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Getting a credit card refund is generally simple, whether you’re returning a defective product or just had a change of heart. Once processed, the merchant issues a credit to your account, effectively reversing the original charge.

While the process is routine, the timing and impact of a credit card refund depend on several factors, including the merchant’s policies and your card’s billing cycle. Here’s what you need to know about how credit card refunds work and what to expect during the transaction.

What Is a Credit Card Refund?

A credit card refund is the money you get back when you return something that you paid for with your credit card. Rather than getting cash back for the full amount of the returned item, you’ll receive a credit to your credit card account for that amount. While the refund process starts as soon as you return the item, it might take a few days for the transaction to show up in your account.

How Do Refunds on Credit Cards Work?

When you use a credit card for a transaction, the merchant initiates a request for payment from your card issuer. Once the issuer settles the charge on your behalf, that specific purchase amount is added to your ongoing account balance. Subsequently, you are responsible for settling your credit card statement to reimburse the issuer for the funds they advanced for your purchase.

In the event that you return an item, the merchant processes a refund back to the credit card issuer rather than providing cash directly to you. In turn, your credit card company applies a corresponding credit to your account balance to reflect the returned goods.

Recommended: When Are Credit Card Payments Due?

Types of Credit Card Refunds

There are two basic types of credit card refunds:

Refund at the Point of Sale

This is when you return an item by going to the store in person or sending back an online purchase. If you return something at a physical register, the merchant swipes your card or scans your receipt, and the credit is issued immediately from their system (though it may take a few days to process and show up in your account).

For online returns, the credit is typically triggered only after a staff member inspects the package and confirms the item is in resellable condition.

Disputed Transaction

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

It’s generally best to start with the seller when you have an issue with the goods or services provided. However, if that doesn’t resolve the problem, you can file a dispute with your credit card issuer.

Typically, you must file a dispute within 60 days of the date when you received the bill that includes the transaction in question. The issuer will usually then issue a provisional credit to your account. They then have up to 90 days to investigate and resolve the issue. If the merchant is found to be at fault, your credit card company will initiate a chargeback, which is a reversal of the original payment and your provisional credit becomes permanent.

How Long Does a Credit Card Refund Typically Take?

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

Online merchants may take longer to issue a credit card refund because you need to allot time for shipping and processing the returned merchandise.

With a disputed charge, you often receive a temporary credit within one to two business days while the bank investigates, though it can sometimes take longer. The entire, formal investigation process can last up to 90 days to reach a final resolution.

Do Credit Card Refunds Count Toward Payments?

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

Instead, you’ll see a credit in the amount of the refund in your account statement and, depending on where you are in the billing cycle, this could reduce the total amount you owe by the amount of the refund. Even so, you must still make at least the minimum payment by the due date to avoid a late fee.

How Credit Card Refunds May Affect Your Credit Score

To understand how credit card refunds impact your credit, it’s important to understand credit utilization ratio. This term refers to the percentage of your total credit limit that you are currently using. Credit utilization can be an important factor in calculating your credit score and, generally, the lower it is, the better. Financial experts often suggest keeping your credit utilization ratio under 30%, with 10% being an even better figure to aim for.

A refund reduces your outstanding balance, which decreases the amount of credit you are using. This could lower your credit utilization ratio and have a positive impact on your credit profile. However, if a refund takes weeks to process, the high balance might be reported to credit bureaus, which could have a temporary negative impact on your credit.

What to Do With a Negative Account Balance

Sometimes a refund will give you a negative balance on your credit card, which means the issuer actually owes you money. Common for those paying in full, a negative balance is not harmful to your credit and can be used for future purchases. Typically, an issuer will automatically apply a credit balance to your next purchases, eventually bringing your balance back to $0 or above.

However, a negative balance can be problematic if you’re receiving a large refund and don’t often use that credit card. In these instances, you can ask your credit card company to issue a refund via check, money order, or direct deposit. Some issuers will automatically issue a check if a negative balance is left unused for a certain period of time.

How Credit Card Refunds Affect Your Rewards

When you return a purchase made with a rewards credit card, the points, miles, or cash back earned from that transaction are typically deducted from your rewards balance once the refund is processed.

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

The Takeaway

A credit card refund is a straightforward process where a merchant credits your card issuer, which in turn reduces your outstanding balance. While routine returns are usually resolved within three to seven business days, disputed transactions can take longer.

