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Credit card networks provide the financial infrastructure for transactions, while credit card issuers are responsible for providing cards to consumers and managing their accounts. To put it another way, credit card networks facilitate transactions between merchants and credit card issuers, and credit card issuers pay for transactions on the cardholder’s behalf when they use their card.

Once you understand this difference, however, you may be confused by the fact that some credit card networks are also card issuers. To get a better understanding, keep reading for a closer look at the differences between a credit card network vs. issuer.

What Is a Credit Card Network?

Credit card networks create the digital infrastructure so merchants can facilitate transactions between themselves and the credit card issuers — meaning they’re key to how credit cards work. In order to facilitate these transactions, the credit card networks charge the merchants an interchange fee, also known as a swipe fee.

Here’s an example of how this works:

•   Say someone walks into a clothing store and uses their credit card to buy a pair of pants. They swipe or tap their credit card to make the purchase.

•   The store’s payment system will send the details of this transaction to the cardholder’s credit card network, which then relays the information to the credit card issuer.

•   The credit card issuer decides whether or not to approve the transaction.

•   The clothing store is alerted as to whether or not the transition was approved.

Essentially, credit card networks make it possible for businesses to accept credit cards as a form of payment, making them integral to what a credit card is. Credit card networks are also responsible for determining where certain credit cards are accepted, as not every merchant may accept all networks.

The Four Major Card Networks

The four major credit card networks that consumers are most likely to come across are:

•   American Express

•   Discover

•   Mastercard

•   Visa

All of these credit card networks have created their own digital infrastructure to facilitate transactions between credit card issuers and merchants. These four credit card networks are so commonly used that it’s possible to find a business almost anywhere in the U.S. that accepts one or more of the payment methods supported by these merchants.

When traveling and using a credit card internationally, it’s more common to come across Visa and Mastercard networks.

Now, for the detail mentioned above that can cause confusion: Two of these popular payment networks — American Express and Discover — are also credit card issuers. However, their offerings as a credit card network are separate from their credit card offerings as an issuer.

Does It Matter Which Card Network You Use?

Which credit card network someone can use depends on the type of credit card they have and whether the credit card network that supports that card is available via the merchant they are purchasing from. Most merchants in the U.S. work with all of the major networks who support the most popular credit cards, so it shouldn’t matter too much which credit card network you have when shopping domestically. When traveling abroad, however, it’s important to have cash on hand in case the credit card network options are more limited.

Merchants are the ones who are more likely to be affected by the credit card networks that they use. This is due to the fact that credit card networks determine how much the merchant will pay in processing fees in order to use their system.

Recommended: Charge Cards Advantages and Disadvantages

What Are Credit Card Issuers?

Credit card issuers are the financial institutions that create and manage credit cards. They’re responsible for approving applicants, determining cardholder rewards and fees, and setting credit limits and the APR on a credit card.

Essentially, credit card issuers manage the entire experience of using a credit card. Cardholders work with their credit card issuer when they need to get a new card after losing one, when they have to make their credit card minimum payment, or when they want to check their current card balance.

Credit card issuers can be banks, credit unions, fintech companies, or other types of financial institutions. Some of the biggest credit card issuers in the U.S. are:

•   American Express

•   Bank of America

•   Barclays

•   Capital One

•   Chase

•   Citi

•   Discover

•   Synchrony Bank

•   U.S. Bank

•   Wells Fargo

Credit Card Network vs Issuer: What Is the Difference?

Credit card issuers and credit card payment networks are easy to confuse. The main difference, as noted, is as follows:

•   Credit card networks facilitate payments between merchants and credit cards.

•   Credit card issuers create and manage credit cards for consumers. If you have an issue with your credit card — like in the instance you want to dispute a credit card charge or request a credit card chargeback — it’s the issuer you’d go to.

These are the main differences to be aware of when it comes to credit card networks vs. issuers, provided in chart form:

How Credit Card Networks and Issuers Work Together

Credit card networks and issuers need each other to function. Without a credit card network, consumers wouldn’t be able to use their card to shop with any merchants, and the credit card issuer’s product would go unused. Credit card networks create the infrastructure that allows merchants to accept credit cards as payment.

However, it’s up to the credit card issuers to approve or decline the transaction. The credit card issuer is also the one responsible for getting credit cards into consumers’ hands when they’re eligible and old enough to get a credit card, thus creating a need for the credit card networks’ services.

