SoFi

From airlines to banks to retailers, many of the best-known companies now offer loyalty programs. The details of these programs vary widely, but they all serve the same purpose: to attract new followers and reward repeat customers with special membership perks.

Since membership rewards programs are so widespread, it’s worth understanding how they work. Here’s an overview.

What Are Membership Rewards?

Membership rewards are incentives that a company offers its customers as encouragement to use its products or services again and again.

Companies find membership rewards systems—known as loyalty programs—to be effective in identifying, wooing, and keeping customers. In fact, the vast majority (85%) of consumers say loyalty programs make them more likely to continue shopping with those brands.

Some loyalty programs are free, while others charge their members a subscription fee. A membership subscription to SoFi Plus, for example, costs $10 a month to subscribe, or you can qualify for complimentary membership through eligible direct deposit or qualifying deposits through March 2026.¹

Many loyalty programs have membership tiers or status levels. Members who qualify for a higher tier can access more valuable rewards. To ascend to those tiers, however, a member may have to earn a certain number of rewards points, pay higher fees, or both.

How Do Membership Rewards Work?

Despite their many variations, membership rewards programs are all fundamentally similar. The core principle is simple. Consumers enroll in loyalty programs to gain rewards, which they earn by accumulating rewards points.

Members can typically rack up rewards points by taking actions: making purchases, referring friends, engaging with online events, and so on. Those who earn a given number of rewards points can trade them for benefits as set out in the membership agreement. (We’ll touch on specific benefits later in this article.)

Aside from points, members may also qualify for cash back rewards or discounts on merchandise or services. Premium membership tiers—possibly requiring a higher fee—may give them access to special benefits such as free shipping or priority service.

Credit cards in particular emphasize loyalty programs. Cardholders can gain credit card points by spending a specified amount of money each month or quarter.

And opportunities to earn points are easy to find. Members can pile up points by using a rewards credit card regularly for shopping, dining out, travel costs, household expenses, and other things.

Some people try to game the membership rewards system by credit card churning. Churning involves opening a credit card account to snag sign-up rewards and then promptly closing it. The practice isn’t illegal, but it is risky. Not only could multiple hard credit pulls in a short time be harmful to your credit score, but also, issuers are likely to deny future card applications if you’ve opened too many accounts in the last year or two.

Recommended: 10 Credit Card Rules You Should Know

Benefits of Membership Rewards Programs

Rewards programs don’t work unless they can attract and hold members. So the benefits need to be noteworthy, useful, and not too hard to earn.

For example, the SoFi Plus Smart Card rewards users with points equal to 5% cash back rewards² on money spent at grocery stores.

In general, an easy way to earn points is through credit card bonus offers to newcomers or big spenders. For instance, Discover gives new cardholders double the cash back they’ve earned during their first year.

An advantage of credit cards that are affiliated with airlines or hotels is that rewards points can often be converted to airline miles. An abundance of miles can often be redeemed for deals on flights, hotels, or vacation packages, strong incentives for the avid traveler.

People who choose cash back rewards points can use them to reduce their outstanding account balance. The value of the points will generally show up as an account statement credit.

Other benefits you can get with a membership subscription or credit card rewards might include discounts, gift cards, free merchandise, members-only content, early access to new products, or perks like free shipping.

In some cases, just being a member of a loyalty program gives you access to certain benefits. For example, SoFi Plus members are eligible to take part in SoFi Plus Experiences. Among the awards are VIP access to NFL and NBA games, concert tickets, and passes to music festivals.

Examples of Membership Rewards Programs

The countless membership rewards programs out there offer a universe of benefits. Here are several familiar variations.

Frequent flyer miles are a familiar type of membership rewards program. Members accumulate miles they can redeem for award tickets, upgrades to business or first class, free wifi, and more.

Some banks feature rewards checking accounts. (As of this writing, SoFi does not.) Account holders who meet certain conditions—such as direct deposit amounts, a defined average balance, or a minimum number of transactions—may get cash back, fee reimbursements, shopping discounts, or points you can convert to airline miles.

SoFi Plus is a paid rewards program for customers of SoFi Bank. The program provides qualifying members with extras that range from cash back and deposit matching to higher interest rates on savings accounts and professional financial planning sessions.

