When are Credit Card Payments Due?

Renting a car. Booking a hotel room. There are plenty of reasons a credit card can be a worthy addition to your wallet. But as you’ve doubtless heard, credit cards can also be dangerous: an easy way to rack up a towering debt total that can be difficult to pay off.

If you’re able to play it smart, credit card benefits can outweigh the drawbacks. And one of the most important parts of any smart credit strategy is to make your payments on time.

So how do you determine when your credit card payments are due—and what else should you keep in mind to ensure you’re using your credit cards wisely?

Recommended: Tips for Using a Credit Card Responsibly

Are Credit Cards a Smart Financial Move?

These days, it may feel like you’re bombarded with news about the staggering credit card debt plaguing American households. Based on that, how can using credit cards ever be a wise choice?

After all, Americans often carry revolving consumer credit card debt in amounts that can be detrimental to overall financial health. According to the latest data from The Federal Reserve , Americans have trillions of dollars in revolving credit balances. And that debt total is steadily increasing year by year.

That doesn’t mean credit cards can’t be part of a smart financial strategy. In some ways, credit cards can be a factor in helping you get closer to some of your financial goals.

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

Credit Cards May Help You Build Your Credit

Even if you want to live a largely credit-card-free lifestyle, having a solid credit history is helpful. If you ever want to take out a mortgage or finance a car, a good credit score might help you secure better terms and lower interest rates—while a poor one can keep you locked out of those financial products entirely.

Credit cards can be a relatively easy way to build good credit: When you pay in full and on time, that behavior is reported to the credit bureaus and often reflects well on your report.

However, since credit card companies will likely run a hard credit check on you when you’re applying for a card, opening a new credit card may temporarily lower your credit score.

Of course, if you max out your cards and rack up a ton of revolving debt, that can reflect badly on your score; your total debt load is another important, heavily weighted factor in the total credit score calculation.

Credit Cards Can be Used to Earn Valuable Rewards

Many credit cards come packed with rewards that may really add up, whether they’re airline miles or a cash-back percentage of each item you purchase.

That said, if you end up making sky-high interest payments on a large revolving balance, that might eclipse the value of any reward your card offers.

Credit Cards are Sometimes a Useful Tool in Paying for Certain Goods and Services

Ever try to book a hotel room or rent a car without a credit card? If so, you already know that plastic can unlock a whole host of possibilities—even in a world where “cash is king.”

While relying too much on credit cards or charging more than you can actually afford to pay off each billing cycle may be a recipe for disaster, it can also be helpful to have the power of plastic at your disposal.

Cash in on up to $300–and 3% cash back for 365 days.¹

Apply and get approved for the SoFi Credit Card. Then open a bank account with qualifying direct deposits. Some things are just better together.

Some Things to Look for When Opening a New Credit Card

There are many different types of credit cards to consider if you’re in the market, and which will work best for you depends on your specific set of goals and circumstances.

Type of Credit Card

For instance, if you’re trying to repair shoddy or short credit history, a secured card can go a long way, though opening one may require you to spend money upfront as a security deposit.

On the other hand, if you already have great credit and are looking to maximize your card’s value, you could choose a travel reward or cash-back card to help you rack up points, pennies, or miles.

But no matter what kind of card catches your fancy, there are a few key aspects worth keeping an eye on before submitting your application.

Credit Card Fees

A good first step is to check if the card carries an annual fee—that’s a once-yearly cost required to pay for the privilege of simply holding the card. In some cases, the rewards and benefits you can earn may outweigh this fee, but there are many cards that don’t carry an annual fee, so you may want to skip the expense entirely.

Your credit card may also carry other types of fees: for balance transfers, foreign transactions, or late payments. (Of course, you won’t have to worry about this last one, since you’re going to figure out when your credit card is due and pay on time every month… right?)

Credit Card Interest Rates

Last but certainly not least is the card’s interest rate. This will be expressed as an APR, or annual percentage rate, and will probably be listed as a range (say, 14.24% to 25.24%).

If you’re approved, the exact rate you’ll pay will likely depend on your credit score and history; as well as other factors. Often, the better your score, the lower your interest rate.

Some credit cards may offer a promotional 0% interest rate, which means for a given length of time your revolving balance will not accrue interest. However, after the promotional period is up, the regular interest rate will kick in, so you ideally want to be able to pay off whatever balance you’re carrying before that happens.

That’s because credit card interest rates tend to be higher relative to other kinds of loans and financial products. For example, unsecured personal loans typically have lower interest rates than credit cards; as of this writing, the average consumer credit card sits at more than 17% APR. Unsecured personal loans, in contrast, are averaging around 10% to 12% APR for well-qualified borrowers.