Recommended: When Are Credit Card Payments Due

The Takeaway

A credit card network provides the financial infrastructure for cards and facilitates the transaction between the issuer and the merchant. The issuer is responsible for creating, offering, and managing consumers’ accounts. A couple of businesses are both credit card networks and issuers. Understanding the fine points of how credit cards operate can be an important part of your financial literacy and using credit responsibly.

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

FAQ

What is a credit card network?

A credit card network is the party that creates the necessary infrastructure to process transactions between a credit card issuer and a merchant. In return for processing the transaction, the merchant pays the credit card network an interchange fee, which is how the credit card networks make money.

How do I know my credit card issuer?

To find out a credit card’s issuer, simply look at your credit card. There will be a string of numbers on the credit card, and the first six to eight digits represent the Bank Identification Number (BIN) or the Issuer Identification Number (IIN). The Issuer Identification Number identifies who the credit card issuer is.

Who is the largest credit card issuer?

The four largest credit card networks are American Express, Discover, Mastercard, and Visa. Most merchants in the U.S. work with all four credit card networks. When traveling abroad, it’s more common to come across Visa and Mastercard networks.

Photo credit: iStock/Poike

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.


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

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If you’ve purchased a product or service using a credit card and never received it, or if the item arrived damaged, then you may be eligible for what’s known as a chargeback. A credit card chargeback is when a bank reverses an electronic payment to trigger a dispute resolution process.

In this guide, you’ll learn more about what a credit card chargeback is, how it works, and when you may be able to request one.

What Is a Credit Chargeback?

Credit card chargebacks usually occur between a merchant and a bank that issued the credit card used for the transaction. Chargebacks are used to reverse a payment after a billing error, unauthorized credit card use, or the failure to deliver a product or service. You can also request a chargeback when the goods or services that you paid for with your credit card you received aren’t delivered as advertised.

For example, if you ordered a red jacket, and you received a blue one, you could request a chargeback if the merchant refuses to exchange or refund your purchase.

Chargebacks can be initiated for almost any merchant that accepts credit card payments.

Credit Card Chargeback vs Refund

While both a chargeback and a refund can result in you getting your money back, they aren’t the same thing. Knowing the difference is an important part of understanding how credit cards work.

•   With a refund, it’s the merchant rather than the consumer that initiates the return of funds. Additionally, a consumer typically deals with the merchant to get a refund

•   When a chargeback occurs, it’s the bank issuing the credit card that you’ll work with.

How Does a Credit Charge Back Work?

If you have an issue with a product or service you received or you notice a charge on your credit card statement that you don’t believe was authorized, you can initiate a credit card chargeback. These are some details about how this typically works:

•   You can usually only make a chargeback within 120 days of the date of purchase.

•   Once you’ve contacted the credit card issuer to dispute the charge, the bank will take over the process and contact the merchant. The merchant will have the opportunity to either accept or refute the chargeback, and you may be asked to provide evidence supporting your request.

•   At the end of the investigation, the chargeback will either be accepted, in which case you’d get your funds back, or it will be rejected.

•   If you disagree with the decision, you can always continue to dispute the charge through a process called arbitration.

When to Use a Chargeback

The Federal Trade Commission (FTC) provides protections to consumers who use credit cards, including the right to accurate billing, protection from unauthorized charges, and the right to dispute credit card charges for goods or services that are different than described. As such, chargebacks are issued for a variety of reasons.

Before proceeding, however, keep in mind that if there was an issue with your service or goods, you may consider giving the merchant the opportunity to make it right before requesting a chargeback.

Fraud or Unauthorized Use

A common reason to request a credit card chargeback is due to fraud or unauthorized use. If you don’t recognize a transaction on your credit card statement or believe someone used your card without your authorization, you may consider requesting a credit card chargeback.

Moving forward, a good way to prevent credit card fraud can be to keep your credit card expiration date and CVV number on a credit card safe.

Incorrect Amount

If an amount on your credit card bill is incorrect, you can file for a chargeback. For example, if the merchant adds an extra zero to your bill and you can’t reach the company to have it corrected, then this would be a good time to request a chargeback — especially if the overcharge has pushed you close to your credit limit.

Recurring Billing Was Not Stopped

If you cancel a subscription service but continue to be billed afterwards, a chargeback can make sense. It can help if you have proof in hand that you had canceled the subscription already.

