avoid paying much in interest for a certain period of time and instead put your money toward paying down the principal balance.

•   Balance transfer fees: These cards often charge separate balance transfer fees, which you should be aware of if you plan to transfer large balances.

Rewards Credit Cards

Credit card rules say that you shouldn’t get a card just for the points. However, rewards credit cards may come with a variety of benefits. These include cash back, points and miles, and various perks, such as rental car insurance and airport lounge access. You can redeem points and miles for statement credits, gift cards, flights, and hotels, so you’ll have to decide what’s most important to you.

Here are some rewards credit card features to consider:

•   Sign-up bonuses: Some rewards credit cards include sign-up bonuses that can be worth hundreds of dollars.

•   Low or no annual fee: While some of these credit cards have annual fees, not all of them do.

•   Rewards categories: Rewards credit cards generally let you earn a percentage of your purchases in cash back or points/miles. Some have higher earning rates for certain categories, such as groceries or travel. Look for one that earns a lot of points where you normally spend the most.

•   Other perks: These cards can come with a variety of other perks, from UberEats credits to free hotel nights. If you never travel, for example, you may not be interested in free hotel stays.

Narrowing Your Choices by Doing Research and Asking Questions

The key to how to pick a credit card is understanding how you want to use it. While some credit cards are more like generalists, doing many things somewhat well, others are niche cards that are great in certain scenarios. Consider what’s most important to you and how much you need certain features.

Once you’ve decided which type of credit card you want, the next step is to compare some of the best options. For instance, if you want a rewards credit card and don’t want to pay a high annual fee, look for no annual fee rewards credit cards. For balance transfer credit cards, you can look for ones with the lowest fees, including a lengthy 0% introductory APR. Also keep in mind you don’t need to rely on one card to meet all of your needs — here’s a primer on how many credit cards you should have.

Identify a handful of cards that look like good candidates based on your research. Once you have two to three cards that seem like the right fit, you might want to submit a prequalification form. This process will give you a hint about whether you might qualify — and it won’t affect your credit score. Prequalification doesn’t guarantee approval, but it will help you know where you stand.

Familiarizing Yourself With the Interest Fees and Rates

Having a basic understanding of interest rates and fees will help you avoid paying more than expected to use your new credit card.

Different types of credit cards tend to come with varying interest rates. For instance, the minimum annual percentage rate (APR) for travel cards tends to currently range between 18.24% and 29.99%. However, the maximum APR for these credit cards can be slightly lower than the maximum for 0% APR and low-interest credit cards.

Of course, fees also matter. Balance transfer cards might have a 0% introductory period, but a fee may apply every time you initiate a balance transfer. Depending on the card, other fees may be involved, such as late fees and penalties, annual fees, and foreign transaction fees. Be sure to review all relevant fees before signing up for and using a credit card.

Deciding Which Rewards You Want

You also may need to decide which type of rewards you’ll want to earn. There are a few different types of rewards that credit cards can offer:

•   Cash back: With a cash back rewards credit card, you will earn a percentage in cash on each eligible purchase you make with your card. You could get a flat rate across categories, or you may earn a higher rate in specific categories. Or you might see offers for unlimited cash back. If you want to earn rewards across spending categories and don’t want to worry about calculating and converting, cash back might be the right rewards option for you.

•   Points: Another way to earn credit card rewards is through points. You’ll earn a certain number of points for every dollar spent, with the rate and redemption options varying depending on the issuer. The perk of points is that you can redeem them in a number of different ways, including cash back, travel, charitable donations, statement credits, gift cards, and more.

•   Miles: If you’re a frequent flier, you might prefer earning airline miles. Credit cards that allow you to earn miles let you redeem your rewards for flights and other travel-related perks, such as hotel stays or access to airport lounges.

Looking at Sign-Up Bonuses

Some credit cards feature sign-up bonuses to attract new customers. Usually, you have to spend a certain amount in the first three or four months of opening the card. If you meet the minimum spending threshold within that time frame, you’ll receive cash, points, or miles as a reward. The trick is to ensure you can meet the spending threshold on time.