That’s one reason why it’s so easy to get into a lot of credit card debt quickly—and why credit card debt is one of the toughest types of debt to pay off. When you’re constantly struggling just to keep up with interest payments, it can be difficult to chip away at the principal—especially when you’re also using the card for everyday purchases.

If you’re already in credit card debt, you can use this credit card interest calculator to see an estimate on how much you could end up paying in total interest over the course of your repayment.

In some cases, it may be a smarter financial move to take out a personal loan to pay off a credit card fully. Depending upon the term length you choose, you may end up saving money if the interest rate you’re offered is lower than the one offered by the credit card.

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Determining When Your Credit Card Payment Is Due

Now that you’ve got that credit card in your wallet, how do you find your credit card due date? Unlike other sorts of bills, credit cards aren’t always due on a regular date like the first of the month. The exact due date will vary depending on your credit card billing cycle, and may fall on a seemingly-random date.

To find your credit card due date, you can check your billing statement. The due date, along with the minimum payment due, will likely appear close to the top of your written statement.

You can also find due date and payment information in your online account, if you’ve created one; these digital portals also often make it simple to make online payments.

If you don’t have access to either a paper or digital billing statement, you can call the customer service number on the back of your card and ask a representative when your payment is due. Most cards also allow you to make payments over the phone, either through an automated system or with a live customer service agent.

How to Pay Your Credit Card on Time—and Why it’s Important

To pay your card on time, you’ll pay at least the minimum amount listed by the credit card payment due date. Generally, the cutoff time is 5 p.m. on the day the payment is due, but you may want to reach out to the issuer directly to get exact details.

That said, it may be a better idea to avoid cutting it so close, if you can help it. You can make your credit card payments before the due date typically both online and by phone, and doing so can help ensure the payment has time to post to your account before the cutoff.

Paying your credit card on time will help you avoid paying late fees, for one thing—which, when added to interest payments, can make your credit card debt spiral.

But on-time payments can also help bolster your credit history since they’re reported to the major credit bureaus, and your payment history—including timeliness—accounts for around 35% of your FICO® Score. And there’s one more compelling reason to make payments before the deadline.

The Grace Period

It’s helpful to understand that practically all credit cards offer a grace period: the time between your statement closing date and the due date, in which the purchases you’ve made during that billing cycle do not accrue interest.

By law, if offered the grace period must be at least 21 days, which means you get a three-week window to pay your card off in full without being responsible for any finance charges. (This may not be true in the case of balance transfers or cash advances, and interest may accrue immediately.)

But it’s possible to use a credit card on a regular basis without paying interest. All you have to do is pay it off on time and in full each and every month.

Paying Your Credit Cards on Time

Even if you only have one or two credit cards, chances are you have a lot on your plate on any given month.
Between making rent, shelling out your car payment, and actually keeping the job that lets you pay for all this stuff, keeping tabs on your credit card due dates may feel like just another task in a long list of chores. (It’s true: Adulting is hard.)

No matter how you decide to stay on top of your credit card due dates and manage your finances overall, paying your cards in full and on time can help you keep your debt total low, avoid paying interest, and possibly bolster your credit score.

That way, you are more likely to take advantage of all the benefits credit card use offers without dealing with any of the financial fallout.

If you are looking to get your credit card debt in control, think about learning more about credit card consolidation loans with SoFi. Using a personal loan to consolidate your credit card debt might help your financial position and possibly lower your interest rate.

Learn more about the 2% cashback credit card from SoFi. Apply for the SoFi Credit Card today.

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What is a Financial Asset?

You’ve probably come across the term “asset” many times in your life—long before you began saving and investing.

What is an asset? Generally, the word may be used to refer to anything of value—from a great smile to a great work ethic to a great group of friends. But when you’re talking about finances, the term asset is typically used to refer to things that have economic value to a person, a company, and/or a government.

For individuals, it can mean pretty much everything they own—from the cash in their wallet to the boat in the backyard to the baubles in a jewelry box. But usually, when people talk about their personal assets, they’re referring to:

•   Cash and cash equivalents, including checking and savings accounts, money market accounts, certificates of deposit (CDs), and U.S. government Treasury bills.
•   Personal property, including cars and boats, art and jewelry, collections, furniture, and things like computers, cameras, phones, and TVs.
•   Real estate, residential or commercial, including land and/or structures on the land.
•   Investments, such as stocks and bonds, annuities, mutual and exchange-traded funds, etc.

Those who freelance or own a company also may have business assets that could include a bank account, an inventory of goods to sell, accounts receivable (money they’re owed by their customers), business vehicles, office furniture and machinery, and, the building and land where they conduct their business.

