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Getting a credit card refund is usually a straightforward process, whether you’re asking for one because a product is defective or you’ve simply changed your mind. When you get a refund on a credit card, you’ll receive a credit on your account for the amount you paid for returned goods that you’d charged to your card.

Although credit card refunds are routine, there are some important things to know about the process. Read on to learn more about how credit card refunds work.

What Is a Credit Card Refund?

A credit card refund is the money you get back when you return something that you’d paid for with your credit card. Rather than getting cash back for the full amount of the returned item, you’ll receive a credit to your credit card account for that amount. The process of a credit card refund is started when you go to return the item, and it can take a few days or longer to see the money credited to your account.

How Do Refunds on Credit Cards Work?

When using a credit card to make a purchase, there’s a third party involved in your transaction. The store or other merchant at which you swipe or tap your card to buy something requests their payment from the credit card issuer. When your credit card issuer pays the charge, it adds the amount of the purchase to your account balance. Then, you pay your credit card bill to pay back the credit card issuer for the purchase you made.

When you return a purchase, the merchant issues a refund to the credit card issuer, not directly to you. In turn, your credit card company posts the credit to your account. This process is why credit card refunds aren’t immediate like cash refunds.

Recommended: When Are Credit Card Payments Due

Types of Credit Card Refunds

There are two basic types of credit card refunds. It can be helpful to know the difference between the two and how a refund to a credit card works in each instance. It may not be something that you took note of when applying for a credit card.

Refund at the Point of Sale

This is when you return an item, either by going to the store in person or sending back an online purchase. The retailer then credits you for the return when the item is received.

Disputed Transaction

Disputed transactions are different from straightforward returns. With a disputed transaction, you’re making a complaint about the purchase as opposed to just making a return. For instance, you might dispute a credit card charge for an online purchase that never arrived. Or you might dispute a charge for a canceled event.

In most cases, you must file a dispute within 60 days of the transaction, providing details and perhaps documentation of the problem. From there, your credit card company has 90 days to investigate the issue and resolve the issue.

While it’s best to start with the merchant when you have an issue with the goods or services provided, you do have options if the merchant will not grant you a credit card refund. In this instance, you can request a credit card chargeback, which reverses your original charge after you have filed a claim with your credit card company.

With a chargeback, the refund process is initiated by the credit card company (often automatically once you dispute a charge), whereas with a credit card refund, the merchant initiates the process.

Recommended: What is a Charge Card

How Long Does a Credit Card Refund Typically Take?

The amount of time it takes to receive a credit card refund depends on the retailer and the type of refund you’re requesting. It typically takes about three to seven business days to see your refund from a routine return you make in person, and sometimes it’s even faster than that.

Online merchants may take a bit longer to issue a credit card refund because you need to allot time for shipping and processing the returned merchandise. As mentioned above, chargeback or disputed charge refunds can take much longer — sometimes as long as 90 days due to the time allowed to file and investigate a disputed charge.

Do Credit Card Refunds Count Toward Payments?

No, credit card refunds are not considered a payment or partial payment, and they do not automatically go toward that month’s minimum payment on your card.

Instead, you’ll see a credit in the amount of the refund in your account statement and, depending on where you are in the billing cycle, this could reduce the total amount you owe by the amount of the refund. You will still need to make your monthly minimum payment while you’re waiting for a refund credit to appear on your account. In fact, one of the cardinal credit card rules is to always make your minimum payment on time.

Keep in mind that interest will continue to accrue on your charge until the refund credit appears. Depending on how much the purchase is for and where you are in the billing cycle, this can affect your overall balance.

How Credit Card Refunds May Affect Your Credit Score

To understand how credit card refunds work when it comes to your credit score, it’s important to understand something called credit utilization ratio. This term refers to the percentage of your total credit limit that you are currently using. Credit utilization can be an important factor in calculating your credit score — the lower your credit utilization ratio, the better. Most financial experts suggest a credit utilization ratio of no more than 30%, with 10% being a good figure to aim for.

In some situations, a refund may build your credit score if the refund reduces your balance and lowers your credit utilization ratio. On the other hand, a delayed refund could lower your credit score if the amount of the purchase pushes your credit utilization higher during a certain billing period.