Goods and Services Not Delivered

Paying for a good or service that you never received is another reason to file a chargeback. If you order something that never arrives and are unable to get the company to send it or give you a refund, then filing a chargeback may be your best course of action. After all, you don’t want to potentially pay interest on something you never received, even if you do have a good APR for a credit card.

Goods or Services Were Not as Described

If you receive a good or service that was substantially different from what was described or agreed to, you can file a chargeback for the cost of that good or service. For example, if you paid to have work done on your house, but it was done incorrectly and the service provider refused to fix it, then you could request a chargeback.

However, remember that the merchant will get the opportunity to prove that the services were provided as described.

Return Credit Not Processed

If you returned an item or canceled a service within a merchant’s return policy but never received credit for the return, such as a refund, you can file a chargeback with your credit card. This can help you recoup the funds you were owed (plus any credit card interest that may have accrued in the meantime).

Recommended: How Many Credit Cards Should You Have?

How to Submit a Chargeback

Here are the typical steps for submitting a credit card chargeback:

1. Contact Your Bank or Card Issuer

To submit a chargeback, you first initiate the process with your bank or card issuer, often through its website. Some card issuer websites allow you to initiate or process most disputes entirely online. Otherwise, you can call your card issuer to file the chargeback or request a chargeback by mail.

2. Receive Confirmation of Your Request

After you’ve submitted the chargeback request, your bank will provide written confirmation of your chargeback request. They will then either post a temporary credit to your account to cover the disputed amount or pause required payments and APR on a credit card on the disputed amount while the issue is being investigated.

3. Wait While Your Request Is Submitted to the Merchant

Next, the bank will submit your chargeback request to the merchant. The merchant has a certain amount of time to respond to the bank’s inquiry.

During the investigation, make sure that you continue to pay your credit card bill for the remaining charges. At the least, make sure that you’re making the credit card minimum payment. Otherwise, you’ll end up paying interest on the non-disputed charges.

4. Receive a Decision

If the chargeback is accepted by the merchant, your billing dispute will be closed and your bank will provide an account credit to cover the disputed charge.

However, if the merchant rejects the chargeback request, your bank will evaluate the information and make a decision, which they will notify you about in writing. If you disagree with the bank’s decision, you can dispute your bank’s decision through the bank’s dispute resolution process.

Recommended: What Does Preapproved Mean for a Credit Card?

The Takeaway

Credit card chargebacks allow you to dispute a charge on your credit card. You can initiate a chargeback from a variety of reasons, such as fraud or unauthorized use, being billed for an incorrect amount, or encountering a situation where goods or services either aren’t delivered or aren’t provided as described. To start the process, you’ll contact your credit card issuer, and they will then reach out to the merchant.

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

FAQ

What happens when you submit a chargeback?

When you submit a chargeback, you initiate the process with your bank. The bank contacts the merchant for the request, and the merchant decides whether to accept or reject the chargeback request.

Does a chargeback hurt your credit?

A chargeback doesn’t hurt your credit in itself, but any unpaid credit card bill during the dispute process could temporarily impact your credit score. If the disputed charge or charges are large and comprise a significant portion of your credit limit, this could also negatively affect your credit score temporarily, since your credit utilization ratio will be high.

Are chargebacks always successful?

Chargeback requests are not always successful. The merchant can respond that the charge is valid and provide documentation to support the claim. In this case, the credit card issuer may deny your request for a credit card chargeback.

How much is the chargeback fee?

A chargeback fee only applies to the merchant, not to the customer. The average chargeback fee is less than 1% (0.60%, to be exact), but businesses with more chargebacks will face higher fees.

Is it worth fighting a chargeback?

Whether it’s worth fighting a chargeback depends on a variety of factors and will vary from person to person. Consider the amount in question, the time it may take, and the reason for the chargeback request. It’s also a good idea to contact the merchant first to give them a chance to correct the problem before requesting a chargeback.

Photo credit: iStock/PamelaJoeMcFarlane

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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If you’re overwhelmed by credit card debt, you might consider credit card debt forgiveness, which can involve paying less than you owe. This type of credit forgiveness is rare, however, and it usually comes with some financial consequences.

Still, if you’re unable to repay your credit card balance, it may be an option worth exploring. Read on to learn how to get credit card debt forgiven and what options there are to credit card forgiveness.

What Is Credit Card Debt Forgiveness?

Credit card debt forgiveness occurs when a portion of your credit card debt is effectively erased. However, this rarely happens. And when it does, it usually comes at a high cost.

