What Is a Credit Card? Find Out All You Need to Know

Credit Card Definition and Explanation

A card is a small, rectangular piece of plastic or metal that lets you make purchases. Whether you’re buying lunch or a new piece of furniture, a credit card enables you to borrow funds from a credit issuer to pay the merchant. Then, every month, you’ll receive a statement in the mail with your balance, which you’ll want to pay off every billing cycle. Otherwise, you’ll owe interest on the remaining amount.

While the concept sounds simple, it’s easy to rack up debt if you’re not careful. With that in mind, here’s credit cards explained in-depth.

Credit Card Meaning

Banks and other financial institutions issue credit cards to consumers to extend revolving lines of credit. A revolving line of credit means the cardholder can borrow money up to their credit limit and then repay it on a continuing basis.

With other lines of credit, like a personal loan, you take out a lump sum amount and agree to repay it within a specific timeframe. During this timeframe, you make fixed installment payments. Whereas with a credit card, you can repeatedly borrow against the limit, which gives you more flexibility to use the card as needed.

When you receive your credit card, you’ll note several different numbers on it. There’s the credit card account number, alongside your name and the credit card issuer’s logo. Also on a credit card are the credit card expiration date, which marks when the card is valid through, and the CVV number on a credit card, which offers an extra layer of security in purchases made online or over the phone.

Recommended: What Is a Credit Card CVV Number?

How Does a Credit Card Work?

Once you have a new credit card in hand, you can use it to make purchases at places that accept credit card payments. Then, every month, you’ll receive a statement either electronically or in the mail, depending on your preference. The statement will include all purchases, your outstanding balance, and the minimum monthly payment due.

You’re required to make at least the minimum payment on your account to keep it open and in good standing. However, you also can opt to pay your entire balance in full or decide on another amount (as long as it meets the minimum payment requirement). If you were to pay an amount that exceeds your total balance, then you’d end up with a negative balance on your credit card.

If you aren’t able to make the minimum credit card payment, the outstanding balance will roll over to the next month and begin accruing interest and fees — which can significantly add up over time. Therefore, it’s best to get in the habit of paying off your credit card every month to avoid paying an exorbitant amount of interest. But, if your finances don’t allow you to pay the entire balance, you could make smaller payments throughout the month to minimize the amount of accumulating interest.

To ensure you make your monthly payments, you can usually set up auto-pay for the minimum payment. This way, you won’t miss a payment and get charged a late fee. Unfortunately, late payments also can end up on your credit report, which can negatively affect your credit score.

How Does Credit Card Interest Work?

Every credit card comes with an annual percentage rate (APR), which represents the annualized cost of borrowing including interest and fees and marks an important part of how credit cards work.

Some credit cards have more than one APR, such as a balance transfer APR, an introductory APR, or a cash advance APR. While introductory APRs are usually lower than the standard rate but only last for a promotional period, cash advance APRs are typically higher than the standard purchase APR.

You will pay interest based on the APR on a credit card if you have an outstanding balance that carries over from one month to the next. Credit issuers use your average daily balance, interest rate, and the number of days in the billing cycle to calculate the interest amount.

Usually, credit issuers offer a grace period where interest will not accrue. This period is typically between the statement date and due date, commonly 21 days.

Credit vs. Debit Cards

They may look alike, but there are notable and important differences between credit cards and debit cards. For starters, you’re not borrowing funds with a debit card. Instead, you’re drawing on funds in the bank account attached to the debit card. As such, you can’t incur interest charges, nor can you rack up debt. However, you can’t use a debit card to help establish your credit.

In general, debit cards offer less robust consumer protections against fraud in theft than credit cards do. They also don’t typically offer rewards or other benefits that credit cards can have.

6 Common Types of Credit Cards

Now that you understand how credit cards work, here are some available credit card options.

1. Reward Cards

You can earn cashback, points, or even miles when you spend money using a rewards credit card. Some credit cards may also offer a sign-up bonus. For example, a credit card could offer 100,000 points when you spend $4,000 or more within the first three months of enrolling.

You can usually find a card offering rewards that coincides with your spending habits. For example, if you love shopping at a particular store, retail-branded cards have lucrative benefits for frequent shoppers.