What to Do With a Negative Account Balance

Sometimes a refund will give you a negative balance on your credit card, meaning your available credit is more than the amount you owe on the card. This can often happen with cardholders who pay their balance in full each month.

If you have a negative balance, it’s usually not a problem. The negative balance will be applied to the next purchase you make on that card, eventually bringing your balance back to $0 or above. A negative balance will likely not affect your credit score because that’s something that credit card companies report to credit bureaus.

However, a negative balance can be problematic if you’re receiving a large refund and don’t often use that credit card. In these instances, you can ask your credit card company to issue a refund via check, money order, or direct deposit. Your credit card issuer may require this request in writing in order to issue the refund.

How Credit Card Refunds Affect Your Rewards

Any credit card rewards you earned on a purchase that was returned, such as cash back rewards or miles, will not be awarded after your refund is processed.

If you decide that it makes more sense to keep the rewards, you can ask the merchant or service to refund you in the form of a merchant credit or store credit. However, that means you will still have to pay for the purchase on your credit card.

The Takeaway

Knowing how credit card refunds work will help you manage both your budget and your credit score. Credit card refunds are usually straightforward transactions. But they can take longer than a purchase made with cash, and they can affect your credit score. Additionally, you usually won’t be able to hang onto the rewards you’d earned from the purchase you returned.

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 refunds affect your credit

Yes, refunds can affect your credit score. A refund can lower your credit utilization — or the total amount of credit you’ve used compared to your overall credit limit. Credit utilization is something credit rating agencies look at closely when determining your credit score. A delayed refund could hurt your credit score because if the charge stays on your account for a while, it may increase your credit utilization ratio, thus negatively impacting your store. On the other hand, when you receive a refund, that may lower your credit utilization, helping to build your credit score.

Do credit card refunds affect the rewards earned from a refunded purchase?

In most cases, you will not receive the rewards that you may have earned from a purchase you’ve returned. You may want to consider getting a store credit for your refund if you want to keep your rewards, but you will then have to pay for the full amount of the purchase on your credit card.

What happens if I have a negative balance after a credit card refund?

Sometimes you’ll get a refund credit, and it will exceed the balance you have on your card. This is usually not an issue, as the amount of the credit will be applied to the next purchase you make on the card. If the refund is quite large and you don’t use the card often, you may want to ask your credit card issuer for a refund via check or direct deposit.

Photo credit: iStock/Amax Photo

SOCC-Q224-1905518-V1

A deposit and a withdrawal are both common banking transactions, but the way they function is completely different. A deposit is money put into a bank account and held there until you need it. A withdrawal is money taken out of your account.

But that’s not the full story about deposits vs. withdrawals. You have many choices when it comes to getting money into your account and taking it out. Knowing the different methods is important and could even help you manage your finances.

What Is a Deposit?

In banking, a deposit generally means you put your money into a bank account. Deposits add to your funds in the account, and you can use that money to pay your bills, put it toward something like a vacation, or you can keep it there where it may grow over time.

How a Deposit Works

A deposit involves adding cash or check(s) to your bank account. You can do this in person at a bricks-and-mortar branch of your bank, at an ATM in your bank’s network or, in the case of checks, by using a bank’s mobile app.

You can also receive a deposit by electronic transfer from one bank account to another account. For example, if you are paid by direct deposit, the money moves from your employer directly into your account. Or you could receive a government benefit such as Social Security this way. In addition, you might receive funds from someone else, like a friend, via a mobile payment service like Venmo, and you could then move the money into your checking or savings account.

Both bricks-and-mortar and online banks typically offer different kinds of deposit accounts. You could consider a high-yield checking or savings account at a traditional or online bank, or, if you don’t need to access the money often, you may want to look into a money market account or a certificate of deposit (CD).

Types of Deposits

There are a number of methods you can use to put money into your bank account. Here are some of the ways to make a deposit:

•   Cash deposit at one of your bank’s ATMs or branches

•   Check deposit at one of your bank’s ATMs or branches

•   Check deposit electronically via your bank’s mobile phone app

•   Payroll direct deposit

•   Electronic funds transfer from a linked savings or checking account or via mobile payment services.