Remember that a refund doesn’t count as a payment toward your minimum due, but it can positively affect your credit utilization ratio. If a refund results in a negative balance, you can either use the credit on future purchases or request a payout from your card issuer.

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 credit card refunds affect your credit?

Credit card refunds can affect your credit profile, typically in a positive way. A refund lowers your outstanding balance, which in turn decreases your credit utilization ratio (the amount of credit you are using compared to your total limit). A lower utilization ratio is generally beneficial for your credit. However, if the refund takes a long time to process, your high balance might be reported to credit bureaus before the credit posts, which could temporarily affect your score negatively.

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

When a purchase is returned and refunded, any rewards (points, miles, or cash back) earned on that original transaction are typically reversed or deducted from your rewards balance once the refund is fully processed by the credit card issuer.

If you want to keep the rewards, you can request a store credit from the merchant instead of a credit card refund, but you will still be responsible for paying the original purchase amount on your credit card.

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

If you have a negative balance after a credit card refund, it means the credit card issuer owes you money. Typically, this credit will automatically be applied to your next purchases on that card, eventually bringing the balance back to zero or higher.

If the negative balance is large and you don’t plan on using the card soon, you can contact your credit card company to request the funds be issued to you directly, usually via check, money order, or direct deposit. Some issuers may automatically send a check if a significant negative balance remains unused for an extended period.

Photo credit: iStock/Amax Photo

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.

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 .

SOCC-Q126-032

Protecting yourself against credit card hackers — criminals that engage in credit card fraud and identity theft — is a vital part of using your credit card responsibly. Understanding how credit card hacking works and the many ways thieves can gain access to your personal financial information can help you protect both your physical credit card and your digital credit card account information.

Read on to learn how to protect your credit card from hackers, as well as what to do if your credit card is hacked.

What It Means for a Credit Card To Be Hacked

A credit card hack occurs anytime your credit card or credit card account number falls into the wrong hands. That information is then used fraudulently to make purchases and/or to engage in identity theft.

Credit card theft can entail everything from stealing your wallet to hacking into large databases holding hundreds of thousands of credit card numbers.

Ways Credit Cards Can Be Hacked

Thieves use a variety of ways to get their hands on your credit card information. The biggest money scams in the U.S. are now done digitally through email, text messages, or fake websites. But there are still plenty of old-fashioned scammers who use snail mail, phone calls, and in-person ruses.

Here are some of the most common forms of both types of fraud:

•   Lost or stolen wallet containing credit cards. An old but still common trick for credit card thieves is to steal the physical card, then use it and the information it contains to make fraudulent purchases. In addition, if other personal information is included in your stolen wallet, such as your address and even your Social Security number, thieves can use your identifying information to set up other fraudulent credit accounts in your name .

•   Phishing. Another common credit card hacking method is for a thief to attempt to get ahold of your credit card information through a phone call, text message, or email in which they impersonate a legitimate institution. For instance, a phishing email that appears as if it’s from your banking institution may entice you to click a link that takes you to a page where you’re then asked to enter your account information.

•   Dumpster diving. Criminals search through trash to find discarded statements, receipts, and other documents that contain your credit card number and identifying information such as your name and address. They then use that information to make fraudulent purchases or engage in identity theft.

•   Data breaches. Professional hackers can break into large retail, bank, financial, healthcare, social media, and other websites and steal reams of personal information that often include credit card and other personal financial information from thousands of users. The usual aim is to resell that data on the dark web. From there, criminal buyers use the data to commit credit card fraud and identity theft. If your data is on file at a breached site, you’re at risk.

•   Credit card skimmers. Thieves also can use gadgets that can extract your credit card information when you swipe it to pay for a purchase or to withdraw money from an ATM. These most commonly are found at gas stations or on outside ATMs, though they’re becoming less common with the introduction of chip technology.

•   Inside jobs. Unscrupulous wait staff, store clerks, health-care billing workers, and others with access to credit card data may take a photo or otherwise copy your card information and use it to make fraudulent purchases. On a larger scale, sometimes these workers are part of a criminal ring that helps access financial data from thousands of individuals that’s then sold on the dark web.

•   Public Wi-Fi networks. Your credit card also may be vulnerable to a credit card hack if you use a public internet connection. If someone is monitoring the network and you enter any sensitive information, such as your account information, a thief may be able to swipe it.