In another example, cosmetics retailer Sephora sponsors the Beauty Insider program, with its Insider, VIB, and Rouge tiers. Members earn points by making purchases. In return for their loyalty, they may receive trial-sized product samples, birthday gift sets, free shipping, and more.

Amazon Prime, which doesn’t issue rewards points, shows there can be a difference between subscriptions and membership. Subscribers who pay the $14.99 per month (or $139 per year) can enjoy convenience bonuses for shoppers, free fast shipping, unlimited photo storage, grocery discounts, low-cost prescriptions, and access to extensive video, audiobook, and music libraries. Additional monthly fees unlock further benefits. By contrast, membership loyalty programs foster engagement and connection among people with similar interests.

Ways to Earn Membership Rewards

After you’ve become a member of a brand, card, or store, the obvious way to earn rewards points is by making purchases in those domains. But you may find that the loyalty program offers other, more creative ways to earn rewards, such as:

•   Check-ins that give you points just for visiting the store

•   Providing personal details so that the program has a profile of you

•   Signing up for the brand’s newsletter

•   Boosting the brand’s social media presence by reposting or sharing its content

•   Reviewing products or taking surveys

•   Referring new customers who sign up or make a purchase

•   Attending members-only events or workshops

•   Doing gamified tasks that award you points or point multipliers

If you have signed up for the newsletter or subscribed to the company’s social media feed, you’ll very likely be informed about additional ways to earn rewards.

Membership Rewards Tips

•   Make sure you understand the program’s rules. To maximize credit card rewards, read through all the promotional materials for your loyalty program. You may find that it awards points for actions you hadn’t thought of.

•   Track your progress. Check in regularly to the program’s tracker app or a dedicated website to see your points tally and your progress toward premium tiers.

•   Learn new ways to earn points. You may find that you can pick up rewards points or bonuses by referring new members, reviewing products, providing survey feedback, participating in social media, or something else. Your program should keep you posted on promotional offers.

•   Keep track of expiration dates. Be sure to use accumulated rewards points before they expire.

•   Find out the easiest way to redeem rewards points. Your program will have instructions and conditions for redeeming your rewards points. You may be able to do this through a dedicated app, account page, or website portal.

•   Don’t settle for rewards you don’t care about. Instead, aim to redeem rewards points for something you actually want. This may be cash back, product discounts, or access to exclusive events such as SoFi Plus Experiences. Small perks like product samples or free delivery may be easier to earn.

The Takeaway

Membership rewards programs operate by encouraging members to accumulate points through various actions—such as making purchases or referrals—which can then be redeemed for valuable benefits such as cash back, discounts, travel miles, or exclusive experiences. Members who opt for non-cash rewards frequently get more purchasing power for their points than they’d have with cash back.

FAQ

What is the difference between subscription and membership?

In general, subscriptions offer continuous access to products or services for a recurring fee. Examples might include streaming video or meal kits. After you subscribe, you typically don’t earn points or rewards for taking any particular action.

Membership programs, by contrast, tend to incorporate loyalty features. These might be rewards for repeat purchases (e.g., buy nine sandwiches and the tenth one is free), premium tiers with more valuable awards, gift cards, branded merchandise, or the like.

Do membership rewards expire?

It depends. Some programs may offer lifetime membership points to retain customers. In other cases, points may expire after a set period (such as 12 or 24 months) or on a rolling basis. Sometimes, a member with points about to expire may be able to reactivate them by taking a specified action, such as buying something with a rewards credit card.

What are some creative ways to earn membership rewards?

Depending on your loyalty program, you may be able to score more rewards points through activities such as:

•   Checking in when you visit the store

•   Providing personal details for the program’s profile of you

•   Signing up for the brand’s newsletter

•   Boosting the brand’s visibility on social media by reposting or sharing its content

•   Reviewing products or taking surveys

•   Referring new customers who sign up or make a purchase

•   Attending member-exclusive events or workshops

•   Doing gamified tasks that award you points or point multipliers

The company’s newsletter and social media feed will very likely keep you informed about new ways to earn rewards.

What is the difference between membership rewards and statement credits?

Customers earn their membership rewards, which are delivered in the form of points, cash back, or other perks and privileges. When you redeem those rewards points (or cash), you may decide to apply them to your bank or credit card account to lower its balance. You’ll see the amount recorded on your account statement as a credit.