What Is a Withdrawal?

A withdrawal is when you take money out of your account. You can do that several ways, including using your debit card at an ATM, requesting the money in person from a bank teller, writing a check, scheduling an electronic bill payment, having the money transferred via a payment app, or wiring the money to someone.

Some of these methods of withdrawing funds can involve fees. If you use an out-of-network ATM, for instance, you can get hit with a charge. And wiring money may come with a fee. Check with your bank to find out.

How a Withdrawal Works

The difference between a withdrawal and deposit is that withdrawals take money out of your bank account. You might withdraw cash from your bank account to put in your niece’s birthday card, write a check (or authorize an electronic payment) to pay the electric bill, or use a mobile payment service to pay a friend back.

Any funds removed count as a withdrawal. Depending on your bank’s checking account terms, you may have limited or unlimited withdrawals. Often, there are savings account withdrawal limits. In the past, the number was typically six per month, though these restrictions have typically been eased in recent years.

Types of Withdrawals

Just like there are different types of deposits there are also different methods of withdrawing funds. Here’s how to withdraw funds from your bank account when you need them.

•   Cash withdrawal at ATM with a bank or prepaid debit card (though there will likely be ATM limits to the amount you may withdraw)

•   Cash withdrawal in person at one of your bank’s branches

•   Checks written from your account

•   Cardless withdrawals of cash using phone app at ATMs in your bank network

•   Bank-issued cashier’s check in person or online

•   Cashing a certificate of deposit (CD) at bank (if this is done before the maturity date, you may owe an early withdrawal fee)

•   Funds transfer from a brokerage account

•   Electronic funds transfer from a linked savings or checking account or via mobile payment P2P services

•   Electronic bill pay (recurring or not)

Similarities and Differences Between Deposits and Withdrawals

Deposits and withdrawals are two of the most common banking terms and transactions. Here are the differences and similarities you should know.

How Deposits and Withdrawals Are Similar

Here’s what these two kinds of banking transactions have in common.

•   Both can be done in person at ATMs or branches in your bank’s network (except for check withdrawals, which can only be completed in person or online).

•   Both can involve electronic funds transfer from a linked bricks-and-mortar, an online savings or checking account, or via mobile payment services.

How Deposits and Withdrawals Are Different

These are some of the key ways in which deposits and withdrawals are different.

•   A withdrawal leaves you with less money in the bank while a deposit puts more money in your bank account.

•   A withdrawal will immediately be reflected in your account balance, while a deposit may take longer to show up, until the funds clear.

•   Cash deposits generally have to be made at your bank or bank’s branded ATM network locations, while cash withdrawals can be made at any ATM. (But beware, if the ATM is out of your bank’s network, you could be charged an ATM fee by both the ATM owner as well as your bank.)

•   Check deposits often have to be made at your bank or bank’s branded ATM network locations, or via a bank’s mobile phone app. (Banks that allow you to make deposits at out-of-network ATMs may charge you a fee, plus there may be an ATM fee as well.)

•   Check withdrawals via cashier’s checks, on the other hand, are likely only available in person at one of the branches of your bank. Alternatively, you could request such a withdrawal online from your brick-and-mortar or online bank or credit union.

The Takeaway

While a deposit adds funds to your bank account and boosts your balance, a withdrawal takes money away, subtracting an amount from the funds you have on balance. There are many ways to conduct each of these transactions. You can do your banking in person or use an array of digital tools to send or receive money. And if you’re looking to set up a bank account, there are many different kinds of accounts to choose from.

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 a cash withdrawal?

A cash withdrawal involves taking money out of a bank account in the form of cash. This can be done at an ATM or a physical location of your bank.

What is a cash deposit?

A cash deposit is money that you add to your bank account. It could come via an electronic transfer, an ATM deposit, or currency that you hand off to a bank teller.

What is the difference between a deposit and a withdrawal?

The difference between a deposit and a withdrawal is that a deposit adds funds to your bank account while a deposit removes money from the account.