Keep in mind that you typically have to have a good credit score to qualify for a rewards credit card. But, even if you do qualify, it’s essential to keep your spending habits in check. Reward cards incentivize you to spend money, so you don’t want to end up overspending and getting into a pile of debt you can’t climb out of.

2. Credit Builder Cards

If you have little to no credit or need to build your credit back up, a credit builder credit card is a viable solution. You’ll likely start with a lower credit card limit and an APR that’s higher than the average credit card interest rate to reduce the credit card issuer’s risk.

Credit builder credit cards usually don’t come with the bells and whistles that rewards cards offer. Instead, the card can help you build your credit. With that said, you’ll want to use your credit card responsibly, making on-time monthly payments and paying off your balance every month. Not doing so could negatively impact your credit history and cost you a lot of money.

3. Balance Transfer Cards

Do you have a high-interest outstanding credit card balance? Using a balance transfer credit card is one solution for helping you tackle your debt. Balance transfer credit cards let you move your current credit card debt to a new account with a lower interest rate. Additionally, transferring your balance means you’ll only have to stay on top of one payment a month, rather than multiple.

Having a good credit score can help you qualify for a balance transfer credit card. If you qualify, you could receive a lower ongoing rate or even a 0% introductory rate, which usually will last for six to 18 months. You’ll want to try to pay off your balance within that promotional period, before the higher APR kicks in.

Note that balance credit cards often charge a fee for transferring a balance — usually 3% to 5% of the amount transferred. So, make sure you factor in the additional fees before you move over your existing balance.

4. Secured Credit Cards

Another option for those with little to no credit or poor credit history is a secured credit card. With a secured credit card, you make a refundable deposit, which protects the card issuer from defaulted payments. If you default, the credit card issuer can use the deposit to recoup the loss.

Your deposit is usually the amount of your credit limit. For example, if you are approved for a $500 limit, you may need to put down $500. Though your deposit will be tied up while the account is open, a secured credit card can allow you to build your credit when used responsibly. Just keep in mind that while secured credit cards are generally easier to qualify for, they also tend to have higher APRs and fees.

If you decide to close a secured credit card account, you can usually get your deposit back. The card issuer may also give you the option to upgrade to an unsecured card if you’ve proven your creditworthiness. In this case, you’d receive a refund as well.

5. Travel Credit Cards

If you’re a frequent flier or visit hotels often, a travel credit card can be a lucrative choice. Many airline and hotel brands have credit cards that let you earn miles, points, or rewards to use toward your travel adventures. Some credit cards may also come with a sign-up bonus or extra perks such as free checked bags, access to VIP lounges, and travel insurance.

When selecting a card, you’ll want to find the card that makes sense for the way you travel. That way, you can get the most out of your credit card. Travel credit cards usually require applicants to have good to excellent credit for approval. So, before applying, make sure to check your credit score to see if it’s acceptable.

6. 0% Introductory APR Credit Cards

If you’re getting ready to make a big purchase, a 0% introductory APR credit card might be worth considering. With this type of credit card, the card issuer gives you a 0% introductory rate to make purchases during a specific time frame. This way, you can make the purchase without paying interest on the expensive item(s).

However, you’ll want to make sure you repay the entire amount before the introductory period ends to avoid interest. Before you swipe, make sure you have a plan to pay off the balance within that time frame.

Also note that to qualify for a 0% introductory APR credit card, you usually must have good to excellent credit.

Pros and Cons of Credit Cards

Here’s an overview of the pros and cons of credit cards, which are helpful for anyone just getting familiar with the credit card definition to be aware of:

Pros of Credit Cards Cons of Credit Cards
Convenient method of payment Allows you to pay over time
Can help to build credit Makes it easy to track spending
Provides fraud protection May offer rewards and other benefits
Potential to damage credit Possible to rack up debt
Interest Fees

Pros

Reasons a credit card can be worthwhile include:

•   Convenience. A credit card offers much greater convenience than, say, carrying around a wad of cash. You can easily swipe or tap your card at any merchant that accepts credit card payments, which the vast majority do.