Liquid vs. Non-Liquid Assets

When you’re building your portfolio and assessing your overall financial situation, you’ll quickly realize that all assets are not created equal.

Some assets are liquid: Liquid assets can be accessed quickly and converted to cash without losing much of their value. Cash is the ultimate liquid asset, but there are plenty of other examples.

If you can expect to find a number of interested buyers who will pay a fair price, and you can make the sale with some speed, your asset is probably liquid. Stock from a blue-chip company is an asset with liquidity. So is a high-quality mutual fund.

Some assets are non-liquid or illiquid: These assets have value, but they may not be as easy to convert into cash when it’s needed. Your car or home might be your biggest asset, for example, depending on how much of it you actually own. But It might take a while to get a fair price if you sold it—and you’ll likely need to replace it eventually.

The same goes for a business. And even if you’re willing to part with a prized collection—your “Star Wars” action figures, perhaps—you’d have to find a buyer who’s willing to pay the amount you want without delay. And if something happens to affect the market for a particular collectible—think Beanie Babies—your asset may sell at a loss or not at all.

While some investments have long-term objectives—including saving for a secure retirement—liquidity can be an important factor to consider when evaluating which assets belong in a portfolio.

Many unexpected events come with big price tags, so it can help to have some cash or cash equivalents on hand in case an urgent need comes up. General recommendations suggest having three to six months’ worth of living expenses stashed away in an emergency fund—using an account that’s available whenever you need it.

Some might also consider keeping a portion of money in investments that are reasonably liquid, such as stocks, bonds, mutual funds and exchange-traded funds (ETFs). This way, ideally, the assets can be liquidated in a relatively quick timeframe if they are needed. (Although, of course, there’s never any guarantee.)

Finding the Right Asset Allocation

As an investor, you’re also likely to hear about the importance of “asset allocation” in your portfolio.
Asset allocation is simply putting money to work in the best possible places to reach financial goals.

The idea is that by spreading money over different types of investments—stocks, bonds, cash, real estate, commodities, etc.—an investor can limit volatility and attempt to maximize the benefits of each asset class.

For example, stocks offer the best opportunity for long-term growth, but can expose an investor to more risk. Bonds tend to have less risk and can provide an income stream, but their value can be affected by rising interest rates. Cash can be useful for emergencies and short-term goals, but it isn’t going to offer much growth, and it won’t necessarily keep up with inflation over the long term.

When it comes to volatility, each asset class may react differently to a piece of economic news or a national or global event, so by combining multiple assets in one portfolio, an investor can mitigate the risk overall.

Alternative investments such as real property, precious metals, and private equity ventures are examples of assets some investors also may choose to use to counter the price movements of a traditional investment portfolio.

An investor’s asset allocation typically has some mix of stocks, bonds, and cash—but the percentages of each can vary based on a person’s age, the goals for those investments, and/or a person’s tolerance for risk.

If for example, someone is saving for a wedding or another shorter-term financial goal, they may want to keep a percentage of that money in a safe, easy-to-access account, such as a high-yield online deposit account. An account like this would allow that money to grow with a competitive interest rate while it’s protected from the market’s unpredictable movements.

But for a longer-term goal, like saving for retirement, some might invest a percentage of money in the market and risk some volatility with stocks, mutual funds, and/or ETFs. This way the money can grow over the long-term, and there will likely be time to recover from market fluctuations.

As retirement nears, some people may wish to slowly shift their investments to an allocation that carries less risk.

Getting Some Help with the Mix

If you’re new to investing and feeling a little daunted by the many asset choices available, one option is to look at diversifying your allocation by purchasing ETFs or mutual funds.

These funds give investors who might not have the money or time to research and buy individual securities access to a basket of assets—different stocks and bonds—that are professionally managed.

Though investing in a mutual fund or ETF doesn’t guarantee those investments will increase in value over time, it’s a way to avoid some of the complicated decision-making and constant market-watching that can make investing stressful.

And you can use ETFs and/or mutual funds in your portfolio whether you choose to be a hands-on investor or take a more hands-off approach.

With SoFi Invest®, for example, investors can DIY their asset allocation with active investing, and pick out stocks or ETFs to trade. Or they can or sit back and let SoFi do most of the work with automated investing.

Either way, one-on-one help is available from SoFi advisors, who can help set up a portfolio with asset allocation percentages that work toward individual goals.

The Importance of Rebalancing

Choosing that original asset allocation is important—but maintenance and portfolio rebalancing is also key over time. As people attain some of their short- or mid-range goals—paying for that wedding, for instance, or getting the down payment on a house—they may wish to consider where the money will go next, and what kind of account it should be in.