Photo credit: iStock/Eva-Katalin

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.

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.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

SOBK-Q224-1902122-V1

If you ever see a bank error made in your favor, you might think, “Free money!” but the truth is, you need to report the error ASAP.

An unfortunate fact of life is that people — and sometimes technology — can make mistakes. Every once in a while, your bank might make an error and deposit cash into your account that wasn’t meant for you. A teller at a bank branch could have entered the wrong digit in an account number as a customer tried to deposit a check or transfer funds, for example. Whatever the reason, you’ll notice that your bank account balance is higher than it ought to be.

While this may seem like a cash windfall and you might be tempted to keep the money, failing to report and return the funds could result in legal consequences. You should report the error to your bank as soon as you notice it. That way, the mistake can be corrected as quickly as possible.

Can I Keep the Money from a Bank Error in My Favor?

So what happens when money is accidentally deposited into your account? You may wonder if it’s a case of “finders, keepers.” The only time that you can keep funds added to your bank account is when the money deposited was legitimately meant for you.

When a bank error occurs in your favor, you cannot keep the money — even if the error seems small and likely to fly under the radar. The money isn’t legally yours, so you must return it.

What’s more, the customer whose money accidentally landed in your account will probably notice the mistake and ask the bank to track down the money. Or, the bank will catch the mistake in one of the regular audits that it makes on accounts and withdraw the money again. If the money isn’t in your account, they may ask you why you didn’t report the mistake earlier.

Recommended: Ways to Deposit Money into a Bank Account

What Is the Penalty for Attempting to Spend or Keep the Money?

Even if you are a person who doesn’t pay much attention to your banking details and assume the money is yours, it is still a big problem if you use it. If you spend the money from a bank error in your favor, move it to another account like your checking account, invest it, or give it away, you could wind up in a lot of trouble.

Failing to return the money may be tantamount to theft, and you could face criminal charges, such as theft of property lost by mistake or receiving stolen property. Criminal charges may be made to get a court order to force you to repay the amount, and in some cases, you could even end up with probation or prison time. That’s a very good reason to contact your bank and return the funds to them as soon as you realize there’s been an error.

A few years ago, a Pennsylvania couple went on a spending spree when their bank accidentally deposited $120,000 in their account instead of a business’ account due to a teller error. The couple bought various vehicles with the money and also gave $15,000 away to friends in need.

The bank requested that the couple return the money and then reversed the transfer, causing an overdraft on the couple’s account of over $100,000. The couple was eventually convicted of theft, sentenced to seven years’ probation, 100 hours of community service, and ordered to repay the money they stole. This is a good example of why there’s no such thing as free money in this situation.

When Should I Report the Error?

If you discover money in your account and can’t explain where it came from, contact your bank right away, and ask them to figure out the origins of the funds. If it turns out the money really was for you — perhaps a relative deposited it in your account as a gift, for example — your bank will let you know that you are free to access the funds and use them for whatever you’d like.

If the funds weren’t originally meant for you, the bank can start the process of reversing the transaction.

To report the error, first call your bank. Take down the name of the person you talked to and make a note of the time and date. Follow up your call with an email that outlines the details of the error. That way, you’ll have a paper trail of your attempts to correct the issue. The time frame in which to report a bank error varies, so check with your particular account’s fine print to find out the specifics.

What Happens if the Bank Does Not Respond?

Generally speaking, banks have 10 days to complete an investigation into an account error. But it is possible the investigation could take as long as 45 days. You can take a look at your deposit account agreement to find out how long it should take your bank.

If nothing has changed after that period of time, contact your bank again to check in on the progress of the investigation. Do not assume the money has somehow become rightfully yours. You don’t want to make a bad situation worse, cause legal action, and wind up eventually having to hire a lawyer to represent you.

What Should I Do So That I Don’t Get in Trouble?

When an erroneous deposit is made to your account, here are the steps you should take to help ensure that you don’t get into any trouble.

Do Not Touch or Transfer Money

First things first, if you notice money in your account that’s not yours, don’t touch it. Don’t spend, don’t give it to someone else, and don’t move it into a different account. Don’t even spend the money if you plan to repay it and report the mistake later. Anything you do to tamper with the money, no matter how benign it seems, could have big consequences later.