What are some reasons to choose membership rewards over cash back rewards?

Points redeemed for non-cash rewards typically end up having greater purchasing power than cash back rewards points, according to Experian. Beyond that, it’s a question of lifestyle. Cash back is simple, but you might prefer membership rewards if you:

•   Spend enough on your credit card that the value of the rewards exceeds the annual fee

•   Travel frequently enough that you appreciate benefits like airport lounge access and travel insurance

•   Value elite amenities and upgrades such as business class flights and luxury hotels

•   Don’t mind actively managing your points and overall spending for best results

Naturally, you’ll want to check the loyalty program agreement first for information. It should spell out the value of your rewards points and mention any affiliates with additional benefits.

Photo credit: iStock/FreshSplash

¹SoFi Plus: SoFi Plus is a premium membership that gives members access to our best rewards, benefits, and more when they pay the SoFi Plus Subscription Fee. Between 12/9/25–3/30/26, members with Eligible Direct Deposit or Qualifying Deposits will receive complimentary access to SoFi Plus. Benefits are subject to change and may not be available to everyone. All terms and conditions applicable to the use of SoFi Plus apply. To learn more about SoFi Plus and available benefits and terms, please see the SoFi Plus page.

*Based on a series of blinded surveys of financial memberships across banking, borrowing, investing, and credit cards. A nationally representative sample of 900 consumers were asked to rank offerings based on the question “Which financial membership brand is most rewarding?” Results as of January 2025. See sofi.com/plus-survey for details.

²5% Cash Back Rewards Program
Earn 5% cash back rewards on eligible grocery store purchases with the SoFi Smart Card. Cash back rewards are issued in the form of SoFi Member Rewards points. Members earn 5 points for every dollar spent on eligible grocery store purchases. SoFi, in its sole discretion, determines grocery store eligibility. Superstores like Walmart and Target, warehouse clubs like Costco and Sam’s Club, convenience stores, grocery delivery services, and meal-kit delivery services are not considered grocery stores. This benefit is subject to continued paid SoFi Plus subscription. All terms and conditions applicable to the use of SoFi Member Rewards apply. To learn more about SoFi Member Rewards, please see the SoFi Member Rewards page. No rewards points will be earned with respect to reversed transactions, returned purchases, cash advances, or other similar transactions. SMC_200.0

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 Invest®

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If you don’t pay your credit card bill, you could face more severe consequences than you might think. Though it will depend on your credit card issuer, you can generally expect to be charged a late fee as well as a penalty interest rate which is higher than the regular purchase annual percentage rate, or APR.

Life happens, and, from time to time, payments are missed, especially if you’re dealing with emergencies such as losing a job or a family crisis. In the event you have skipped a credit card payment, it’s crucial you understand what consequences you may face. That way, you can take steps to reduce the odds of it having a major impact on your financial health.

What Happens If You Don’t Pay Your Credit Card?

Consequences for missed credit card payments could include being changed late fees and possibly losing your grace period. It may also negatively affect your credit score since issuers report your payment activity to the credit bureaus — in most cases after 30 days.

There may be other consequences depending on how late your payment is and whether it’s your first time missing a payment.

Accruing Interest

When you don’t pay your credit card, interest will accrue and will continue to do so as long as you have a balance on your card. In essence, you are paying more for your initial purchase thanks to that interest.

The longer you go without paying your credit card, the more you risk your rate going up. Your credit card issuer may start imposing a penalty annual percentage rate (APR), which tends to be higher than your regular purchase APR. If this happens, you’ll end up paying more in interest charges. The penalty APR may apply to all subsequent transactions until a certain period of time, such as for six billing cycles.

Collections

Depending on your credit card issuer, your missed payments may go into collections if it goes unpaid for a period of time. You’ll still continue to receive notices about missed payments until this point.

More specifically, if you don’t pay your credit card after 120 to 180 days, the issuer may charge off your account. This means that your credit card issuer wrote off your account as a loss, and the debt is transferred over to a collection agency or a debt buyer who will try to collect the debt.

Once this happens, you now owe the third-party debt buyer or collections agency. Your credit card issuer will also report your account status to the major credit bureaus — Experian®, TransUnion®, and Equifax®. This negative information could stay on your credit report for up to seven years.