As life changes, it is possible that the original balance of stocks vs. bonds vs. other investments is no longer appropriate for a person’s current and future needs. As a result, they may want to become more aggressive or more conservative, depending on the situation.

Rebalancing also may become necessary if the success—or failure—of a particular asset group alters a portfolio’s target allocation.

If, for example, after a big market rally or long bull run (both of which we’ve experienced in recent years) a 60% allocation to stocks becomes something closer to 75%, it may be time to sell some stock and get back to that original 60%. This way, an investor can protect some of the profits while buying other assets when they are down in price.

Yes, it may be tempting to stick with a particular asset class that’s performing well—after all, the goal of investing is to make money. But too much of a good thing could become a problem if the market shifts—so there’s a reason to get back to that original percentage.

You can do your rebalancing manually or automatically. Some investors check in on their portfolio regularly (monthly, quarterly or annually) and adjust it if necessary. Others rebalance when a set allocation shifts noticeably.

With automated investing through an account like SoFi Invest®, investors can set a goal (or goals) with SoFi advisors and know that their investment account will automatically correct to the chosen percentages if they get too far out of whack.

The Value of Knowing What You Own

Knowing where your money is invested and having some idea of each asset’s value can provide a better understanding of your overall financial well-being.

Ready to do some math? Your assets are what you own. Liabilities are what you owe (debts such as credit card balances, student loans, car loans, etc.). The difference is your net worth. And tracking your net worth over time can help you make a plan to reach your financial goals.

If you’re only using your checking and savings statements to monitor your money, you may be missing out on some key information that could affect your financial planning.

Putting the big picture down on a balance sheet or tracking it with an app can help you see what you’re doing right and what might be going wrong. With this insight, you can adjust your investments and financial plan as you see fit.

The assets you accumulate will likely change over time, as will your needs and your goals. So, it’s important to know the purpose of each asset you own—as well as which ones are working for you and which ones aren’t. Here are some questions you can ask yourself as you mindfully manage your assets:

1. Are you getting the maximum return on your investment, whether it’s a savings account or an investment in the market?
2. How does the asset make money (dividends, interest, appreciation)? What must happen for the investment to increase in value?
3. How does the asset match up with your personal and financial goals?
4. How liquid is the investment? How hard would it be to sell if you needed money right away?
5. What are the risks associated with the investment? What is the most you could lose? Can you handle the risk financially and emotionally?

If you aren’t sure of the answers to these questions, you may wish to get some help from a financial advisor who, among other things, can work with you to set priorities, suggest strategies for investing, assist you in coming up with the right asset allocation to suit your needs, and draw up a coordinated and comprehensive financial plan.

Ready to start investing? A SoFi advisor can help you look at what you have, what you might need, and how you can maintain the right mix. To get complimentary, personalized advice, check out SoFi Invest® today.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
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The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.


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5 Things to Consider When Choosing a Mortgage Lender

Buying a home is likely one of the biggest moves you’ll make in your personal and financial life, and your home may represent one of your largest assets.

If you take out a mortgage loan to help you buy it, you will end up making mortgage payments—and if your lender ends up servicing your loan after closing—you will make payments to that lender, possibly for decades. This is one possible reason you may choose to shop around before committing to a mortgage lender and loan program that’s right for you.

Today, borrowers have more choices on ways to apply. With the rise of online and marketplace lenders, there’s increased competition, which fuels improvements in process, service, and cost—and can mean a much better experience for you.

That said, there may be different factors each individual wants to consider when on the lookout for a lender. If you want to avoid getting stuck with a not-so-great lender, take the time to shop around. Asking questions could help you evaluate your options. Here are some of the questions you may be looking for answers to:

1. Does the lender offer competitive interest rates?

First things first, it’s generally recommended to get the lay of the land by looking at various lenders and the rates and fees they advertise. Taking this step may help you understand what the market looks like overall and who may be offering competitive rates.

Remember that the rates and programs you are ultimately eligible for will likely depend on the lender you choose along with your needs and financial situation, yet this initial comparison can give you a baseline to start working from.

Try taking a look at the common loan types offered. Interest rates for fixed-rate loans do not change over the life of the loan. Interest rates for adjustable-rate mortgages can change over the life of the loan and are influenced by the Federal Reserve boosting or lowering their benchmark rate which in turn causes movements in the indexes tied to ARM rates, such as the LIBOR .

Hybrid Adjustable-rate mortgages are mortgages that offer an initial fixed rate for a certain period of time. These hybrid ARMs are commonly offered and typically come with a low introductory rate for either 1, 3, 5, 7 or 10 years. These introductory rates may be one element that entices borrowers to use them.