Contact Your Bank

As we mentioned above, contact your bank immediately when you notice the error, and keep records of your interactions.

Monitor Your Account

Get in the habit of scoping out your financial accounts regularly, whether it’s checking your credit report or your bank account. The fact that even your bank can accidentally deposit money into your account illustrates the necessity of reviewing your bank account regularly.

If you don’t look at your account statement frequently, you may not notice small errors, and these can have a big impact on your personal finances. How often should you check your bank account? There’s no precise answer, but between once a week and once a month can be a good place to start.

For example, say a small deposit of just a few hundred dollars is accidentally made to your checking account. Say, too, that you don’t notice the deposit and spend some of the funds. When the bank discovers the mistake, they can withdraw the funds without your permission, freeze your account, or put a hold on your funds.

If you’re still operating unaware of the erroneous deposit, this can wreak havoc on your account. It could cause overdrafts or your checks to bounce. It might also mess up any automated bill pay that you may have set up.

As a result, you may be on the hook for overdraft fees, or you may end up paying some bills late.

Keeping careful tabs on your account can help you catch errors so you can avoid these situations and improve your financial health. Consider setting up alerts for deposits in your account. That way you can spot any mistakes as soon as they happen.

In addition, you may want to consider other automatic ways to monitor your finances, such as credit score monitoring and card security and protection, to help keep your accounts safe.

The Takeaway

If a financial institution makes a mistake in your favor, this isn’t the moment to go on a spending spree. The best thing you can do if money is accidentally deposited into your bank account is act quickly to alert your bank. That way, the error can be corrected, the right person can receive the money they need, and you can continue banking as usual. If you fail to do so, you could wind up with overdrafts and other issues when the bank takes the money back. Worse still, you could face legal consequences with far-reaching effects.

So do the right thing, and keep your financial life on the up and up to help your money rightfully grow.

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

Can I keep money credited in error to me?

No, you cannot keep money that is deposited in your account in error. You should alert your bank immediately and have the funds redirected to their rightful owner.

Do I have to report a bank error?

Yes, you should report the error right away. Contact your bank and report the mistaken deposit as soon as you notice it so the problem can be corrected.

What happens if the bank makes a mistake? Who is responsible and why?

If your bank makes a mistake, you should alert them as soon as you notice it. Your bank will also run regular audits of your accounts, which can help them catch errors. When they do catch a mistake, it must be resolved with the funds going back to the correct account. To do so, the bank can reverse transfers, withdraw funds from your account, freeze your account, or place a hold on the funds without your permission. If the money that was mistakenly put into your account is no longer there, you will be asked to repay it, and you may face criminal charges.

Photo credit: iStock/fizkes

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.

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

This article is not intended to be legal advice. Please consult an attorney for advice.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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 .

SOBK-Q224-1902332-V1

You can count on your credit bill arriving every month, thanks to your billing cycle, or the length of time between one statement’s closing date and the next. But how does a billing cycle for a credit card work and does it impact your credit score? Many of us aren’t exactly sure, even if we regularly swipe and tap our cards in daily life.

Understanding the ins and outs of a credit card billing cycle can help you manage your money, make sure you have enough set aside to pay your bills, and avoid unnecessary fees.

Definition of a Billing Cycle

A billing cycle on a credit card is the length of time from one billing statement closing date to the next. The exact number of days in a billing cycle may vary, but they usually last from 28 to 31 days.

Credit cards usually have monthly billing cycles and require cardholders to make payments every month. Billing periods must end on the same day of every month, such as on the last calendar day.

The Consumer Financial Protection Bureau states that each billing cycle should be equal. “Equal” in this case means each billing period must not vary more than four days from its usual length. So your credit card bill has a rhythm to it; you can depend upon it being ready at pretty much the same time (give or take a few days) every month. That way you can plan ahead to have enough money in your checking account to cover it.

How Does a Credit Card Billing Cycle Work?