Protecting Your Physical Card

Although digital credit card theft is more common than ever, plenty of old-fashioned thieves are still out there and would like to get their hands on your physical card. So, it makes sense to stay diligent. Taking these steps can help:

•   Don’t reveal your physical card. Avoid giving your physical card to anyone, and never post photos on social media with your credit card showing.

•   Black out the security code on the back of your card. Instead, you can file it in your password manager or another safe place. If your card is stolen, it’s harder for thieves to use the account information for online purchases if they don’t have your security code.

•   Don’t sign your card. You can limit fraudulent in-person purchases if your stolen card is unsigned. You can write “See ID” in the blank area, then show your ID to store clerks in lieu of a signature. When a thief is asked for ID, they won’t be able to provide it, potentially preventing the transaction from going through.

•   Use a protective sleeve or wallet. These radio frequency identification (RFID)-blocking layers can prevent your card from being scanned and stolen by a technical device like a card reader.

•   Report lost or stolen cards immediately. If your card is compromised, make sure to alert your credit card issuer immediately. They will then close your card and issue a new one immediately. You may also want to do this if you’ve been notified that you’ve been part of a data breach.

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

Protecting Your Credit Card Account Information

In addition to your physical card, you need to protect your credit card data as well. Big credit card data hacks can mean your personal financial details and credit card account information are vulnerable. But there are steps you can take to protect yourself:

•   Only use reputable shopping sites. Often, fraudulent sites are set up as a ruse to collect credit card information. When you shop online, always buy from trusted merchants.

•   Avoid using your credit card when you’re on public WiFi. It can be easy for criminals to pick up your data when you’re using public internet networks. As such, you’ll want to avoid entering any personal or sensitive information while you’re using these networks, even if you’re on your own personal device.

•   Check your account frequently. Don’t just wait for your statement to arrive in your email every month. Get in the habit of regularly monitoring your credit card activity online, especially if your credit card keeps getting hacked. If you find a suspicious charge, report it immediately.

•   Be wary of phishing scams. You may get an authentic-looking email, text, or phone call asking for your credit card information. This may be a completely cold call or a data thief looking to fill in information they may not have for you, such as your expiration date or CVV (card verification value) security code. Never give your information to anyone asking for it. Banks, credit card companies, retailers, and other reputable places only take your information if you contact them.

•   Use smart passwords. Use strong passwords that include lowercase and capital letters, numbers, and symbols. Change your passwords frequently and remember that if it’s easy for you to remember, it’s probably easy for a thief to figure out. Password manager software can help you generate and keep track of strong passwords.

•   Sign up for two-factor authentication. With two-factor authentication, a one-time code is texted or voiced to your phone when you log into certain types of accounts, including financial accounts. This helps to ensure the account holder is actually the one logging on. Other types of secure authentication, such as face ID, are used by some organizations.

Recommended: Tips for Using a Credit Card Responsibly

Steps to Take When Your Credit Card is Compromised

If you think you were a victim of credit card fraud and/or identity theft, it’s important to act fast. The Fair Credit Billing Act (FCBA) limits your financial responsibility for credit card fraud to $50, so you won’t be on the hook for more than that in the case of bogus credit card charges that have led you to request a credit card refund. Even better, many major credit card issuers offer zero-dollar liability protection.

Under most state laws, you typically have limited liability if the thieves go on to use your personal information to commit other types of financial fraud. But again, it’s vital to report the identity theft immediately. Acting fast will also help minimize the onerous work involved in untangling identity theft.

Here’s what to do if what to do if your credit card is hacked, or you see suspicious charges on your statement or other signs of fraudulent activity:

Contact Your Credit Card Company

As soon as you spot anything, call your credit card company. Tell them you think your card and card information is vulnerable and request a new card with a new account number. Most credit card issuers will comply right away. However, you may be without a credit card for a bit while you wait for the new one to arrive.

Sign Up for Fraud Alerts

If you’ve received a letter or other notification that your personal data may have been compromised, you can place a fraud alert at one of the three credit bureaus — Equifax®, Experian®, and TransUnion® — that may be monitoring your account and that credit bureau is required to notify the others. This stops unauthorized individuals from accessing your account information for a year, at which point you can request for it to be renewed.

Freeze Your Credit

A stronger step than setting up a fraud alert is to freeze your credit. When you ask for a freeze, the three top credit reporting agencies will make sure no one can ask for your credit report without your approval. (You’ll need to contact all three of the credit bureaus to place a freeze.) The downside: A freeze can make it more cumbersome for you to legitimately apply for new credit.