Another element may be that some hybrid ARMs offer an interest-only payment option for a specified period of time such as 10 years.

When the initial fixed-rate period is over, the interest rate is normally reviewed on an annual basis for adjustment. Although the index tied to the ARM rate may have moved much higher, these loans offer yearly and annual interest rate caps to control rate and payment fluctuations.

When talking to a lender about their mortgage offerings don’t just ask about interest rate, also ask about APR, or annual percentage rate . This figure takes into account certain fees like broker fees, points, and other applicable credit charges, giving you an easier way to compare loan offers.

2. Does the lender offer loan products with terms that suit your needs?

Your needs and financial situation can play a large part in which mortgage programs you choose and are eligible for. For example, some lenders require a 20% down payment to qualify for a mortgage.

If you can’t pay 20%, lenders may require that you have private mortgage insurance, which covers them in case you default on your mortgage payments. Mortgage insurance premiums vary depending upon many factors.

Ask your chosen lender how much insurance payments will add to your monthly payment and keep in mind that in certain circumstances private mortgage insurance does not apply, such as with some Jumbo loan programs and in other cases, can be eligible for removal from your home loan later if certain criteria is met.

If you can’t afford a 20% down payment, you can look for lenders who offer more flexible down payment requirements. Also, consider what term—the length of time you’ll be paying off your loans—works best for you. See what kinds of terms lenders offer and the interest rates that accompany those terms.

A shorter-term will likely come with higher monthly payments, but lower interest rates that result in lower interest charges over time. Not everyone can afford those higher monthly payments, however, in which case a longer term may be preferable. Note that longer terms usually mean that you end up paying more in interest over the life of the loan.

Once you’ve found a loan with rates and terms that work for you, you can obtain a rate lock from your lender, generally for the time it takes to close on the transaction, such as 30 or 45 days.

You may have to pay a fee if you want to lock in the rate for a longer extended period of time, but once you do it will guarantee that you have access to the mortgage at a specific rate during the lock-in period even if interest rate rises while your loan is being processed.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

3. What type of origination, lender, and other fees might you be responsible for?

We’ve already alluded to the fact that you’ll likely be on the hook for other costs in addition to your down payment. One good idea is to request a Loan Estimate (LE) for any mortgage you’re considering to see a solid estimate of what costs you may be on the hook for.

Keep your eye out for things like:

•   Commissions: Mortgage brokers are paid on commission, which is either paid by you, your lender, or a combination of both.
•   Origination fees: These fees may cover the cost of processing your loan application.
•   Appraisal fees: Appraisal fees cover the cost of having a professional come in and put a value on the home you want to buy. You must have a property valuation of some type in order to borrow money to buy a home and in most cases a full appraisal is required.
•   Credit Report Fee: Covers the cost of the bank obtaining your credit report from the credit reporting bureaus.
•   Discount Points: Optional fee the borrower can pay to reduce or buy down their interest rate.

The added fees will typically impact the overall cost of buying the home if the borrower does not receive a seller or lender credit towards closing costs, so doing your research and reading the fine print up front might pay off.

Depending on the loan terms and fees charged, some will be paid upfront at the beginning of the application process such as credit report and appraisal, while other fees might be paid at loan closing such as lender fees, title insurance and more.

In some cases, under certain loan programs, you can borrow the money to cover these fees, which will increase your overall mortgage payment(s). Therefore, having a clear understanding of what fees you’ll owe is critical to understanding how much you’ll end up paying.

Request from your lender a quote on all the costs and fees associated with the loan. A Loan Estimate (LE) is a typical form used to disclose loan fees to a borrower. Ask questions about what each fee covers. Have your lender explain any fees you don’t understand, and then find out which ones may be negotiable or can be waived entirely.

4. How much of the process is online vs. on paper or in person?

How much facetime you have to put in to apply for a mortgage can vary by lender. Some online banks will have you complete the process entirely online, while brick and mortar banks may require an in-person visit.

In the past, applying for a mortgage required a lot of physical paperwork. But much of this has now been replaced by online interactions. For example, you are now likely able to send your financial information like bank statements and W-2s electronically.

Lenders who complete much, or all, of the mortgage application process online may be able to offer lower rates or fees, since they don’t have the cost of brick and mortar bank locations and their employees to maintain.

That said, if you’re someone who likes face-to-face help, you may consider a lender that allows you to apply in person or a lender who utilizes facetime.

5. How quickly can the lender close once you’re in contract?

Once you’ve found the home you want to buy and you’re under a purchase contract with the seller, the amount of time it takes to close on a loan can vary. Depending on the situation you may have to wait for inspections, appraisals, and all sorts of paperwork to go through before you can close.