Credit card billing cycles coincide with a certain day of the month. During each billing cycle, new transactions are added to your billing statement. Your swipes, taps, online purchases, and credits are all being tracked and compiled.

Then, at the end of the billing cycle, the card issuer will send you a credit card statement, either electronically or by mail. Whether you receive a paper or electronic statement depends upon whether you opt into paperless billing. It’s important to note the due date and make a payment of at least the minimum amount due by that date to avoid incurring late fees on top of those typically high credit card interest rates.

Fortunately, credit card billing cycles often come with a grace period, which is a time between the end of the billing period and the due date. You won’t be charged interest during this time. By law, credit card companies must deliver your statement to you at least 21 days before the payment due date.

If your credit card is paid in full between the time you receive your statement and the due date, no interest will be charged. However, if there is still a remaining balance after the due date, interest may start to accrue.

How Long Is a Billing Cycle?

The length of a credit card billing cycle can vary, but the length is usually between 28 and 31 days, just like the months of the year.

Credit card billing cycles must be as close to the same length as possible from one month to the next. But they can vary by up to four days to take into account things like weekends, holidays, and months that are different lengths.

Check your statement to find out the exact length of each billing cycle. The first page of the statement usually shows such information as opening and closing date. All of the transactions on the statement fall within that date range.

Can I Change My Billing Cycle?

Your card issuer probably won’t allow you to change some things related to your billing cycle, such as the billing period length. However, one of the things you may be able to change is the date when your credit card payment is due. You may find that helpful because a different due date might suit your situation better.

For instance, you might be able to sync up your payment due date to fall after you get paid, so you know there’s money in your bank account.

Keep in mind that not all card issuers will be flexible with this, and many will only allow you to change your due date within a certain time frame. And if you do request a due date change, it may take one to two billing cycles to take effect. Hence, you should monitor your statement to watch for the change.

Also, note that your card issuer has the right to change the terms and conditions of your credit card agreement at any time. However, if they do so, they generally must notify you 45 days in advance.

How Does A Billing Cycle Affect Your Credit Score?

Your credit card billing cycle can impact your credit score if you aren’t able to pay at least the minimum due on time. Most credit card issuers send monthly updates to credit reporting bureaus about your credit usage. The three main credit reporting bureaus are Experian, TransUnion, and Equifax. These updates usually coincide with your billing cycle date.

On your billing cycle date, reporting bureaus may receive information about your credit usage, including any instances of late payments on your credit cards. Late payments can have a negative impact on your credit score, so be sure you are aware of the due date on your statement at the end of your billing cycle.

It’s also important to be aware that paying your bills on time, all the time, can be one potential way to help build your credit.

Why Understanding Your Billing Cycle Is Important

Understanding your billing cycle and how it works is key to your financial health. Here’s why:

•   Your billing cycle lets you know when your next payment is due and the minimum amount due. Paying the minimum can help you avoid penalties and possible hits to your credit score. Paying the full amount due will avoid accruing interest.

•   Understanding your billing cycle may help you budget more effectively. Because you know when you have to pay your credit card bill, you can set money aside to make your payments on time. You can request your due date be moved a bit to better suit your cash flow, if needed.

•   It will help you monitor your credit card balance more efficiently. That purchase you made today might not appear on the last statement issued, but it will appear on the next one. You may use your cycle’s timing to schedule purchases for the optimal time in terms of keeping your balance due in check.

The Takeaway

Your credit card billing cycle is the period of time between one billing statement’s closing date to the next. This period usually lasts between 28 and 31 days and should be as close as possible to the same length every month. Be sure to pay at least the minimum by the due date to avoid penalties and fees as well as possibly hurting your credit score.

You can request that your due date be moved, if that would help you better manage your budget, and you will likely have a few days’ grace period in which to pay your bill without getting hit with additional charges. Given how high credit card interest rates can be, knowing and following your billing cycle is an important part of being financially responsible.

Another way to help reach your financial goals is to make sure you have enough money in savings. And choosing the right savings vehicle can potentially help your money grow. You may want to explore such options as a high-yield savings account, for instance. Paying your bills and saving for the future are important tools for securing your financial future.

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

Why is a billing cycle important?