•   Pay over time. Another benefit of a credit card is that it allows you to pay over time for a purchase. Say you’re in an emergency and need to access funds immediately, but know you’ll be good to pay back the amount soon. Or maybe you’re making a big purchase and don’t want to have to shell out for it all at once, instead spreading out payments throughout the month.

•   Build positive credit history. Credit cards give you the means to establish a strong payment history, which can help boost your credit score. When you need to apply for a personal loan or mortgage in the future, a higher credit score can help you qualify for better terms and rates.

•   Track spending. Credit cards are valuable tools for budgeting since many cards let you track your spending on an app or online. Also, some credit cards give you the ability to categorize your expenses to see where your money is going and make adjustments accordingly.

•   Get fraud protection. If your debit card information is stolen, fraudsters can directly access your bank account. But, if you use a credit card, you usually have more fraud protection benefits in places such as purchase protection and identity theft protection. For instance, you can dispute a credit card charge and even receive a credit card chargeback.

•   Earn rewards. Many credit cards offer a reward program that gives you points or cashback when spending money. For example, you could earn money for traveling, shopping, or even statement credits.

Cons

Remember, while credit cards are a valuable financial tool, they can also hinder you if not used responsibly. Here are some downsides to keep in mind:

•   Potential to damage credit. Just as you can boost your score with a credit card, you can also damage it.

•   Possible to rack up debt. Credit cards can make it easy to rack up a mountain of debt that can continue ballooning, thanks to interest. It’s not easy to get rid of credit card debt either (for instance, here’s what happens to credit card debt when you die).

•   Interest. Credit cards generally have higher APRs compared to other types of debt — usually well into the double digits. It can make purchases much more expensive if you’re paying a hefty amount of interest on top of the actual cost.

•   Fees. Another downside of credit cards is the potential to incur fees. Some are avoidable, like late fees or cash advance fees, while others can be harder to avoid, such as if your credit card of choice charges an annual fee.

How to Apply for a Credit Card

Before you apply for a new credit card, you’ll want to check your credit score. You can pull a free copy of your credit report at AnnualCreditReport.com. Knowing your credit score will help you determine whether you meet the approval requirements for the cards you’re interested in.

Once you decide on some card options, you can usually get prequalified online. If you prequalify for a card, your approval odds could be in your favor (though you’re still not actually approved). Also, when companies process your preapproval, they only complete a soft credit inquiry, which won’t impact your credit like a hard inquiry does. However, when you’re ready to apply, the credit issuer will conduct a hard credit inquiry.

If you’re approved for the card you apply for, you should receive your credit card in the mail within 14 days.

Recommended: How to Apply for a Credit Card

FAQ

What are the main differences between credit and debit cards?

Debit cards use the money in your checking account to pay for purchases. When you make a purchase using a credit card, on the other hand, you’re using a line of credit to borrow money. Therefore, you usually have to pay interest on your transactions with a credit card if you don’t repay your balance right away.

How do I choose a credit card?

It’s helpful to select a credit card that matches your needs and financial habits. You’ll also want to make sure you meet the card issuer’s approval criteria. For example, if a credit card requires a credit score of 700 and your score is 650, you may have to explore other options or take steps to improve your credit before applying.

How long does it take to get a credit card?

Once you submit a credit card application, it may take just minutes before you’re approved. Usually, you’ll receive your credit card within 14 days of approval. You can call the credit issuer and request expedited processing if you need your credit card sooner.


Photo credit: iStock/Nodar Chernishev

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.

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

1See Rewards Details at SoFi.com/card/rewards.

Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details, please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

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 .

1Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

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How to Pay Your Taxes With a Credit Card

Can You Pay Taxes With a Credit Card?

Sadly, there’s no avoiding paying taxes to the IRS — whether that’s once a year or multiple times for those who are self-employed. However, what you do have agency over is how you pay. One of the few ways you can pay taxes is with a credit card.

Whether you want to pay the IRS with a credit card so that you can earn rewards or have a bit of financial breathing room, it’s important to be aware of the implications of using such a payment method. Read on to learn more about how to pay taxes with a credit card.

Can You Pay Federal Taxes With a Credit Card?