However, your lender may offer you ways to speed up the process. For example, you may be able to get preapproved for a loan, which takes care of a lot of potentially time-consuming paperwork upfront before you’ve even started shopping for a home.

Ask your lender how much time their closing process usually takes and what you can do to expedite it. Especially if you’re crunched for time, their answer can have a big impact on which lender you choose. After all, the faster you’re financed, the sooner you’ll be able to move in.

SoFi offers loan options with as little as 3% down for qualifying first-time homebuyers and 5% down for all other borrowers.

On the path to homeownership?

We’re right there with you. Download the SoFi Guide to First Time Home Buying to get valuable tips on these topics and more. Our guide also demystifies modern mortgage myths around down payments, the pre-approval process, student loans, rising interest rates, and more.

Ready to buy a home? Check out mortgages with SoFi Home Loans.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

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Why Credit Card Debt Is So Hard to Pay Off

Ideally, you would never carry credit card debt, and you’d pay off your statement balance in full every billing cycle, by the due date. Unfortunately, that doesn’t always happen. Emergencies come up. Budgets get derailed.
If you’re having trouble paying off your credit cards, know that you’re not alone.

According to the New York Fed, as reported by NerdWallet, Americans carried an average revolving credit card debt of $6,849 at the end of 2019.

It’s not necessarily a problem to have a balance on your credit card—as long as you pay it off every billing cycle. In fact, using credit cards for rewards or to build credit can be a financially healthy choice. And getting into the habit of paying off your statement balance in full by the due date is important.

But if you start to carry a credit card balance, you’re not just paying for your purchases, you’re paying hefty interest charges on top of what you’ve spent. In fact, the average household with credit card debt paid $1,162 in interest in 2019 .

The problem is when you don’t completely pay off your credit card balance each cycle, the debt can quickly pile up, even if you’re making the required minimum payments. Understanding how credit card interest and penalties compound can help you understand how to reduce your credit card debt.

How Credit Card Interest, APR, Works

When you applied for a credit card, you likely read about the fees, terms, and annual percentage rate. The APR, which for credit cards is usually stated as a yearly rate, is the approximate interest percentage you will pay on balances not paid in full by the statement due date. APRs vary across credit cards and depend on your credit history, but on average, credit card APRs range from around 13% to 23% .

Most credit cards charge compounding interest, which means that you end up paying interest on the interest you accrue. Essentially, if you don’t pay your statement in full each billing cycle, interest is calculated continually and added onto your balance, which you then also pay interest on (in other words, it compounds).

For example, if you owe $100 and your interest is compounded monthly at 10%, then after the first month you’d owe $110. And after the second month, you’d owe $121.

Most credit card interest is compounded daily, so every day you owe money after the due date, the interest climbs. It’s easy to see how compounding interest can add up.

Interest compounds even if you make the minimum payments. That’s because if you just pay the minimum amount due on your monthly credit card bill, then the remainder of the debt still accrues interest, and it compounds until you pay the balance off completely.

If you are wondering how much interest you could pay on your debt, you can take a look at SoFi’s Credit Card Interest Calculator to find out.

What Happens When You Stop Paying Your Credit Card?

Unfortunately, you can’t just ignore credit card bills until they go away. If you stop paying your credit card, your balance can inflate quickly.

If you miss a payment or don’t make the minimum payment due on a bill, you will typically face a late fee or penalty. In addition, the amount you still owe on the credit card—whatever you haven’t paid—continues to accrue interest, and that gets added onto future bills.

If you miss more than two payments, then your interest rate will likely increase to a higher penalty interest rate . And once your credit card interest rate goes up to the penalty rate, it usually stays there until you make at least six on-time payments. Those details are laid out in your credit card contract, even if you didn’t read all the fine print.

If something does come up and you know you’re going to be late on a credit card payment, you should consider contacting your credit card company. Some credit card companies may offer plans to allow you to pay off just the interest or a portion of the payment due.

These options aren’t ideal, since the remaining debt still accumulates interest, but it may allow you to avoid having a delinquency on your credit report. After 30 days of being delinquent on credit card payments, you’ll be reported to all three major credit bureaus—and will be again, every 30 days thereafter, if you still haven’t paid.

As accounts become more and more past due, more fees can rack up and/or the credit card company could offer a settlement, or they could attempt to get a judgment against you for the total amount owed. They could also sell your debt to a collection agency as you get closer to the 120 days late mark.