As part of the terms and conditions you agreed to when signing up for a credit card, you likely committed to repaying your credit card debt accrued from swiping your card to make purchases. For this reason, it’s unlikely the credit card company will forgive your debt unless you have a compelling reason for why you don’t have to repay it.

(If your identity was stolen and a fraudster ran up your credit card bill, for instance, you’re probably not responsible for repaying the outstanding balance. In this case, you may consider disputing a credit card charge.)

When you don’t pay your credit card bill for an extended time, the credit card company may sell your debt to a debt collector. At this point, the debt collector will reach out to try to get you to repay all or a portion of the debt you owe. However, if you agree to repay a portion of your debt, they may forgive the rest, resulting in credit debt forgiveness.

Recommended: Charge Card Advantages and Disadvantages

How Does Debt Forgiveness Work for Credit Cards?

If a debt collector forgives your debt, you’ll generally still have to pay off a portion of the amount you racked up. Here’s a look at how credit card debt forgiveness works:

•   Say that you owe $10,000 in outstanding credit card debt. If you haven’t paid your bill for the last six months — not even your credit card minimum payment — your credit card company may have sold the debt to a debt collector.

•   At this point, you’ll no longer communicate with your credit card company about debt negotiations since the debt collector is now responsible for recouping the loss.

•   If you agree to repay $5,000 of the debt, your debt collector may require you to make a lump sum payment or installment payments over a set period of time.

•   This means that the other $5,000 of your outstanding credit card balance is now forgiven, meaning you don’t have to pay it.

While this may seem like a relief, here’s one important point to note: You’re still responsible for paying taxes on the amount of credit card forgiveness you receive in most cases. Essentially, you will claim the forgiven debt as taxable income and report it on your tax return.

When Does Credit Card Debt Forgiveness Work Best?

When you’ve fallen behind on your credit card payments and your creditor sells your debt to a debt collector for a fraction of the total balance, this is usually the best time to request credit forgiveness. Typically, debt collectors are more willing to settle some of your debt since they purchased your debt for a portion of what you owe. In other words, any debt you agree to pay back will help the debt collector make a profit from the transaction.

However, if your debt has not yet gone to a debt collector and the creditor is about to charge-off your account, you could still consider credit card forgiveness. A charge-off means that the creditor is accepting your debt as a loss. Therefore, they can recoup the funds by selling your debt to a debt collector. So, before they sell the debt, they might be willing to negotiate credit card debt forgiveness with you.

How Credit Card Debt Forgiveness May Affect Your Credit

The most significant financial implication of credit card debt forgiveness is the negative impact it can have on your credit. When you don’t pay your credit card bill for an extended amount of time, the creditor may report this as a charge-off to the three major credit bureaus (TransUnion, Equifax, and Experian). A charge-off indicates that you didn’t follow through with your financial commitments to a lender, and it can stay on your credit report for up to seven years.

Because credit bureaus use this information to calculate your credit score, a charge-off could lower your score for a while. A lower credit score may make it challenging to qualify for future loans or credit cards. And if you do qualify, you may have to pay a higher than average credit card interest rate, which can make borrowing more expensive.

To avoid this situation, it’s best to contact your credit card issuer as soon as you get behind on payments. Credit card companies may be willing to help you if you’ve fallen on hard times. They may offer a hardship plan, which can lower your monthly payments or reduce your interest for a set amount of time and ultimately help you get back on your feet. This is only a temporary solution though, so if your financial issues are more significant, you may need to explore another solution.

Pros and Cons of Credit Card Debt Forgiveness

If you can’t make your credit card payments, credit card forgiveness might be a viable option. But, while getting your debt forgiven can help alleviate the financial burden, it also can harm your credit and cost you financially.

Here’s a breakdown of the pros and cons of pursuing credit card debt forgiveness.

Alternatives to Credit Card Debt Forgiveness

An alternative to credit card debt forgiveness may make more sense for your financial situation. Exploring all of your options in advance can help ensure that you make the best decision for your needs.

Debt Management

Third-party credit counseling agencies offer debt management plans that help you establish a plan for debt repayment. Working with one of these agencies may help you lower the fees you owe as well as your interest rate. However, you usually must agree to repay the total amount of outstanding debt before moving forward.

With a debt management plan, you’ll make one monthly payment to the credit counselor, who will then distribute the funds among the creditors you owe. Most plans help you repay your debt within three to five years. During this time, your account will still accrue interest, though your creditor might be willing to offer a lower rate.