A billing cycle is important because it keeps you informed of your credit card activity for the month. Plus, your payment is due at the end of each cycle (after the grace period), and you want to respect that to avoid accruing additional interest and fees.

How long is a billing cycle for a debit card?

Your checking account or debit card may issue regular statements, and the billing cycle length is approximately 30 days. In other words, the length is similar to your credit card billing cycle, but with a debit card, the funds are automatically deducted from your bank account. You don’t get a bill to pay.

What is two-cycle billing?

Two-cycle billing or double-cycle billing is a credit interest calculation. The interest is applied to the average of the prior two months’ outstanding balance. However, the practice was outlawed with the passing of the Credit CARD Act of 2009.

Photo credit: iStock/RichVintage

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.

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.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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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A variable-rate certificate of deposit (CD) is a financial product that locks up your money for a set period of time (or term) and has a fluctuating interest rate. This varying rate of return is what sets it apart from traditional CDs, which pay a fixed rate, meaning you know exactly how much money your money will earn.

When interest rates are high, a variable-rate CD can help pump up your returns, but the opposite holds true, too. Depending on your financial goals, style, and comfort level, a variable-rate CD may or may not be a good option for you.

What Is a Variable-Rate Certificate of Deposit?

A variable-rate certificate of deposit, or CD, is a financial product that you can purchase from a banking institution, broker, or credit union. All types of CDs are a savings account that have fixed investing terms. That means they hold your money for a certain amount of time, be it six months or several years.

You pick a term that suits you best. During that time, your money earns interest, but you are not supposed to withdraw any funds early or you are likely to be assessed a penalty fee. (No-penalty CDs are sometimes available but usually with lower interest rates.) When the term ends, your CD is said to have matured, and you may withdraw the funds plus interest or roll them over into a new CD. Usually the total amount of interest is also received at the end of the investment term.

More specifically:

•   Traditional CDs pay a consistent rate of interest that you are informed of at the start of the term.

•   With variable-rate CDs, however, the interest rate fluctuates throughout the term.

This means, you, the investor can potentially earn more on your deposit when interest rates go up. Or you could earn less if interest rates go down. Several market factors influence interest rates. These include the prime rate, treasury bills, a market index, and the consumer price index (CPI).

One last note: CDs are insured. Certificates of deposit are time deposits protected by the Federal Deposit Insurance Corporation (FDIC). If the bank holding the CD were to fail, you’d be insured up to $250,000 per depositor, per account ownership category (such as single, joint, or a trust account), per insured institution.

Special Considerations of a Variable-Rate CD

Here are a few key things to consider when looking into investing in variable-rate CDs. This type of CD is generally most profitable if purchased when interest rates are low, because it’s more likely that the interest rate will increase during the investment term. For this reason, there is a higher demand for these CDs when interest rates are low.

There are four main factors that influence interest rates. These are:

•   Consumer Price Index (CPI): The federal government uses the Consumer Price Index to calculate changes in the amount that consumers pay for certain products and services. Whatever the current CPI is can affect how interest rates fluctuate.

•   Market Index Levels: Another factor that affects interest rates is the performance of investment portfolios, such as major market indices. Some indices that are often analyzed include the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite Index.

•   Prime Rate: The prime rate is the interest rate that banks charge customers who have the highest credit ratings. These customers are the least likely to default on loans, so they get the best interest rates.

•   Treasury Bill Yields: The U.S. Treasury sells Treasury bonds in order to raise money, and they also pay interest on those bonds. The interest rate associated with Treasury bonds depends on the amount and time period of the bond.

It’s worth noting that, during times of high inflation, CDs may not be your best option. If inflation surges, even a variable-rate CD may not be able to keep pace. At the end of your term, you may find that your investment has lost ground versus inflation.

Another factor to consider before you lock in on a variable-rate CD is the fee for early withdrawals. Some variable-rate CDs have higher fees than others. If there’s a good chance you may end up withdrawing funds early, before a CD’s maturity date, you should check those penalties and make sure they aren’t too steep.