Yes, you can. More specifically, you can pay your federal taxes with a credit card (and in some cases, you may even be able to pay your state taxes with one as well). The IRS offers different third-party payment processors that accept credit card payments for taxes.

Keep in mind that if you pay the IRS with a credit card, this type of transaction isn’t free, given how credit cards work. Whichever third-party payment service provider you choose, you’ll be charged additional processing fees for the convenience of using your credit card to pay taxes. For example, all of the third-party options charge a percentage of the amount you’ll be paying in taxes, but there’s also a minimum flat fee you’ll owe.

In addition, there may be limitations on how many times you can use your credit card for IRS payments. For instance, if you wanted to pay your personal income taxes, you can only do so twice per year for the current tax year due. However, if you worked out a monthly payment plan with the IRS, you can pay with a credit card up to two times per month.

Recommended: Apply for an Unlimited Cash Back Credit Card

What to Know Before Paying Taxes With a Credit Card

Before pulling out your credit card to pay your taxes, it’s important to know what your goals are. Here are some common reasons taxpayers choose to pay their taxes with a credit card:

•   You may earn rewards points, cash back, or miles. Many consumers love to earn perks offered by their credit card issuers and see it as a major benefit of what a credit card is. Even with the additional fees associated with paying taxes with a credit card, you may feel like the rewards offset what you’ll pay. In other words, if the value of the rewards is much higher than the service fees, it might be worth using your card. As an example, let’s say you’ll be able to earn 4,000 rewards points from your tax payment, which equates to $100 toward a flight or hotel room. If you owe $3,000 in federal taxes and the third-party payment service charges a 1.96% fee, you’re effectively paying $58.80 in fees to earn $100 in rewards. Whether that’s worth it is up to you.

•   It’s possible to earn a major rewards bonus. If you signed up for a new rewards credit card and need to meet a minimum spending threshold to earn a huge bonus, it might be worth considering paying your taxes with that credit card. For instance, if you signed up for a credit card offering 50,000 bonus miles — an equivalent to $1,000 worth of travel — paying a $4,000 tax bill with a payment service charge of 1.96% equates to $78.40 in fees. Assuming that meets your minimum spending threshold, the value you receive is pretty high. Just make sure you can make more than your credit card minimum payment, and ideally your full balance, to avoid interest accruing.

•   You’ll gain the ability to spread out your payment. Paying taxes with a credit card might be worth considering if you’re looking for a low-cost way to spread out your tax payments. If you have excellent credit, you may qualify for a credit card offering a 0% introductory annual percentage rate (APR), meaning you’ll have time until the offer runs out to pay off your taxes interest-free. Sure, you’re paying card processing service fees, but that could be worth it to spread out your payments. However, many credit card companies have terms and conditions that stipulate how you can remain in good standing for the introductory offer for the APR on a credit card — make sure you’re following them, or you could end up paying a high amount in interest.

Recommended: Apply for a Rewards Credit Card

What Is the Fee for Paying Taxes With a Credit Card?

As mentioned, the amount of the fee you’ll owe for paying taxes with a credit card will vary depending on which payment processor you use. Here’s a look at how much each processor’s fees run:

Payment Processor

Fee Rate

Minimum Fee

payUSAtax 1.85% $2.69
Pay1040 1.87% $2.50
ACI Payments, Inc. 1.98% $2.50

Pros and Cons of Paying Taxes With a Credit Card

There are advantages and disadvantages to paying the IRS with a credit card. Here’s an overview of the pros and cons, which we’ll cover in more detail below:

Pros of Paying Taxes With a Credit Card

Cons of Paying Taxes With a Credit Card

Earn cash back and credit card rewards Third-party payment processors charge fees
Meet spending thresholds for bonus rewards earnings Rewards earnings may not offset fees paid
Use a convenient form of payment Potentially pay high credit card interest rates if you carry a balance or the introductory APR period ends before your balance is paid off
Spread out payments interest-free if using a card with 0% introductory APR IRS payment plan interest rates may be lower than what’s offered by credit cards

Pros of Paying Taxes With a Credit Card

There are the major upsides of paying the IRS with a credit card, including:

•   You can earn cash back and credit card rewards. By putting the amount of your tax bill on your credit card, you might earn some credit card rewards. Just make sure your rewards earnings will offset any fees you’ll pay (though rest assured, taxable credit card rewards usually aren’t a thing, except in certain cases).