To sum up: even if you always make the minimum payment due, if you’re not paying off the full credit card debt, then the remainder will accrue compounding interest. That can still add up, and the debt can start to feel insurmountable. But there are ways to lower your interest rate and get rid of your credit card debt before it ever spirals totally out of control.

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Getting Ahead of Credit Card Debt

While it can seem like a steep, uphill climb, getting out of credit card debt is possible. It might take some serious planning and commitment, but with the right tools, it’s an achievable goal.

Sometimes it can help to break it down into smaller steps so the process doesn’t seem as overwhelming. Here are some ideas for getting ahead of credit card debt:

Limiting the Use of Credit Cards

If you’re carrying credit card debt, you can try to avoid using the card while you’re getting the balance under control. Eliminating the use of your credit cards can be challenging.

Using credit cards means you’re still adding to your overall debt total, which can make it feel like you’re constantly treading water to stay afloat, instead of making progress toward eliminating your debt. One way to avoid this is to limit the use of your credit card while you take control of your debt.

Budgeting for Debt Repayment

To get serious about repaying your credit card debt, create a plan that will help you get there. One place to consider starting is revamping your budget. If you don’t have one, you may want to think about making one.

If you do have a budget, but it’s currently gathering digital dust in a spreadsheet or going unchecked in an app, it may be time to update it. Tallying up your monthly expenses and your monthly income is a good first place to start.

If you’re budgeting with a partner, including their information as well may help your budget realistically reflect your household finances. Then comes the hard part. What patterns do you see when you look at your spending habits?

To eliminate your credit card debt you may have to make some changes to your regular spending. Identifying areas where you can cut back may help you see those trouble spots. Are impulse orders on Amazon dragging you down? Overspending on new clothes? Food? Whatever it is, understanding your spending vices can help you get them under control.

As a part of this improved (or new) budget, detail your plan for reducing your debt. There are a few strategies, including the “debt avalanche” and the “debt snowball” methods.

In order to accelerate the debt repayment process, both methods encourage debt holders to overpay on certain debts each month, while making the minimum payments on all other debts.

The main difference is how each strategy organizes the debts. In the debt avalanche method, the debts are organized by interest rate. The idea here is to focus on the debt with the highest interest rate. When that debt is paid off, you’d roll the payment previously allocated to it into the payment for the debt with the next highest interest rate. You’d do this until the debts are repaid completely.

In the debt snowball method, the debts are organized by balance amount. Here, efforts are focused on the debt with the smallest balance. When that is paid off fully, payments previously allocated to that debt are rolled into the debt with the next smallest amount. Continue until all the debts are paid in full.

Both strategies have pros and cons, so consider which method you’ll be most able to stick with and create a strategy that will work for you.

Finding Help (If You Need It)

If you’re still struggling with credit card debt, consider getting help from a qualified professional. A debt or credit counselor may offer resources to put you in a better position to repay your debt. They may be able to offer personalized advice or help you create a plan to achieve your goal.

How Do You Lower Your Credit Card Interest?

In addition to crafting a debt repayment plan, if you’ve accumulated a large amount of credit card debt, then it might make sense to consolidate it all with a lower-interest loan or credit card.

Balance transfer credit cards allow you to transfer your credit card debt onto a lower-interest or no-interest card, usually for a promotional period of six to 12 months, and then pay off that card.

However, these cards often come with fees and a much higher interest rate that kicks in after the promotional period has ended. So essentially, you may be setting yourself up to face the same problem all over again unless you can pay off your debt within the promotional period.

Another option is to take out an unsecured personal loan with (ideally) a lower interest rate. Essentially, you’d use the personal loan to consolidate and/or pay off your credit card(s) balances, and then you’d pay off the personal loan.

You could choose a fixed interest rate on most personal loans, which means the interest won’t compound and the rate won’t change over the life of the loan. Personal loans just require you to make one simple monthly payment, over a set period of time (no revolving debt here); you can typically work with the lender to find a repayment timeline that works for you.

Learn more about how a SoFi personal loan may be able to help you tackle your credit card debt.

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

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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.
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7 Facts You Didn’t Know About Student Loan Debt

Some of today’s luxury splurges include African photo safaris, the latest phone, fancy soap … and college? According to the CollegeBoard’s 2019 Trends in College Pricing report, over the past decade, American undergrads have watched their tuition bills climb an average of 2.2% per year above and beyond inflation, which amounts to about $200 more per year.

And during the 2019-20 school year, the average cost to attend a public, four-year college, with in-state tuition including room and board and other fees, came in at just over $21,900 .

Multiply that times four years, add out-of-state or private school tuition, or look at an advanced degree, and it’s not surprising that as many as 42.2 million students and their parents borrowed money for school in Q3 of 2019.