There can be a wide range of bonus amounts; for instance, the Chase Freedom® Student credit card has a $50 bonus for making a purchase in the three months. On the other end of the spectrum is the American Express Platinum Card, which at the time of writing offers 125,000 points after spending $8,000 in the first six months. Most sign-up bonuses, however, fall somewhere in between.

Choosing the Card With the Highest Overall Value

There are several credit cards available that offer similar benefits. In those cases, you will want to compare them directly to one another and find features that give one card the edge. Here are a few things to consider for each type of credit card:

Student and secured credit cards:

•   Credit limit increases: Some student credit cards will automatically increase your credit limit if your account remains in good standing.

•   Flexible credit lines: Some secured credit cards give you access to a larger credit line than your deposit.

0% introductory APR or balance transfer credit cards:

•   No late fees or penalties: Some credit cards waive these fees, which might be helpful when transferring balances.

•   Installment plans: Some balance transfer cards offer installment plans to help you repay your balance over time.

Rewards or travel credit cards:

•   Low spending threshold: Requirements to earn sign-up bonuses can vary; look for one that’s well within your budget.

•   Points transfer: Some travel credit cards let you transfer points to airlines or hotels, which can lead to better redemption rates in some cases.

How Your Credit Score Affects Your Chance of Approval

Your credit score is one of the biggest factors in determining whether you’re approved for a credit card. If you have poor or no credit, you probably won’t get approved for a card that requires very good to excellent credit, regardless of other factors, given what a credit card is and how the approval process works.

Luxury credit cards, for example, may require a credit score of 670 or higher. If your score is higher, you might be approved for one of these cards (though approval is not guaranteed). If your credit score is below 670, however, your approval odds will probably be quite low.

While a credit score and credit card offers are intertwined, that may not be the only factor a card issuer considers. Issuers might also look at things such as your employment status and income. This is one of the reasons that a good credit score doesn’t guarantee approval.

Still, a better credit score can help you secure the credit card you want. As such, you might consider taking steps to build your credit score before applying for a credit card, such as by making on-time payments or lowering your credit utilization ratio.

What Comes Next After Choosing a Credit Card?

If you’ve already submitted prequalification forms, you should have some idea about your approval odds for each card. As mentioned, those forms do not guarantee approval but can serve as a valuable guideline.

Once you have chosen a credit card, it’s time to apply. Some general steps are to:

1.    Visit the card issuer’s website and click apply.

2.    Fill in the required information.

3.    Submit your application.

In some cases, you may receive instant approval (or denial). In others, the card company will need more time to review your application. If approved, you can usually expect to receive your card in the mail in seven to 10 business days.

If you are denied, you can call the card’s reconsideration line and provide additional information. Perhaps you forgot some additional sources of income that could help your case. Anything that may help is worth mentioning.

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

The Takeaway

Deciding which credit card is best for you can be a long and arduous process. However, once you have a better understanding of what you need, the process of choosing a credit card doesn’t have to be so complicated. Some credit cards are simply better than others, and picking them is a surprisingly easy choice after comparison shopping.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

How does your credit score determine the card to choose?

Your credit score is one of the most important factors in deciding which credit card to choose. For example, if your credit score is poor, you probably won’t be approved for a premium card with excellent rewards that requires good to excellent credit.

How do you choose a credit card for the first time?

In most cases, the best choice for your first card should have no annual fee. Some good choices are student credit cards (for students) or secured credit cards. These cards are ideal for building credit and often have low fees.

What is the most important factor when choosing a credit card?

The most important factor when choosing a credit card is probably how you intend to use it. For example, a premium credit card may offer excellent benefits for the frequent traveler, but someone who just wants to earn cash back on groceries may not benefit from travel perks.

Photo credit: iStock/Eva-Katalin

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

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

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

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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