•   It can help you meet spending thresholds to earn bonus rewards. Often, credit cards that offer bonuses require you to spend a certain amount within a specified period of time in order to earn them. If you’re struggling to reach that threshold, paying your taxes with your credit card could help, allowing you to snag those bonus rewards.

•   It’s a convenient form of payment. Anyone who has paid with a credit card knows it’s easy. You don’t have to fill in various bank account numbers like you otherwise would if you opt to cover your tax bill with a credit card.

•   You can spread out payments — and interest-free, if you have a 0% APR card. If you’re tight on cash or simply want to spread out your tax payment, a credit card can enable you to do so. Even better, if you have a card that offers 0% APR, you’ll avoid paying any interest while you space out your payments.

Cons of Paying Taxes With a Credit Card

It’s not all upsides when it comes to paying taxes with a credit card. Make sure to consider these drawbacks as well:

•   You’ll pay third-party processing fees. Perhaps the biggest drawback of paying the IRS with a credit card is you’ll pay fees. The exact amount you pay in fees will vary depending on which third-party payment processor you use, but they can range from 1.85% up to 1.98%. If your tax bill is $1,000, for example, you could pay up to $19.80 in fees.

•   The rewards you earn might not offset the fees. If your rewards rate is close to the amount in fees, those two will effectively cancel each other out. In other words, you’ll pretty much break even if you pay roughly the same amount in fees as you earn in credit card rewards, which might not make using a credit card worthwhile.

•   You could end up paying interest at a steep rate. If you aren’t able to pay off your balance in full by the statement due date, or if for some reason you don’t pay off your full balance by the time your 0% APR intro offer ends, interest charges will start racking up. Plus, credit card interest rates tend to be pretty high compared to other types of loans.

•   There might be lower interest rate payment plans available. If you’re hoping to spread out your payments, using a credit card might not be your most cost-efficient option. The IRS offers a payment plan for those who qualify, and the interest rate can be lower than the APR on a credit card.

Recommended: What is a Charge Card?

How Do You Pay Taxes With a Credit Card?

If you’ve decided you want to use your credit card for tax payments, here’s how you do it.

1. Decide Which Credit Card to Use

Consider your reasons for using a credit card — is it to earn rewards, meet a minimum spending threshold, or spread out your payments interest-free? Whatever it is, make sure to choose a card that meets your goals. If you want to open a credit card, then you’ll want to make sure you receive the card in time to pay the IRS before the tax filing deadline.

Recommended: When Are Credit Card Payments Due?

2. Determine the Amount You Want to Pay

Whatever the amount is, ensure it’s well within your credit card limit. You can spread your payments over multiple credit cards, but keep in mind the transaction limits that the IRS imposes for certain payments.

3. Choose a Third-Party Payment Processor

The IRS website currently lists three approved payment service providers that you can use. Compare which one offers the best features and lowest fees for your situation.

4. Make Your Payment

Once you’ve selected which payment service provider you want to go with, head to their website and follow the instructions. You may be asked to provide information such as the credit card expiration date and CVV number on a credit card. Double check that you’re making the right type of payment and that all the information you’ve entered is accurate before pressing submit.

Other Ways to Cover Your Tax Bill

If you’re not convinced the costs involved in credit card payment are worth it, there are other ways that you can pay your taxes.

Direct Pay With Bank Account

While this option won’t allow you to earn rewards or spread out your payments, you’ll also steer clear of paying any fees or potentially owing interest. To make a tax payment directly from your bank account, you’ll simply need to select this option and provide the requested banking information, such as your bank account and routing numbers.

Recommended: How to Avoid Interest On a Credit Card

IRS Payment Plan

If you’re hoping to be able to pay off your balance over time, you can apply for a payment plan with the IRS. You may qualify for a short-term payment plan if you owe less than $100,000 in combined tax, penalties or interest, or you could get a long-term payment plan if you owe $50,000 or less in combined tax, penalties, and interest and have filed all required returns.