To use one of these plans, you usually have to close your credit card account. This can negatively impact your credit score since it lowers your total credit card limit, thus increasing your credit utilization rate. Your credit utilization ratio is one of the most significant factors credit bureaus use when calculating your credit score.

Also, you will likely have to pay a monthly fee to your credit counselor. If considering this option, carefully vet the counselors you are considering and make sure the one you are working with has a good reputation.

Debt Settlement

Working with a debt settlement company can help you to lower the amount of debt you owe. For example, if you owe $10,000 as your credit card balance, the credit debt settlement company may try to help you settle your debt for $5,000 instead. But, of course, this strategy will only work if the creditor would rather have some of your debt repaid instead of having you default on the account.

Debt settlement also can harm your credit. Usually, debt settlement companies require you to stop making credit card payments while they negotiate with your creditor. At this time, your payments will go toward the debt settlement company so they can offer your creditor a lump sum payment as an incentive to settle your debt. However, pausing payments can negatively impact your debt since payment history is another factor used to calculate your credit score.

While debt settlement may sound good in theory, you should use it as a last resort option before filing bankruptcy. This solution is risky since it doesn’t guarantee that you’ll settle your debt. Your creditor could reject the offer.

Debt Consolidation

If your credit isn’t damaged too much, you might be able to qualify for a debt consolidation loan. While this isn’t technically a debt relief option, it can help you to consolidate your debt and potentially lower your interest rate, allowing you to save money.

To consolidate your debt, you’ll apply for another loan, ideally one with better terms than your existing debt. You’d use the loan to pay off your outstanding credit card debts. Then, you will make installment payments to the lender instead of paying the creditors.

Before you apply for a debt consolidation loan, compare your options to identify the loans with the most competitive terms and interest rates.

Declaring a Chapter 7 or Chapter 13 Bankruptcy

Depending on your situation, declaring Chapter 7 or Chapter 13 bankruptcy may make the most sense. For instance, if you can’t make the payments with a debt management or debt settlement plan, bankruptcy could be an option to avoid going deeper into debt. But before you declare bankruptcy, consider speaking with a bankruptcy attorney to weigh out the pros and cons of this solution.

Bankruptcy should be one of your last resorts since it can drastically harm your credit. Also, it will stay on your credit report for up to 10 years after the filing date. To settle your debts with bankruptcy, you may also be forced to sell some of your assets.

The Takeaway

Credit card debt forgiveness involves paying less than the full amount you owe. While this prospect may sound great in theory, in reality it can harm your credit and end up costing you financially. If you find yourself starting to struggle with debt repayment, contact your credit card company to see if they will offer a hardship plan. If they’re unwilling to help or your financial troubles require a more long-term solution, you can explore credit debt forgiveness and other alternatives.

While credit cards can land you in a heap of debt, they can also be a great financial tool when used responsibly.

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

FAQ

How long does it typically take before a debt is forgiven?

Depending on the route you go, the time frame for debt forgiveness may vary. For example, bankruptcy can take four to six months, while debt settlement can take 36 months or more.

Does debt forgiveness hurt your credit score?

Yes, once you become delinquent on payments, your credit score can be negatively impacted. Then, when your credit card company sells your debt to a debt collector, they may report your balance as a charge-off or a complete loss, which can also impact your credit drastically.

How do you get your credit card balance forgiven?

Usually, once a creditor sells your outstanding debt to a debt collector, the debt collector may agree to forgive some of your credit card debt. But, you must agree to repay a portion of the debt for this to happen.

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.


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.


Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Photo credit: iStock/damircudic
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If you’re young and looking to access and build credit, opening a credit card can be a great step. However, you need to be at least 18 years old to open your own account. If you’re under the age of 18, you can’t open your own credit card, but you can be an authorized user on someone else’s account.

Even if you’re old enough to get a credit card, when you’re under the age of 21, you may face additional requirements when applying. Read on for tips on getting a credit card when you’re young and options you might consider to be able to start building your credit.

At What Age Can You Get a Credit Card?

To open your own credit card, you must be at least 18 years old.

However, if you’re between the ages of 18 and 20, you may encounter stricter verification requirements, including showing proof of ability to repay, such as through income, or getting a cosigner. This is due to regulations from the Credit CARD Act of 2009, which is intended to protect young consumers from taking on more debt than they can handle.