It’s hard to tell what third-party debt collectors will do to try and collect your debt. Yes, they may send letters, call, and otherwise attempt to obtain the money due.

Some collections agencies may even try to file a lawsuit after the statute of limitations expires. In rare cases, a court may award a judgment against you. This means the collections agency may have the right to garnish your wages or even place a lien against your house.

If your credit card bill ends up going to collections, take the time to understand what your rights are and seek help resolving the situation. Low- or no-cost debt counseling is available through organizations like the National Foundation for Credit Counseling (NFCC).

Bankruptcy

You may find that you have to declare bankruptcy if you still aren’t able to pay your high credit card debt and other financial obligations. This kind of major decision shouldn’t be taken lightly. You will most likely need to see legal counsel to determine whether you’re eligible.

If you do file for bankruptcy, an automatic stay can come into effect, which protects you from collection agencies trying to get what you owe them. If you successfully declare bankruptcy, then your credit card debt will most likely be discharged, though there may be exceptions. Seek legal counsel to see what your rights and financial obligations are once you’ve filed for bankruptcy.

Recommended: Understanding Purchase Interest Charges on Credit Cards

Making Minimum Payments

A minimum payment is typically found in your credit card statement and outlines the smallest payment you need to make by the due date. Making the minimum payment ensures you are making on-time payments even if you don’t pay off your credit card balance. Any balance you do carry over to the next billing cycle will be charged interest. You can also avoid late fees and any other related charges by making a minimum payment vs. not paying at all.

If you find you’re regularly struggling to make the minimum payment, or preferably, more than the minimum payment, it may be time to consider finding a lower interest rate. Carrying a balance longer-term on a high interest credit card can cause your debt to spiral.

💡 Quick Tip: Credit card interest rate caps have recently been proposed in response to rising interest rates. However, one option already available to borrowers is securing a fixed, lower-interest rate loan. A SoFi credit card consolidation loan may offer a lower interest rate, set terms, and a transparent pay-off plan.

What Happens if You Miss a Payment

If you can’t pay your credit card for whatever reason, it’s best to contact your issuer right away to minimize the impact. Let them know why you can’t make your payment, such as if you experienced a job loss or simply forgot. For the latter, pay at least the minimum amount owed as soon as you can (ideally before the penalty or higher APR kicks in).

If this is your first time missing a payment but you have otherwise paid on time, you can try talking to the credit card company to see if they can waive the late fee.

Some credit card issuers may offer financial hardship programs to those who qualify, such as waiving interest rates, extending the due date, or putting a pause on payments (though interest may still accrue) until you’re back on your feet.

Recommended: Breaking Down the Different Types of Credit Cards

15/3 Rule for Paying Off Credit Cards

The 15/3 payment method can help you keep on top of payments and lower your credit utilization — the percentage of the credit limit you’re using on revolving credit accounts — which can impact your score.

Instead of making one payment when you receive our monthly statement, you pay twice — once 15 days before the payment due date, and the other three days beforehand. This plan is useful if you want to help build your credit history and pay on time.

The Takeaway

Missing your credit card payment may not be a massive deal if it just happens once or twice, but it can turn into one if you continue to ignore your bill. Late fees, a higher penalty APR or, worse still, having your account go to collections could result. That’s why if you are having trouble paying your bill (or simply forget to), you should contact your credit card issuer ASAP.

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.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

FAQ

How long can a credit card go unpaid?

The statute of limitations, or how long a creditor can try to collect the debt owed, varies from state to state, which can be decades or more.

What happens if you never pay your credit card bill?

If you never pay your credit card bill, the unpaid portion will eventually go into collections. You could also be sued for the debt. If the judge sides with the creditor, they can collect the debt by garnishing your wages or putting a lien on your property.

Is it true that after 7 years your credit is clear?

After seven years, most negative remarks on your credit report, such as accounts going to collections, are generally removed.

Photo credit: iStock/MStudioImages

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 content is provided for informational and educational purposes only and should not be construed as financial advice.

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.

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 .

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

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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

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Credit cards, when used responsibly, can enhance your financial life, allowing you to build your credit score, earn rewards, and more. Unfortunately, if you’re not careful and make credit card mistakes, using a credit card can have the opposite effect on your financial life.