File a Police Report

If you’re a victim of credit card fraud, you may need to file a police report. You might need that documentation as you move through different steps to report identity theft and other fraud as you try to recoup your losses. Your credit card issuer can help you determine if a police report is necessary.

Before filing a police report, file a report with the Federal Trade Commission on its website. Then, when you file the police report, include a copy of your FTC report for evidence of the identity theft.

Recommended: When Are Credit Card Payments Due?

Credit Card Security and Fraud Protection

There are a number of steps that credit card companies can take to increase credit card security and curb credit card hacks. For instance, some credit cards have two-factor authentication to protect access to your account.

Credit card companies can also offer the option to freeze your card immediately. You often can do so through their website or via their app if you notice suspicious charges or other activity.

And, as mentioned previously, some credit card issuers offer a zero-liability policy. As long as you report unauthorized or erroneous card transactions no later than, say, 60 days after the first statement on which the problem occurred, the card issuer won’t hold you liable for any fraudulent charges.

The Takeaway

Credit card hacks can be costly, onerous, and time-consuming. But there are steps you can take to avoid hacks by protecting both your physical card and your online credit card information.

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 can I protect my credit card from being hacked?

You can fight credit card hacking by being mindful of phishing scams, shopping online with caution, keeping your physical card and your digital card information safe, and checking your account regularly for any suspicious charges. Make sure to report any suspicious activity as soon as possible and to use credit freezes and fraud alerts when necessary.

Can a hacker steal my credit card information?

Yes. Credit card hacks include directly stealing your physical card or credit card information and making fraudulent purchases directly with your account. Thieves may also use your stolen personal information to set up a new fraudulent account in your name. Additionally, credit card hacks can happen when thieves steal financial information from databases at large retailers, financial institutions, and other businesses.

Can hackers use a credit card without a CVV?

Yes, although it can be more difficult for hackers to use a credit card without a CVV. The CVV(card verification value) number is often requested in transactions that don’t occur in-person as an additional layer of security to ensure that the person actually has the physical card. However, the CVV is not always required for all transactions or by all merchants.

Photo credit: iStock/Talaj

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.

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

SOCC-Q126-038

A prepaid credit card is a type of credit card onto which you load money in advance. You can use the card to make purchases online or at brick-and-mortar stores or to withdraw money at ATMs.

While they have “credit card” in the name, prepaid credit cards are actually quite different from a standard credit card. Here’s a closer look at what a prepaid credit card is, the different types of prepaid cards, and the pros and cons of having one.

What Is a Prepaid Credit Card?

A prepaid credit card is a card on which you load money ahead of time, similar to the way you would with a gift card. Some of the same credit card issuers that offer traditional credit cards may offer prepaid credit cards.

The amount you load onto the prepaid card is the maximum amount you can spend on the card. For instance, if you load $200 onto the card, you can spend up to $200. Many of these cards are reloadable, so you can add more money to them.

You can use the card to make purchases, and many prepaid cards allow you to make withdrawals from an ATM. Prepaid cards might also be used for government benefits or for payroll.

Many prepaid credit cards are also called prepaid debit cards or stored-value cards. While they may look just like a traditional credit card and bear the logo of a major credit card company like Visa or Mastercard, they’re not actually credit cards.

Because you’re not borrowing from a line of credit, you won’t have to worry about accruing debt, making a minimum payment by a due date, or owing interest. Your activity also will not be reported to the credit bureaus, meaning it won’t affect your credit score or history.

Recommended: What Is a Charge Card?

Types of Prepaid Credit Cards

There are two main types of prepaid credit cards: open-loop and closed-loop. Here’s how they differ.

Open-Loop

An open-loop prepaid credit card can be used anywhere that accepts the credit card network that the card is within. For instance, if your open-loop prepaid credit card has a Visa logo, then your prepaid card will be accepted at any merchant, location, or ATM where Visa cards are accepted.

Closed-Loop

Also known as a single-purpose card, a closed-loop prepaid credit card can only be used to make purchases from a single retailer or a group of stores. For instance, you may only be able to use the card when you shop at a particular grocery store chain. Closed-loop prepaid credit cards usually don’t have a credit card network logo on them.

How Does a Prepaid Credit Card Work?

You can use a prepaid credit card to make purchases and many also allow you to take out money at ATMs, just as you can get cash from a credit card. Each transaction you make using the prepaid card will reduce the total balance you have available. So, for instance, let’s say you loaded a total of $500 onto your card. If you make a purchase for $150, you would have $350 remaining to spend with your card.