After age 21, these regulations won’t apply to you, but card issuers may still review your income as part of your application. It’s also important to pay attention to the terms and conditions of the credit card, such as the APR on a credit card, as you consider your credit card options and apply.

If you’re younger and have a limited credit history, you may only get approved for a card with a higher APR. Do your research before applying to have an idea of what is a good APR on a credit card.

Tips for Getting a Credit Card When You’re Young

Once you understand what a credit card is and how credit cards work, you may see the appeal of a credit card and want to open one. If you’re under the age of 18, the best things you can do to work toward being able to get your own credit card are to start building credit and to learn the basics of financial management.

Start Building Credit

Building credit when you’re young may be hard, especially if you’re under 18 and not yet eligible for your own credit card. One way to do so, however, is by becoming an authorized user on a credit card account.

A responsible parent or guardian can add you as an authorized user for their account, even if you’re still under the age of 18. Being added to the primary cardholder’s credit history can help build your credit.

Learn the Basics of Financial Management

It’s also important for young people to learn the basics of financial management. Learning about things like budgeting, credit card interest, and credit scores before you even own a credit card can help put you on the path to financial success. That way, when you do eventually get your own credit card, you’ll know how to stay on top of credit card minimum payments and avoid debt.

This can also be a good time to familiarize yourself with common financial scams, such as credit card skimmers, so you’ll know what to be aware of when you do get your own card.

How to Get a Credit Card If You Are 18 to 20 Years Old

Many young people between the ages of 18 and 20 are attending college or trade school or working. They may not have a lot of income yet, and their credit history may be limited. Still, first-time cardholders do have options for getting a credit card, which can be an important step toward building their credit history and score.

Secured Credit Cards

One option is secured cards, which are a type of credit card that require the cardholder to make a refundable security deposit. The security deposit typically becomes the amount of the card’s credit limit.

Secured cards are often marketed toward people who want or need to build their credit, so they can be a great choice for young people who are age 20 and under. Once you make the initial minimum security deposit (which usually serves as your credit limit), you can use your secured credit card in the same way that you would use any other credit card. Like any other credit card, your credit card will have a credit card expiration date and a CVV number.

A few points to note:

•   Since your credit limit is often equal to the amount of your security deposit, secured credit cards often don’t have very high credit limits compared to the average credit card limit. However, having a lower credit limit can help prevent young people from overspending.

•   With a secured card, your money is tied up temporarily in the security deposit. While you get your security deposit back when you close or upgrade the account, that’s money you otherwise can’t use in the meantime.

Become an Authorized User

Young cardholders could also become an authorized user, which is someone who’s added to a credit card account with authorization to use that account. The authorized user typically has their own card and can use it to make payments as usual. However, only the primary account holder is held responsible for payments.

The authorized user benefits from this arrangement because the primary cardholder’s account history and activity are reported on the authorized user’s credit report, which can help build their credit history.

Apply for a Student Credit Card

Student credit cards are designed and marketed for students roughly between the ages of 18 and 22 years old. Students generally have different needs than other credit card customers, so it may make sense for them to get a credit card designed specifically for them.

As an added bonus, some students may qualify for credit cards with rewards, such as cashback on categories that students may spend more on, like restaurants and grocery stores.

Consider Credit Builder Credit Cards

There are also some credit cards that are available to applicants with poor credit who are looking to build their credit. Responsible use of a credit card can be a great way to build or improve credit, as your payment history will be reported to all three major consumer credit bureaus. Just keep in mind that these cards can have higher than average credit card interest rates and more fees due to their availability to those with lower credit scores.

Get a Cosigner

Another option for young applicants is to get a cosigner for a credit card. Indeed, applicants within the 18 to 20 age range must get a cosigner if they can’t provide proof of employment or income when applying. Also, people in this age may not have much of a credit history, if any, which can be a downside.

A cosigner can be a parent, guardian, or other family member who assumes legal and financial responsibility for the applicant if they are unable to pay off the balance of the card. Ideally, the cosigner should have a decent credit history to improve the chances of the credit card application getting approved. If the cardholder fails to repay a card or falls in debt, it will negatively affect the credit score of both the cardholder and the cosigner, so this is an important responsibility.

Check with your bank or credit card issuer before using a cosigner, since not all banks allow cosigners on credit cards.

The Takeaway

Once you reach the age of 18, you will be able to get a credit card of your own. You can make sure you’re ready for this responsibility by building your credit history, getting down the financial basics, and knowing how to apply for a credit card when the time comes. You’ll have options as a young credit card applicant, from secured credit cards to student credit cards to credit builder cards and more. Learning how to use a credit card responsibly is an important part of your financial life.