Here are some of the most common credit card mistakes to avoid, including some specific travel credit card mistakes to watch out for.

Credit Card Mistakes to Avoid

When using your credit card, here are some credit mistakes you could be making — and how you can avoid them by following some basic credit card rules.

1. Making Late Payments

Payment history is one of the most significant factors in determining your credit score. The more payments you miss, the more your credit score could go down, and it could take a fair amount of time to repair your credit.

A late or missed payment can stay on your credit report for up to seven years (unless you can prove it was a credit report mistake).

How to avoid it: Set up automatic payments, or set reminders to help yourself remember when your credit card payment is due.

2. Making Only Minimum Payments Monthly

While making minimum payments is important to avoid incurring late fees, it won’t allow you to avoid interest charges. In fact, by only making the minimum payment, you’ll end up paying a high amount of interest (assuming you’re not using a card in its 0% introductory period). You also risk getting further into debt if you keep using your credit card, and it could take years to pay off your balance in full.

How to avoid it: Budget carefully so you can pay off more than the minimum amount due or ideally, the entire balance off each month.

💡 Quick Tip: Credit card interest caps have become a hot topic, as the total U.S. credit card balance continues to rise. Balances on high-interest credit cards can be carried for years with no principal reduction. A SoFi personal loan for credit card debt may significantly reduce your timeline, however, and could save you money in interest payments.

3. Misunderstanding Credit Card Interest

Interest is a key part of what a credit card is, but the way credit card interest is charged can be confusing. A credit card can have a few different annual percentage rates (APR) depending on the type of transaction, including on purchases, cash advances, and balance transfers.

The bottom line: To avoid interest on new credit card purchases, make sure to pay off your balance in full each month. You’ll owe interest on any amount you carry over.

How to avoid it: Check your credit card agreement to understand how interest is charged, and aim to pay off your balance in full to avoid incurring interest.

4. Ignoring Your Credit Card Agreement

Credit card agreements contain important details like fees, your credit limit, and other important terms you’ll benefit from knowing. Ignoring credit card terms could lead to nasty surprises, like fees you didn’t anticipate paying.

How to avoid it: Set aside time to read your credit card agreement, and contact your credit card issuer if you have any questions about how credit cards work.

5. Neglecting Your Monthly Statement

It might seem like a slog, but reading your monthly statement is important to staying on top of your credit card account. For starters, it includes a plethora of important information, such as your statement balance, the amount of your minimum payment owed, and your payment due date. Plus, regularly reviewing your credit card statement can ensure you quickly spot any signs of fraud.

How to avoid it: Set reminders to look at your monthly statement to see how much you owe, and make sure to dispute credit card transactions you didn’t approve.

6. Getting Close to Your Credit Limit

Your credit card limit is the amount that you can charge your card. If you get close to hitting your limit, it could hurt your credit score because you’ll have a higher credit utilization ratio. This ratio compares your balance to your available credit, and the higher it is, the more adversely it could affect your score.

How to avoid it: Monitor your balance to ensure you’re not close to your limit — ideally, you’re only using up to 30% of what’s available to you or less. Some financial experts suggest using no more than 10% of your limit.

7. Applying for Multiple Credit Cards at Once

Each time you apply for a new credit card, lenders will conduct a hard inquiry, which tends to temporarily lower your credit score. While this dip might not make a huge difference, applying for multiple accounts could cause lenders to take pause. It can possibly give them the wrong impression as to why you want so many new cards.

How to avoid it: Get preapproved for a credit card before applying to see your chances of getting approved before submitting a full application.

8. Applying Without Comparing Credit Cards

There are many benefits and features that come with credit cards, and without comparing them, you may not end up opening a card that’s not the right fit. By shopping around and exploring different credit card rewards, you’ll ensure you understand your options and get the most competitive choice available to you.

How to avoid it: Take the time to think about the features you want the most from a credit card and do some research to narrow down your choices before applying.

9. Canceling Your Card on a Whim

Canceling a credit card could mean the issuer will require you to pay off your entire balance with interest. Plus, it could affect your credit utilization ratio since it will lower your overall credit limit. It also could shorten the length of your credit history, which is another factor used when calculating credit scores.

How to avoid it: Consider the consequences of canceling your credit card, and make sure to pay off the entire balance before you do so.