Note that this option may involve fees and interest though. The costs involved will depend on which type of plan you’re approved for.

Recommended: Tips for Using a Credit Card Responsibly

Looking for a New Credit Card?

Indeed, you can pay taxes with a credit card. Paying taxes using a rewards credit card is a great way to earn perks, helping you maximize your spending. However, there are downsides to consider as well, such as the third-party processing fees and the potential to run into high credit card interest if you don’t have a good APR for a credit card.

If you do want to pay taxes with a credit card, it’s important to find the right card to do so. With the SoFi Credit Card, for example, cardholders can earn generous cash-back rewards on all eligible purchases. You can then redeem rewards for cash, investments, or eligible SoFi loan payments, or as a statement credit.

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.1



Take advantage of this offer by applying for a SoFi credit card today.

FAQ

What does it cost to pay taxes with a credit card?

Third-party payment processors charge a service fee to pay your taxes with a credit card. In many cases, it’s typically a percentage of your payment amount, with a minimum flat fee charged.

Does paying taxes with your credit card earn you rewards?

Paying taxes can earn you rewards, depending on the type of credit card you use. Many rewards credit cards offer cash back, miles, or travel points on qualifying purchases. Before doing so, it might be helpful to determine whether the value of the rewards earned will outweigh the fees you’ll pay.

Is it better to pay taxes with a credit card or debit card?

Both methods of paying your taxes can be a great choice, depending on your financial situation. If you’re not interested in earning rewards or spreading out your payments and have the cash on hand, you can pay with a debit card. Some may prefer to pay with a credit card because they feel it’s a more secure way to make payments.

Are credit cards the cheapest way to pay your tax bill?

No. Paying your taxes with a credit card will add an additional fee onto your tax bill, plus you could end up paying interest if you don’t pay off your full statement balance by the due date. Other options, such as direct pay with your bank account don’t involve paying fees or interest.

Can you pay state taxes with a credit card?

It depends. Some states do facilitate tax payments with a credit card. To find out if yours does, check your state’s tax website for more information.

Can you pay property taxes with a credit card?

Once again, it depends which state you live in. Many counties and cities will allow you to pay property taxes with a credit card, though not all do. Reach out to your local tax collector’s office to see which payment options are accepted.


Photo credit: iStock/Moyo Studio

1Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.


1See Rewards Details at SoFi.com/card/rewards.


SoFi cardholders earn 2% unlimited cash back rewards when redeemed to save, invest, a statement credit, or pay down eligible SoFi debt.


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.


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.


New and existing Checking and Savings members who have not previously enrolled in direct deposit with SoFi are eligible to earn a cash bonus when they set up direct deposits of at least $1,000 over a consecutive 25-day period. Cash bonus will be based on the total amount of direct deposit. The Program will be available through 12/31/23. Full terms at sofi.com/banking. SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC.

SoFi members with direct deposit can earn up to 4.00% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 1.20% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 3/17/2023. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet


Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details, please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.


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laptop phone coffee

How Many Credit Cards Should I Have?

In general, there’s no “right” number of credit cards to have. Some might suggest having at least two credit cards, preferably from different networks — say, a Visa and an American Express, or a Mastercard and a Discover card — and strategically choosing them for the best combination of rewards. Others will recommend making this determination based on how many credit cards you can effectively handle, or how many is optimal for your credit score.

At the end of the day, the ideal number of credit cards depends on your personal financial situation. We’ll help you figure out how many credit cards you should have, and whether it will be good for you to have multiple credit cards.

How Many Credit Cards Does the Average Person Have?

Cardholders in the U.S. have an average of 3.84 credit card accounts, according to a review of national credit card data by the credit bureau Experian.

The data also found that the number of credit cards someone has tends to increase the older they get. For instance, baby boomers (ages 56-74 as of 2020), held an average of 4.81 credit cards, whereas millennials (ages 24-39 as of 2020) had just 3.18 credit cards on average.

How Many Credit Cards Are Too Many?

There isn’t a set number of credit cards that tips you over into the territory of having “too many.” As long as you can stay on top of all of your accounts and manage them responsibly, having a number of credit cards won’t negatively affect your credit.