Though it depends on the prepaid credit card, you may be able to reload additional funds onto your card. You can do so by depositing money from a bank account or paycheck, reloading the card at a retail location using cash, or buying a reload pack to add a certain amount to your card.

Advantages of a Prepaid Credit Card

There are benefits and risks of prepaid debit cards, which is another common name for prepaid credit cards. Here are some of the upsides to be aware of if you’re considering getting one.

Doesn’t Require a Credit Check

A credit check isn’t required to open a prepaid card. As such, it may be an option available to those with lower credit scores or a slim credit history. Further, getting a prepaid credit card won’t require a hard credit inquiry, which can temporarily ding your credit score.

Provides an Alternative to Cash

A prepaid credit card is an easy alternative to carrying and using cash. Depending on the network, a prepaid card might come with liability protections similar to those offered by debit cards.

No Bank Account Needed

You won’t need a bank account in order to get or use a prepaid debit card. Unlike debit cards, prepaid credit cards don’t require you to draw funds from a bank account, though if you do have one, you have the option to deposit money onto the prepaid card from your checking or savings account.

Won’t Cause You To Carry Over Debt or Incur Interest

Since you’re using money that’s already been uploaded to the card, you won’t have to worry about running a balance on your credit card. Further, you won’t have to worry about making payment due dates, one of the cardinal credit card rules, or the possibility of incurring interest if you can’t pay off your balance in full.

Recommended: When Are Credit Card Payments Due?

Disadvantages of a Prepaid Credit Card

There are also some distinct drawbacks to prepaid debit cards to consider as well.

Can Carry High Fees

Fees are probably the biggest drawback of a prepaid credit card. Many prepaid credit cards come loaded with fees, which can include the following:

•   Activation fees

•   Monthly maintenance fees

•   Reloading or card replacement fees

•   Purchase fees

•   ATM fees for transactions or balance inquiries

•   Check deposit fees

•   Declined transaction fees

•   Inactivity fees

•   Foreign transactions fees

•   Customer service inquiry fees

Just as you would consider how much a credit card costs before applying for one, do the same due diligence on prepaid card fees beforehand.

Does Not Build Your Credit

Prepaid credit cards aren’t actually credit cards, which offer a revolving line of credit. Because they aren’t a form of credit, your activity is not reported to the credit bureaus. That means they aren’t a way to build your credit.

Offers Fewer Fraud and Liability Protections

While prepaid credit cards might come with some fraud and liability protections, they typically don’t have the full suite of protections that standard credit cards offer. Instead, their protections may be more similar to those offered by debit cards, which are generally weaker than those of credit cards.

Recommended: How to Avoid Interest On a Credit Card

Alternatives to Prepaid Credit Cards

Besides prepaid credit cards, here are a few other options you might consider:

•   Gift cards: A gift card can be used at particular merchants or retailers. There are also gift cards offered by credit card networks, such as Visa or Mastercard, that you can use anywhere these networks are accepted. Like a prepaid credit card, you don’t need a bank account to get a gift card, though using one won’t help you boost your credit. Unlike prepaid credit cards, gift cards don’t typically carry any fees aside from potentially a one-time activation fee.

•   Debit cards: Another option you might consider is a debit card. These do typically require a bank account, however. Like a prepaid card, you’re only using the funds available in the account connected to the card. As such, getting a debit card does not involve a credit check nor will you have to pay interest since you’re not borrowing funds. There may be fees involved though.

•   Secured credit cards: If you have a low credit score or a thin credit profile, a secured credit card — one of the different types of credit cards available — can help boost your credit if you’re using the card responsibly. Secured credit cards require a deposit, and the deposit amount is usually the same as the card’s credit limit. Secured credit cards do have fees, including interest fees. Plus, a credit check is required.

The Takeaway

Contrary to its name, a prepaid credit card isn’t actually a credit card. You aren’t accessing a line of credit with a prepaid card, and you can’t build credit. Instead, you load cash onto the prepaid card, which effectively acts as your credit limit. You can then use the funds to make purchases or, in many cases, withdraw money from an ATM. Considering the benefits and drawbacks of these cards can help you determine if they might be right for you.

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 prepaid cards require monthly payments?

Prepaid cards can have a monthly maintenance fee. The amount of this fee varies, typically ranging from $3 to $10 a month, though the fee may be waived in certain circumstances, depending on the card. The money is drawn from the existing balance on your card.