10. Not Reporting Lost or Stolen Credit Cards Instantly

The longer you go without reporting a lost or stolen credit card, the more likely you’ll be responsible for fraudulent changes that show up. Some credit card companies waive all fraudulent charges (or up to $50) as long as you’re quick to report.

How to avoid it: As soon as you notice your card missing, report it to your credit card company, and then continue to monitor your statements for any fraudulent charges.

11. Loaning Your Credit Card

When you give your credit card to someone else to use, you’re still responsible for the charges made on it. If the person you lent your credit card to doesn’t pay you back, then you’re stuck with the bill. The same applies with an authorized user on a credit card — you’re the one ultimately responsible for paying even if you didn’t make the charges yourself.

How to avoid it: Don’t let anyone borrow your card, and if you do, ask them to pay you upfront for the changes they intend to make.

Travel Credit Card Mistakes to Avoid

In addition to the mistakes above, take care to avoid these particular mistakes if you have a travel rewards credit card.

12. Overspending

To earn welcome or bonus offers, credit card companies typically require you to spend a minimum amount within a certain period of time. If you don’t plan ahead properly, you could end up making unnecessary purchases and racking up charges you can’t afford to pay off.

How to avoid it: Have a plan for how you’ll meet the minimum spending requirements, such as by timing a necessary big purchase with opening a new card.

13. Underspending

On the opposite spectrum, opening a new credit card and not meeting the minimum spend requirements could mean you’re disqualified from earning the welcome bonus. This would mean passing up a big benefit of getting the card.

How to avoid it: Review your spending habits before opening a credit card to ensure you can meet the card’s minimum spending requirements.

14. Spending Points vs Paying a Low Cash Price

Redeeming your credit card points is fine (it’s free!), but spending them on low-value rewards may be a waste. For example, you might be able to nab a flight or hotel at a much lower price in cash than you’d get if you used points for the purchase.

How to avoid it: Research reward redemption options to ensure you maximize the value from the points you’ve earned.

15. Not Using Your Benefits

Travel credit cards can offer other perks, such as annual credits toward travel and free stays at hotels. However, you’ll typically need to take advantage of them within a year, and they won’t roll over. In other words, if you don’t use these benefits in time, they’ll go to waste.

How to avoid it: Read your credit card agreement to see what additional benefits you can take advantage of.

16. Losing Your Points

Some points earned through rewards programs expire. In other cases, you’ll automatically lose your points when you decide to cancel your credit card.

How to avoid it: Use up your points before canceling your card, or check if they expire and make sure to use them up in time.

Recommended: What Is a Charge Card?

17. Failing to Transfer Points

Most card issuers allow you to transfer points to travel partners like airlines and hotels. This can offer a greater value for your points compared to what you’d get through the card issuer’s travel portal.

How to avoid it: Before booking travel, check whether it’s more valuable to book through the card issuer’s travel portal or by transferring points instead.

18. Not Understanding Credit Card Bonus Categories

Many travel credit cards offer bonus points if you spend in certain categories. These bonus rewards tend to vary for different cards. Not understanding what each card offers could result in losing out on earning extra points.

How to avoid it: Read through the terms and conditions of each travel credit card you own to ensure you’re maximizing your earnings.

19. Redeeming Points at Low Value

Not all points are created equal. You might not get the same value from your travel points if you redeem them for a gift card as opposed to with partner hotels or airlines, for instance.

How to avoid it: Do your research on how best to redeem your rewards for your credit card to get the most value.

Recommended: When Are Credit Card Payments Due?

The Takeaway

Knowing and avoiding common credit card mistakes can be a good way to avoid excessive credit card debt and keep your finances in good order. Responsible use of credit can be a foundation of financial fitness. What’s more, avoiding credit card mistakes can also help you enjoy perks, like rewards, that come with your account.

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.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

FAQ

What are some of the most common credit card mistakes?

Some of the most common credit card mistakes include not paying on time, only making the minimum payment, and not understanding the terms of your credit card agreement.

What credit card mistakes can damage my credit?

Major factors that can damage your credit include late or missed payments, having a high credit utilization ratio, and having too many new credit inquiries. Making all of these mistakes can lead to damage to your credit.

Can problems arise from not using my credit history?

Having a lack of credit history could make it harder to qualify for loans. Or you may only qualify for ones with higher interest rates.