That being said, even just two credit cards could be too many if it becomes challenging for you to remember to make on-time payments on both accounts or you’re overspending. The more credit cards you have, the more credit card terms you’ll have to keep track of, which can get complicated. You may also run into paying multiple annual fees, and costs can add up quickly there — especially if you’re not using a credit card enough to justify the cost.

Even if you do think you can manage having multiple credit cards, you’ll want to watch out for applying for too many new cards within a short window of time. Doing so can lower your credit score temporarily, and it can also raise a red flag for lenders. Issuers have even begun to introduce rules to prevent cardholders from attempting credit card churning, which is when you repeatedly open and close credit cards to earn welcome bonuses.

Does Having Too Many Credit Cards Affect Your Credit Score?

Having multiple credit cards can either help or hurt your credit score, depending on how responsibly you use your cards and how well you understand how credit cards work. However, if you’re in a situation where you’re starting to feel like you have too many credit cards, this could lead to negative effects on your credit score.

Multiple credit cards mean multiple due dates to juggle, which can make it easier to miss payments or make them late. Because payment history accounts for 35% of your FICO score, this can have big implications for your credit.

Secondly, opening a number of new accounts can lower the average age of your credit, which matters since credit history length accounts for 15% of your score. Applying for a credit card also requires a hard inquiry, which can temporarily ding your score.

On the flipside, having multiple credit cards does offer you more access to credit. If you don’t increase your current outstanding balances, this could positively impact your credit utilization rate, which compares your outstanding balances to your total credit limit. Further, a new credit card means an addition to your credit mix, which comprises 10% of your FICO score.

Recommended: When Are Credit Card Payments Due

Potential Reasons to Apply for Another Credit Card

Trying to figure out what is a good amount of credit cards to have? Here are some potential reasons you might consider applying for an additional card.

Potentially Raise Your Credit Score

If you’re wondering, ‘is it good to have multiple credit cards?,’ know that sometimes getting an additional card can benefit your credit. This might be the case if your newly opened card increases your overall credit limit. If you keep your total credit card balances the same, your higher limit will lower your credit utilization rate, which is one of the factors that affect your credit score.

Other ways that getting another credit card can help your credit is if the new card adds to your existing credit mix and if you consistently make on-time payments. Both of these also contribute to your credit score, so improvements there could positively impact your score.

Maximize Rewards

Perhaps the top reason that people open multiple credit cards is to maximize the rewards they can earn. For instance, another card might be worth adding to your arsenal if it optimizes rewards in a category in which you don’t currently earn much. Or, for example, you might pair a basic cash-back rewards credit card for your everyday spending with a travel rewards card that can help you cover the cost of flights and enjoy perks while traveling.

Ensure You Can Pay If One Card Is Stolen

Having more than one credit card in your wallet can also act as an insurance policy of sorts. Say one of your cards gets stolen or is unexpectedly frozen due to fraudulent activity. That can leave you in a lurch at checkout if you don’t have any cash on you. By applying for an additional credit card, you’ll ensure that you always have a backup in case anything were to happen.

Pay Off a High-Interest Card with a Balance Transfer

You also might opt for an additional credit card if you have debt to pay off and qualify for a 0% APR introductory offer. These promotional offers allow you to move over a balance and pay it off interest-free within a certain period of time.

Just keep in mind that you’ll usually need solid credit to qualify for these offers, and a balance transfer fee will apply. Other pros and cons of no-interest credit cards include the fact that you’ll need to ensure you can pay off your debt before the promo offer ends — and a higher interest rate kicks in.

Secure a Higher Overall Credit Limit

Another possible benefit of opening an additional credit card account is that doing so can increase your available credit limit. Especially if your credit score has improved significantly since you last applied for a credit card, you could get approved for a higher limit.

Even if this card’s credit limit isn’t that different from those of your other cards, adding another card can help you keep your credit utilization rate from getting too high, as your overall credit limit will go up.

Recommended: What is the Average Credit Card Limit

Potential Drawbacks of Getting Another Credit Card

As mentioned, opening multiple credit cards within a short period of time can lower your credit score. But even if you don’t do that, there are possible issues that can arise when you have multiple cards — in other words, it isn’t always better to have more credit cards.