Do prepaid cards cost money?

Prepaid cards typically have fees. This may include an activation fee, ATM fees, reload fees, and foreign transaction fees, among others. Before getting a prepaid credit card, make sure to check what fees are involved.

Is an account needed for a prepaid credit card?

No. A bank account is not required for a prepaid credit card.

Do prepaid cards help build your credit?

Prepaid credit cards do not help you to build credit. That’s because these cards are not actually credit cards and they don’t offer a revolving credit line. That means your payment history isn’t reported to the three credit bureaus.

Photo credit: iStock/towfiqu ahamed

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.

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.

SOCC-Q126-053

When you piggyback on someone else’s credit card, you become an authorized user on their credit card account. Usually, this is done if you are working to establish credit for the first time or strengthen your credit.

While piggybacking credit can serve as an important tool as you establish firm financial footing, there are also situations in which it can be risky. Because of this, it’s important to understand how piggyback credit works before using this strategy.

What Is Credit Card Piggybacking?

When piggybacking credit, you become an authorized user, or a secondary account holder, on a credit card account. As a secondary cardholder, you may receive your own card. You’ll be allowed to make purchases on the account, but you aren’t necessarily responsible for payment. This differs from joint accounts, where both parties are responsible for payment.

The primary account holder will be able to view all of the purchases and will ultimately be responsible for making all payments. You’ll likely enter into some sort of agreement with the primary account holder to pay them back for any purchases that you make.

How Does Credit Card Piggybacking Work?

If you don’t have a credit history or you’re looking to build your credit, credit card piggybacking can typically help. That’s because when you become an authorized user on someone else’s card, their credit history for that account has an impact on yours.

When you become an authorized user, that account pops up in your credit report. If the primary account holder has a long history of paying their bills on time or they keep their balance low, this might have a positive effect on your credit. If the account has been open for a long time, say 15 years, it will read on your credit report as a 15-year account. Since length of credit history has an effect on your credit score, this can prove helpful in building your score.

Be aware, however, that the impact on your credit score doesn’t always move in the positive direction. If the primary account holder misses payments, for example, the account could have a negative effect on your credit.

Recommended: When Are Credit Card Payments Due?

Does Piggybacking Credit Actually Work?

Piggybacking on a credit card does usually work, but not all of the time. For one thing, not all credit card companies will report a secondary account holder to the credit reporting bureaus Equifax®, Experian®, and TransUnion®.

What’s more, when you become an authorized user, you’re not necessarily learning to use credit cards responsibly — especially if you’re not making purchases and having to pay them off on time.

Is Piggybacking Illegal?

Piggybacking is not illegal. In fact, under the Equal Credit Opportunity Act, Congress determined that authorized users cannot be denied on existing credit accounts.

That said, there are situations in which becoming an authorized user is a deceptive practice and may entice individuals into some fraudulent situations. (See more on this below.)

What Is Person-to-Person Piggybacking?

Person-to-person piggybacking involves becoming an authorized user on the account of a significant other, family member, or friend. For example, young adults often become an authorized user on their parent’s credit card as they seek to build credit for themselves.

Eventually, that young adult will have built enough credit to get a credit card of their own and will be financially stable enough to be able to pay it off on time. At this point, they can decide to drop from their parents’ account.

What Is For-Profit Piggybacking?

Businesses known as tradeline services offer piggybacking for a fee. A tradeline is another word for a revolving credit account that shows up on credit reports.

The tradeline service matches individuals who are looking to build their credit with a stranger who has good credit. The tradeline service adds them to that person’s account for a fee. The cardholder receives a portion of the money, and you won’t receive a physical card or access to the account.

The practice of purchasing a tradeline can be seen as a method of deceiving lenders and credit reporting agencies into thinking you have better credit than you do. If perceived as fraud, this could have some legal ramifications.

Engaging a tradeline service can also be pricey. Depending on what type of credit you’re looking for, it may cost you anywhere from a few hundred to a few thousand dollars.

It’s also important to understand that you’re only authorized on the cardholder’s account for a short period of time. While your credit may be built in the short-term, when you’re dropped from the account, your credit score may fall as well.

Risks of Credit Card Piggybacking

In addition to the considerations above, there are other risks to be aware of when piggybacking, especially when doing so through a third party such as a tradeline service.