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

FAQ

Can I get a joint card?

Some card issuers allow cosigners on credit card. If you’re not able to qualify for a credit card on your own, you could also explore becoming an authorized user on someone else’s credit card account.

Does a student credit card affect credit score?

Yes, a student credit card affects your credit score. A student credit card is a regular credit card that’s just designed with students’ unique needs in mind, so it will affect your credit like any other credit card would.

What is the limit on a student credit card?

Credit limits on student credit cards vary by issuer and card. However, credit limits on student cards are often lower than the average credit card limit due to the fact that students generally have more limited credit histories and lower incomes.

Do you need credit for a secured credit card?

Most secured credit cards have less restrictive requirements for an applicant’s credit. In fact, many secured credit cards consider applicants with very poor or limited credit.

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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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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

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If you’re like many Americans, you swipe and tap your way through your day, using your credit card for everything from that morning latte to that late-night movie download. And, of course, for other purchases and services, from plane tickets to Pilates classes. That spending can add up, but using a rewards credit card can help make those expenditures pay off.

How rewards credit cards work: They pay the cardholder back with bonuses based on a small percentage of the amount spent. You’ll find different offers from credit card issuers in terms of how you can earn and redeem rewards, so you may want to review a variety of programs to see which ones best suit your style and needs.
In this guide, you can get a good grounding in how these programs work, including:

•   What are different types of credit card rewards?

•   How can you make the most of credit card rewards?

•   How do you redeem credit card rewards?

Types of Credit Card Rewards

What credit card rewards are, specifically, depends on the type of rewards your specific credit card pays out. The credits earned for making purchases can come in the form of cash back, points, or airline miles.

By reviewing the options below, you can better understand what kind of rewards might suit you best. This can help you get ready to apply for a new credit card.

Cash Back

For cash back rewards cards, reward earnings are based on a percentage of the amount charged to the card. The rate of earnings can typically range from 1% to 5%. In some cases, you’ll earn a higher rate for an introductory period or on a particular category of spending for a specific period of time.

Calculating what the rewards rate equals as money back can be simple for cash rewards: Just apply the cash-back percentage to total spending on the card.

•   Example: If you had a credit card that offered 2% cash back on all purchases, you’d earn $2 back for every $100 you spent using your card.

In some cases, cardholders will earn a flat rate across all purchases made with the card. But a rewards credit card may offer tiered earnings, as briefly noted above. This means the percentage back will vary depending on the category of purchases or the total amount spent during the year.

Recommended: What is a Charge Card

Travel Miles

As the name suggests, this type of rewards credit card allows you to earn airline miles in exchange for your spending responsibly with a credit card. You can either get a card affiliated with a specific airline or a more general travel rewards credit card.

It’s possible to earn a fixed rate of miles for every dollar spent, or you might earn more miles through spending in certain categories.

•   For instance, you might earn a mile per every dollar spent. Or you could get one mile per $1 in all purchase categories with the exception of travel costs, where you’d earn three miles per every dollar spent.

While they’re called miles, these rewards don’t necessarily translate to airline miles traveled. Rather, you typically redeem the miles you’ve earned to help cover the cost of flights or other travel-related expenses, such as hotel stays.

Unlike cash back rewards, where the value is pretty straightforward, the valuation of airline miles can vary by card. This is worth evaluating when deciding between credit card miles or cash-back rewards. The value of an airline mile can usually range from just under one cent per mile up to around two cents.

Points

Another way to earn credit card rewards is by getting a certain number of points for every dollar spent using the card. You can then redeem those points in a variety of ways, such as in the form of cash back, merchandise, travel purchases, gift cards, and even events.

Credit cards that reward cardholders through credit card points will pay out a certain number of points for every dollar spent on the card. Some considerations:

•   They might offer bonus categories, where cardholders can earn more points for every dollar spent in that particular category.

•   For some cards, earned rewards points may have a set redemption value — for example, every 10,000 points might be worth $100 in flight or merchandise redemptions. However, redemption rates can depend on the type of reward you choose. For instance, there might be different points requirements for flights as opposed to merchandise.

Given these scenarios, cardholders may have to be strategic. They may want to consider the type of reward they select and the actual cost of their selections to get the best bang for their buck.