Photo credit: iStock/Mikolette

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 .

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

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A balance transfer can affect your credit score either positively or negatively — though the upsides are likely to outweigh any adverse effects in the long-term if you manage the balance transfer responsibly. Typically, applying for a new line of credit triggers a hard credit inquiry, which temporarily lowers your credit score by five points or so.

However, the period of low or no interest that these cards offer can allow the cardholder to catch up on payments, lowering their credit utilization and possibly building their credit score. Read on to learn more about how a balance transfer can impact your credit score.

How Does a Balance Transfer Work?

A balance transfer is the process of consolidating existing high-interest debt to a different credit card. In other words, you’re effectively paying a credit card with another. Usually, you transfer the balance to a new credit card, but some cards allow you to do a balance transfer to an existing card.

Balance transfer credit cards often offer a low, or even 0%, annual percentage rate (APR) for a promotional period. This temporarily lowers the credit card interest rate, potentially allowing you to save on interest and more quickly pay off your debt. The length of the introductory APR offer varies by card, usually lasting anywhere from six to 21 months, after which the standard purchase APR will apply.

There is usually a fee required to make a balance transfer. This fee is either a flat rate or a percentage of the balance you’re transferring, such as 3% to 5% of your balance.

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

When to Transfer the Balance on Your Credit Card

There are two key things to look for in order to identify an opportune time for a balance transfer. First, you’re approved for a balance transfer card that offers a 0% APR introductory period. Second, you’re in a place where you can focus on paying off the balance you transfer to your new card before the promotional period ends.

It’s important to work aggressively on eliminating your balance during this period. Otherwise, once the promotional APR kicks over to the usual APR, the interest rate could potentially be as high — if not higher — than the APR of your old card.

If it may not be possible to pay off the balance within the introductory period, it’s worth looking into other options to avoid potentially getting yourself even deeper into debt. The average credit card interest rate was close to 22.00% in late 2025, according to data from the Federal Reserve, compared to late 2015, when it was less than 14%. In fact, high interest rates have recently elicited calls to temporarily cap credit card interest rates at 10%.

While there are vastly different viewpoints on credit card rate caps, there are other options to consider. Though less flexible than a credit card, a non-revolving credit line, such as a personal loan, typically offers lower interest rates, as well as predictable, fixed payments and a clear end date. It’s important to think about options that might be best for your current financial situation.

💡 Quick Tip: There is a lot of debate around credit card interest caps, currently. For those carrying high-interest credit card debt, however, one of the shortest paths to debt relief is switching to a lower-interest personal loan. With a SoFi credit card consolidation loan, every payment brings you closer to financial freedom.

How a Balance Transfer May Hurt Your Credit Score

While a balance transfer itself won’t directly impact your credit score, opening a new balance transfer card could have a ripple effect on your credit. A balance transfer to an existing credit card may not affect your credit score as much as opening a new account.
Here are a couple of the ways a balance transfer could cause your credit score to drop:

•   Applying for new credit results in a hard inquiry. Whenever you apply for a credit card, the credit card issuer will do a hard pull of your credit, which usually lowers your score by a few points. Hard inquiries stay on your credit report for two years. That being said, when compared to what affects your credit score on the whole, hard inquiries don’t impact your credit as much as, say, your payment history or credit utilization.

•   Getting a new card will lower the average age of your credit. Another way that opening a new balance transfer credit could hurt your credit score is by lowering the average age of your credit. The length of your credit history makes up 15% of your score. A longer credit history is an indicator that you’ve taken steps toward establishing credit.

Recommended: When Are Credit Card Payments Due?

How a Balance Transfer May Impact Your Credit Score

Now, let’s take a look at how a balance transfer can impact your credit score:

•   It can lower your credit utilization rate. As credit usage makes up a significant chunk of your credit score — 30%, to be exact — a balance transfer could give your credit score a lift. When you open a new credit card account, it will add to your total credit limit, which, in turn, can lower your credit utilization. As a credit card rule, the lower your credit utilization, the better it can be for your credit score.

   Here’s an example: Say you have two credit cards, and they each have a $10,000 credit limit, for a total credit limit of $20,000. You’re carrying a $10,000 balance. In turn, your credit usage is 50%.