•   You have to give out your personal information. This includes giving your name, address, and Social Security number to the tradeline service. Providing them with your data may put you at risk for fraud and identity theft.

•   It’s not looked on favorably by lenders. Lenders use your credit score to learn how well you’re able to manage your debts. If they learn that you’ve used a tradeline service, they may lose trust in you and be less likely to extend credit to you.

•   There’s the potential for fraud. Beware any company that tells you that you can hide bad credit or a bankruptcy using a credit privacy number. The number they provide might actually be someone else’s Social Security number, which would put you at the heart of an identity theft scam.

•   It could hurt your credit. You might also be duped into buying an account that’s gone into default, which could hurt your credit.

•   There’s the potential for address merging, which is fraudulent. Sketchy companies may also try to use a process called address merging. This involves claiming that the authorized user lives at the same address as the account holder. This is fraudulent and indicates that you are not working with a reliable company.

•   You don’t get the chance to build healthy financial habits. The best way to build your credit score is to avoid taking on more debt than you can afford and to make payments on time. If you don’t have experience with doing that, you may not learn healthy financial behaviors.

Is Credit Card Piggybacking Right for You?

Credit card piggybacking may be right for you if you’re building credit for the first time and need a way to get your foot in the door.

If you do decide to try piggybacking credit, piggyback on the credit of someone close to you, if possible, such as a parent or close friend.

Alternatives to Credit Card Piggybacking

Piggybacking isn’t the only way to build your credit.

You could instead turn to one of the other different types of credit cards. Secured credit cards, for instance, require you to make a security deposit to receive a line of credit, which makes these cards easier for people with no credit history to qualify for. The credit limit on the card is typically equal to the security deposit amount.

For college students, there are student credit cards. These are entry level credit cards with lower credit limits that are generally easier to qualify for. They are designed to help students build a credit history.

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

Tips for Managing Your Credit History

There are a few strategies that can be helpful in building and strengthening a credit history.

•   Paying bills on time. Consistently paying bills on time makes you appear more creditworthy to lenders. Payment history is a major factor that impacts your credit score.

•   Having a diverse mix of credit, such as credit cards, student loans, auto loans, or a mortgage, shows that you can handle different types of accounts, and may help build your credit.

•   Keeping your credit utilization below 30%. Credit utilization measures how much of your credit limit you are currently using. You can calculate it by dividing your credit card balance by your loan limit.

•   Limiting hard credit inquiries. When you apply for credit, you trigger what is known as a hard credit inquiry. These can temporarily lower your credit score.

•   Monitoring your credit report. You can now request a free credit report each week from AnnualCreditReport.com, which is directed by federal law to provide free credit reports from the three credit reporting bureaus. Look for mistakes on the report and alert the reporting bureaus immediately if you spot anything that’s amiss.

Learning to read your credit report can also clue you into areas of your credit that need your attention and may be dragging down your score.

The Takeaway

Piggybacking credit — becoming an authorized user on another person’s credit account — can be a tool for building credit. However, you only get a benefit with credit card piggybacking if the other person’s account is in good standing. If they miss a payment, it could have a negative impact. And if you use a third-party tradeline service, you could be putting your personal information at risk.

Before moving ahead with piggybacking credit and becoming an authorized user on someone else’s account, consider all the pros and cons.

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

Is piggybacking credit illegal?

Piggybacking credit is not illegal. In fact, under the Equal Credit Opportunity Act, authorized users cannot be denied on existing credit accounts.

How much can piggybacking positively impact your credit score?

Piggybacking as an authorized user on the account of someone with good credit who has a history of paying their bills on time might positively affect your credit since this information will show up on your credit report. However, if the other person fails to pay their bills, your credit could be negatively impacted.

Does piggybacking credit still work in 2026?

Piggybacking credit does still work in 2026 when it’s done by becoming an authorized user on the account of someone you know and trust who has a good credit history. Tradeline services that charge to add you to a stranger’s account are more questionable and may, in some cases, be viewed as deceptive by lenders.

Photo credit: iStock/Morsa Images

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.

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

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

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

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Almost half of all Americans carry a balance on their credit card, month after month. If you’re among their ranks, you know that the combination of high prices and high credit card interest rates can make it challenging to pay that debt off in full.

Many cardholders have seen their interest rates creep up in recent years, in line with the Federal Reserve’s recent rate increases. That means interest payments are gobbling up a bigger share of credit card balances. And those credit card balances can be major. This kind of debt hit a staggering $1.23 trillion in late 2025, according to data from the Federal Reserve Bank of New York.