Pros of a Variable-Rate CD

All CDs are known to be very safe investments since they are federally insured up to $250,000, as noted above. In addition to that security, there are several benefits to investing in variable-rate CDs.

High Yield on Investments

Variable-rate CDs are secure, insured accounts that can provide a higher rate of return than other types of savings accounts. For instance, when you buy a fixed-rate CD, you might miss out on the opportunity to earn a higher interest rate if the market ticks upward. Variable-rate CDs, however, can respond to market conditions. If you buy a variable-rate CD when interest rates are low, you can potentially earn more as rates increase.

Profitable When Interest Rates Are Low

When interest rates are low, demand for variable-rate CDs increases, as does the profit potential. That’s because it is more likely that interest rates will increase after you purchase one. The interest rate can tick upwards and earn you more money on your money.

Lower Withdrawal Fee

Generally, variable-rate CDs come with lower penalties on early withdrawals than other types of CDs.

Recommended: How Can I Buy a Bond?

Cons of a Variable-Rate CD

While there are several reasons variable-rate CDs make good investments, they do come with a few downsides to consider before you invest.

Low Interest Rates

Although a variable-rate CD provides the opportunity to snag higher interest rates, it also creates a significant risk of earning a lower rate if market rates go down. If you buy a variable-rate CD when interest rates are low with the hopes that they will increase, there is no guarantee that this will happen. This means they will continue to earn a low interest rate for some or all of the duration of the CD term. In this case, you may have lost out on the possibility of earning a higher return elsewhere.

Paying Extra for “Bump-Up” Feature

Although interest rates can increase or decrease with most variable-rate CDs, there are some that have a “bump-up” feature. This allows for a one-time rate boost (or possibly a few rate hikes) during the CD’s term, but you may well have to pay extra for this “bump-up.” This is because the initial interest rate is typically lower than it would be on a fixed-rate CD.

Inflation Can Outpace Your Rate and Wipe Away Profit

There is a chance that inflation will increase during the term of a variable-rate CD, as noted above. If this happens, inflation could end up being higher than the interest rate you’re earning. That could effectively cancel out your earnings.

Variable-Rate CD: Real World Example

All this talk of varying interest rates can be hard to get a handle on without a concrete example. So consider the following:

•   A CD that has a three-year term and a guaranteed repayment of the principal deposit.

•   The starting rate is 4.00%.

•   During the term of the investment, the rate drops from 4.00% down to 2.00%.

•   To determine the amount of interest you’d receive, you’d take the difference between the initial rate and the final rate, which is 2.00%.

•   So at the end of the term, the investor would receive their initial deposit plus 2.00% interest. That’s half what it was when you started.

Obviously, you, the CD account owner, would be happier if the reverse were true, which it could be!

What Happens if I Redeem a CD Before It Matures?

Most CDs have fees for early withdrawal; these typically involve losing interest that’s been earned and occasionally a bit of the principal. (Generally speaking, you don’t receive earned interest until a CD matures.)

However, some variable-rate CDs do offer early withdrawals with no penalties for fees. These CDs usually have a lower interest rate, so you are paying for this flexibility.

Recommended: How Can I Invest in CDs?

The Takeaway

CDs provide a safe place for your money to grow for a specific period of time. Most of them have fixed interest rates, but variable-rate ones are also often available. These can come with some risks. Time things right, and you could earn a healthy return on your investment. But if rates don’t head in a positive direction, you may not even be able to keep up with inflation.

CDs aren’t the only game in town for earning interest. Also consider the kind of interest you can earn from checking and savings accounts.

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

Are variable-rate CDs issued by the government?

Variable-rate CDs are not issued by the government, but the FDIC, an independent agency of the federal government, insures them up to $250,000 per depositor, per account ownership category, per insured institution.

What determines the rate on a variable-rate CD?

Several factors can affect the interest rate of variable-rate CDs. These include the prime rate, market indices, treasury bills, and the consumer price index.

Do CDs have fixed interest rates?

Many CDs have fixed interest rates, but variable-rate CDs have interest rates that fluctuate throughout their term. It’s up to you which type you invest in.

Photo credit: iStock/Vladimir Sukhachev

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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

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

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

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

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
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.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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