How to Optimize Credit Card Rewards

It’s clear that the returns you can earn when using a rewards credit card can vary tremendously. But in addition to choosing a rewards card with the best earnings rate, there are other ways to take maximum advantage of credit card rewards.

Find the Best Card Based on Individual Spending Habits

Some rewards cards accrue points on a flat-rate basis. This means points or miles are awarded at the same rate regardless of what an individual charges to their credit card.

Others, however, offer higher levels of earning for different spending categories. For instance:

•   Some cards may offer more points per dollar spent on groceries or gas.

•   Other rewards credit cards may provide more miles back when an individual spends on flights or hotels.

For people who tend to concentrate spending on specific categories, some cards may offer added value back. Before signing up, it’s worth taking the time to assess the different types of credit cards you may qualify for and which will be most valuable given your spending habits and the kind of rewards that would be most beneficial.

Max Out Available Promotions

Some rewards credit cards offer higher introductory earning rates, as noted above. This means you can earn more points than usual for a set amount of time or up to a specific spending threshold.

Other promotions may be offered as well, such as greater earnings during a specified time period. Enjoying credit card bonuses like these is key to making the most of credit card rewards.

For instance, you may want to time big-ticket items and other purchases to take advantage of those greater returns.

One important caveat: While offers to earn more rewards certainly seem attractive, it’s wise to ensure that spending is within your budget. That’s because carrying a credit card balance may incur interest and/or penalties that can cancel out the value of any increased earnings. Avoiding interest on credit cards requires paying off your balance in full.

Be Strategic About Redemptions

Given the variability in the value of rewards points, it’s a good idea to crunch the numbers before redeeming. This is especially true because fluctuating prices and redemption promotions can help to stretch earned rewards further. And who doesn’t want to squeeze as much value as possible from their rewards?

•   Get the timing right for your needs. For example, using points to book a $200 short-haul flight may not optimize the value of your reward. But booking that same route at the last minute may be considerably more expensive. In such a case, if you have to travel ASAP, using those points may yield considerably more value.

•   You might also use points for a statement credit redemption. This means the points can be translated into cash that is applied to your credit card balance.

This can be especially helpful if there’s a month where money is tight and you are concerned about meeting your minimum payment. Applying your rewards could help you keep your account in good standing.

•   Be aware that rewards programs may have redemption minimums. This could mean that, say, you need to accrue a certain dollar amount or number of points so you can use your reward. For instance, maybe you have $20 in rewards that you want to use to help meet your credit card statement’s minimum payment. If your card only allows you to redeem rewards when you reach a threshold of $25 or 2,500 points available, you will be out of luck. You’ll need to earn more rewards before you can use them.

•   Also look for redemption promotions or opportunities to redeem for the highest-value choices. This can help you get the most out of a rewards credit card.

Redeeming Credit Card Rewards

Once you’ve racked up some credit card rewards, it’s time to redeem them. Here’s how:

1.    Log into your credit card app or portal. You can usually find your rewards listed somewhere on the main page, though the exact placement depends on your credit card issuer.

2.    Click on your rewards balance. You should be able to see your total available rewards, as well as your options for redemption.

3.    Choose how you want to redeem your rewards. Options for redemption may include a statement credit, a check, merchandise, gift cards, or travel, depending on your specific credit card.

4.    Move ahead with redeeming your rewards. Once you select the option to redeem your rewards, that amount will get deducted from your balance. How long it takes to receive your rewards will depend on how you chose to redeem them.

Do Credit Card Rewards Expire?

It is possible for credit card rewards to expire. However, whether your rewards will expire — and how soon their expiration date will arrive — depends on the type of credit card rewards and your credit card issuer.

•   Airline miles and hotel points often expire (though not always).

•   Points or cash back earned through your issuer’s program are less likely to expire.

•   In some cases, your rewards might even get automatically credited to your account if you forget to redeem them or haven’t used your account in a while.

Check your credit card’s terms and conditions to find out how your credit card works and what the rules are for your credit card rewards.

Once you know the details, you will likely want to stay aware of any expiration date, just as you probably pay attention to when your credit card payments are due.

The Takeaway

Getting rewards — whether in the form of cash back, points, or travel miles — when you spend money is an attractive proposition. However, when it comes to how to take advantage of credit card rewards, you’ll need to do more than just swipe your card. You’ll want to be strategic about earning and redeeming your points to get the most benefit. You’ll also likely want to make sure to max out any promotions that are available.

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.

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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