   Now, let’s say you open a new balance transfer credit card that has a credit limit of $10,000. Combined with your other two cards, you’ll now have a total credit limit of $30,000. With a $10,000 balance, your total credit usage is lowered to about 33%.

•   You may be able to pay down debt faster. As you’re paying less interest — or perhaps no interest at all — during your card’s promotional period, you can more easily whittle away at your outstanding debt quicker. That’s because more of your payments will go toward paying down your principal. Plus, lowering that outstanding balance also feeds into lowering your credit utilization ratio — another positive when it comes to building credit.

•   A balance transfer can make it easier to stay on top of payments. A balance transfer may allow you to consolidate multiple balances into one monthly payment. This can make it easier to stay on top of making on-time payments, as you won’t have numerous due dates to juggle. In turn, this can have a positive impact on your payment history, which makes up 35% of your credit score.

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Steps to Take After a Balance Transfer

So you’ve decided to do a balance transfer. Congrats! Now, here are the steps to take to make the most of it.

Stop Using Your Other Credit Cards

If possible, put a halt on spending with your other credit cards. That way, you can focus solely on paying off the outstanding balance you’ve transferred.

Still, you’ll want to keep your other cards open. You might consider using a credit card to make a small purchase every so often to keep those accounts active.

Know When the Introductory Period Ends

Make sure you’re aware of when the introductory APR for your balance transfer card ends. Also take time to note what the balance transfer card’s standard APR is. When the promotional APR ends, that rate is what your new APR will be.

Devise a Payoff Plan

A balance transfer is really only worthwhile if you aim to pay off your outstanding debt — or as much of it as possible — during the promotional APR period.

Let’s say you have $6,000 in debt, and you’ve secured a 0% APR that will last for 12 months. Aim to pay off $500 every month, or $250 twice a month. That way, you’ll have your debt paid off before the higher APR kicks in.

Make Shifts in your Spending

To ensure that you’re paying off the outstanding amount on your balance transfer card at a steady clip, look at ways you can scale back on your spending. Doing so will free up money that you could throw at your debt payoff efforts instead.

Along the same lines, see if you can increase your cash flow. Perhaps you can take on more hours at work or get a side hustle.

Is a Balance Transfer a Good Idea?

A balance transfer can be a solid move to make if you’re prepared to knock off the debt before the introductory APR period ends. Otherwise, you’re left with a mountain of debt — potentially with a higher interest rate than you currently have.

When deciding whether a balance transfer is right for you, you’ll also want to take into account any balance transfer fees you’ll pay. Do the math to ensure the amount you’ll save on interest will more than offset the cost of these fees.

Also note that, before you worry about balance transfer effects on your credit score, you’ll need to consider whether your credit is even strong enough for you to qualify. The most competitive balance transfer offers generally require at least good credit (meaning a FICO® score of 670 or above), further underscoring the importance of good credit.

If you’re not sure of where you stand credit-wise, don’t worry about taking a peek: here’s how checking your credit score affects your rating (spoiler: it doesn’t).

The Takeaway

A balance transfer can both hurt and help your credit score. Your credit score could temporarily suffer slightly after applying for a new balance transfer card and triggering a hard credit inquiry. However, a balance transfer has the potential to help build your credit score, as it can lower your credit utilization rate and make it easier for you to stay on top of your payments.

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.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

FAQ

Do balance transfers hurt your credit score?

Balance transfers can both hurt or help your credit score. Making a balance transfer can hurt your credit score if you apply for a new card to do so, which requires a hard pull of your credit. It can also ding your score because it may lower the average age of your credit lines.

Will I need a credit credit score for a balance transfer?

To qualify for a balance transfer card with a zero or low interest rate, you’ll need a strong credit score. A good credit score to qualify is generally considered in the range of 670+.

Will I lose points with a balance transfer?

You will not lose rewards points with a balance transfer. That’s because your old creditor will generally consider the balance transfer as payment.

What are the negatives of a balance transfer?

Getting a balance transfer credit card can temporarily bring down your credit score by five points or so if it requires a hard inquiry on your credit report. Plus, it can lower your average credit age. Another downside of a balance transfer is that you’ll need to pay a balance transfer fee, which is either a flat rate or a percentage of the outstanding amount.

Photo credit: iStock/Roman Novitskii

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.

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

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