You might be one of them—or have a family member or close friend who is—but how much do you really know about student debt? After all, it can rank right up there with politics and religion on the list of topics that no one wants to bring up.

Any idea which states have the highest student loan balances? Or how much Americans owe in total on their student loans? What about how common it is for people to stop making payments?

We’ve gathered those answers and more, and the numbers may surprise you. Because whether you see it as a private struggle or a national crisis, student loan debt is a big deal.

1. Americans currently owe over $1.6 trillion on their student loans.

That was the cumulative student loan balance among American consumers as of February, 2020. A decade ago, the figure was less than half as much: $695 billion . Student loans are now the largest form of consumer debt in the U.S. other than mortgages—exceeding car loans and credit card debt.

Want some good news? That seemingly insurmountable number is starting to get some attention. Presidential hopefuls are focusing their 2020 campaigns around eliminating student debt, and billionaires are paying it forward by paying off student debts at their alma maters.

And it’s not just private individuals. After the IRS ruled that Abbott Laboratories could contribute up to 5% of an employee’s salary to their 401(k) if they’re putting at least 2% of their compensation toward student loans, it opened the door to making student-loan repayment a recruitment tool and employment benefit.

2. The average student loan balance is more than $35,000.

The average student-loan borrower today owes around $35,359 , a number that’s steadily on the rise—up 2% since Q1 of 2018.

When divided up by generation, Gen Xers carry the highest balance at just under $40,000 . Boomers come in second, with balances averaging around $34,703, and Millennials were right behind them. Conversely, Gen Z debt-holders have balances around $12,500.

3. Individual debts vary widely.

The average debt is just that—the average. Recent figures show that student-loan balances are as varied as age, state and program statistics. The majority of borrowers owe between $10,000 and $25,000, but total balances range from less than $1,000 to more than $200,000.

This may not come as a surprise when compared to the total costs of attending college. For the 2018-19 school year, Harvey Mudd College in California topped the list of most expensive schools at around $75,000 a year for tuition and fees. On the other hand, a handful of schools, including Berea College in Kentucky, offer free college tuition.

4. Current student debt varies widely by state and college.

While not technically a state, Washington, D.C. topped the list of states with the highest student debt, with an average of $55,729 —a full $15,000 higher than the next highest state, Georgia, which averaged $40,692. The bottom of the list (or perhaps the top, depending on your point of view), includes Wyoming, North Dakota, South Dakota, and Iowa, all with less than $30,000

Likewise, the program students pursue can have a huge impact on the amount of student debt facing graduates. The cost of graduate school can vary widely by program. Specialized degrees—medicine, law, or pharmacy, for example—could leave students facing even higher debt burdens, sometimes upwards of $100,000.

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5. Percentages are going up, everywhere.

No matter where a state-ranked on the list, every single one saw an increase in the average student loan debt from 2018 to 2019, from 4.0% in Idaho to 9.4% in Mississippi.

The number of individual borrowers also went up across the board, including a TEXT increase in the number of student loan borrowers aged 62 and older.

6. Americans with student debt are likely to have multiple loans.

The Department of Education currently contracts a few different loan servicers . The federal student loan will be assigned to a loan servicer when it is disbursed. For borrowers with multiple student loans, it is possible that they’d have multiple loan servicers. That could be a lot to juggle, and one reason borrowers may consider federal student loan consolidation.

And more than 6 million federal student loan borrowers have at least one loan in deferment or forbearance, which are two different ways of delaying repayment. (Here’s a guide to some pros and cons of each.)

7. The number of borrowers defaulting on their student loans is in the six figures.

As of 2018, studies revealed that around 1 million default on their student loans each year. By the year 2023, that number is expected to grow to include 40% of borrowers.

Risk factors for student loan default can include having other forms of debt, such as a credit card balance, car payment, or mortgage. And defaulting on loans can also put borrowers at risk for having other bills, such as medical expenses, end up in collections as well.

What’s to be done? Even if you just stop paying on your student loans, they won’t go away. And in the meantime, interest will continue to accrue and capitalize (along with penalties and other downsides to nonpayment, like being sent to collections).

You can take a look at current interest rates to see if refinancing student loans makes sense for your situation. Refinancing won’t be right for everyone, but it can be worth considering. Know that if you refinance federal student loans, they’ll be eliminated from federal benefits and protections like income-driven repayment plans or Public Service Loan Forgiveness.

SoFi can help refinance both federal and private student loans. See your rate in just minutes.

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If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.

CLICK HERE for more information.

Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. SoFi Bank, N.A. and its lending products are not endorsed by or directly affiliated with any college or university unless otherwise disclosed.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.


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