But the situation isn’t hopeless, however. If you’re one of the cardholders who can’t pay credit card debt in full, here are five steps you can take to address it.

Step 1: Check your Credit Card Interest Rate

If you haven’t carried a credit card balance before, you may not be aware of what interest rate your credit card is charging. But it’s important to know exactly how much you’re getting charged so if you need to, you can budget for interest expense as well as your purchases.

Average credit card interest rate ranges from 20%-25% currently. (Depending on what type of credit card you have, your credit score, and your credit history, you may have a higher or lower interest rate than the average.)

With interest rates this high, it can be a real financial setback to carry a balance for an extended length of time, making only the minimum credit card payment. You may find that you are only paying interest and making little headway in paying off what you actually spent.

💡 Quick Tip: With credit card interest rates rising in recent years, calls for credit card interest caps have been in the spotlight. Those carrying high-interest credit card debt, however, may find debt relief by switching to a fixed, lower-interest personal loan. A SoFi personal loan for credit card debt may provide a cheaper, faster, and predictable way to pay down debt.

Step 2: Understand How Your Grace Period Works

If you pay your credit card statement balance in full by the due date, a credit card grace period will usually take effect for the next billing cycle. That means you won’t owe interest on new purchases until the due date for the next billing cycle. If you pay that statement balance in full by the next due date, the grace period will continue into the next cycle, and on and on.

But, if you make only the minimum payment or a partial payment on the full statement balance by the credit card due date, you’ll get charged interest on the remaining balance and lose your grace period for the next billing cycle. This means you’ll owe interest on any purchase immediately. Even if you go back to paying the full balance, your grace period may not renew for several more cycles, depending on the specific terms of your credit card.

If you’re in a position where you can’t pay credit card bills and must move to partial payments, make sure you’re aware of the additional interest expense you’ll incur on the remaining credit card balance. Try your best to stop making new purchases with that card since interest will be charged on those purchases immediately.

Recommended: What Is a Charge Card

Step 3: Look at Changing Your Due Date

If you’re feeling overwhelmed because many of your bills are due at the same time, talk to your credit card company about changing your due date. You might be able to move your credit card due date to a day of the month that works better for your budget, so the payments you owe are a bit more staggered.

While this switch might not help immediately to pay down credit card debt, it could offer some relief in the long run.

Recommended: How to Avoid Interest On a Credit Card

Step 4: Explore Ways to Pay Off Your Balance Faster

You may find that with higher interest rates and inflationary spending, you need a more efficient way to pay off your credit card debt, such as by refinancing credit card debt. Luckily, there are some options for how to pay off credit card debt, though keep in mind the best way to pay off credit card debt will depend on your financial specifics.

Balance transfer credit cards that offer a limited time low or sometimes even 0% interest rate can help — especially if you think you can pay the balance in full during the promotional low-rate period.

Another option you might consider is applying for a low-interest personal loan to pay off credit card debt in full. This could help you secure a lower interest rate, and by consolidating your credit card debt, you’d have fewer due dates to keep track of. Keep in mind, however, that there are pros and cons of personal loans to pay off credit card debt.

Recommended: Tips for Using a Credit Card Responsibly

Step 5: Consider Using a Budgeting Tool

If you’re finding it hard to make your credit card payments, that can be a signal it’s time to take a close look at your spending, perhaps with the help of one of the many online budgeting tools available.

Personal finance tools can help you understand just how much your cost of living has risen in recent months and make it easier to flag places you can cut back. Some can help to pinpoint fees you may be paying unwittingly or the automatic payments you’re making on your credit card that could get trimmed. Cutting these costs can then make it easier to pay off credit card debt.

The Takeaway

If you’re struggling with a credit card balance you can’t pay off, taking steps to pay off credit card debt faster and budget smarter can help. These can involve understanding your rate, changing your payment due date, and other moves.

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 is a fast way to pay off credit card debt?

You might be able to use a balance-transfer credit card and pay down your debt during the 0% APR promotional period. Or you might consider securing a personal loan to pay off the debt. You would then pay off the personal loan, which could have a lower interest rate.

Can you change your credit card payment due date?

You may be able to change your payment due date. See if your card’s website or app allows this kind of shift, or contact customer service.

Do most Americans carry credit card debt?

According to recent data, approximately 49% of Americans carry credit card debt.

Photo credit: iStock/Sneksy

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 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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