Potential to Lower Credit Score

Perhaps the biggest potential issue of having multiple credit cards is the possibility of harming your credit score. If you’re missing payments because you’re finding it hard to juggle multiple due dates, or are overspending and driving up your credit utilization ratio, your credit score will suffer.

Plus, even if you’ve paid off your accounts, having a large number of credit cards open can make you look risky to lenders, possibly lowering your score.

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

Fees

Another possible downside to having a number of credit cards is the fees you could face. Depending on the credit cards you have, you could end up paying multiple annual fees. These could become harder to offset with your credit card usage if your spending is spread across multiple cards.

Further, you might have a harder time keeping track of which cards charge which fees. This can make it more challenging to dodge unnecessary fees.

Recommended: How to Avoid Interest On a Credit Card

Harder To Keep Track Of

It’s likely that all of your credit cards could start off with a different due date, which can make it that much easier for a payment to slip through the cracks. Plus, you’ll have multiple different websites or mobile apps to check in on and visit in order to make your payment.

To make it easier on yourself, consider automating your payments or changing your due dates so they all fall on the same day. This can make it easier to adhere to one of the cardinal credit card rules of always making on-time payments.

Could Get Into a Cycle of Debt

When you have an array of credit cards in your wallet to choose from, it can feel easy to keep swiping. Plus, by using a number of different cards, you’ll be spreading your charges out, which can make it more challenging to track how much you’re actually spending in total.

To keep your spending in check, don’t spend more on your credit cards than you can actually afford to pay off in cash. Ideally, you’ll be able to pay off all of your credit card balances in full each month. Otherwise, interest charges can add up quickly, which is one of the reasons why credit card debt is hard to pay off.

Recommended: What is a Charge Card

More Difficult to Spot Fraudulent Activity

When you have just one credit card, checking your credit card balance regularly is pretty easy to do. But once you start growing your number of cards, it will take more legwork and effort to stay on top of your statements and check for any suspicious charges. This can make it harder to spot any potentially fraudulent activity and report it in a timely manner.

Determining How Many Credit Cards to Have

Now that you know the potential upsides and drawbacks to having multiple credit cards, you’re left with the question: How many credit accounts should I have? As mentioned before, the ideal number of credit cards varies from person to person. Here’s what to consider as you make this determination for yourself:

•   Do you have a history of responsible spending? If you think that applying for another credit card will lead to spending beyond your means, you might be better off skipping an additional card.

•   What’s your reason for getting another card? As mentioned, opening up another card can help you maximize rewards, increase your purchasing power, or even assist in building credit. However, if you’re seeking another card because you’re low on funds and want to be able to fund more purchases, that could lead to a cycle of debt.

•   Are you confident you’ll be able to pay off your balances in full each month? Credit card interest can add up quickly if you’re not paying off your balances in full on a monthly basis (just check out our credit card interest calculator for proof). Before taking on an additional credit card, ensure you’re in a good financial position to pay off your balances regularly and in full.

•   Has your credit score improved since you last applied? A better credit score generally translates to better rates and rewards and higher credit limits. To make applying for a new card worth your while, it generally helps if you’ve done work to improve your credit since you last applied.

•   Do you have any other upcoming loan applications? If you know you’ll need to apply for a loan — whether that’s a car loan, a personal loan, or a mortgage — consider whether a credit card application is necessary right now. Applying results in a hard inquiry, which temporarily dings your score, making you a potentially less competitive applicant for the other loan you need.

Recommended: Tips for Using a Credit Card Responsibly

The Takeaway

The answer to the question, ‘How many credit cards should I have?,’ largely depends on your personal financial situation and how many credit cards you feel you can responsibly manage. In the big scheme of things, how you use your credit cards may be more important than how many you have. To determine the ideal number of credit cards for you, you’ll want to weigh the pros and cons of adding another card to your wallet.


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1See Rewards Details at SoFi.com/card/rewards.

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 .

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

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Guide to Metal Credit Cards: What You Need to Know

Guide to Metal Credit Cards: What You Need to Know

Pulling a metal credit card out of your wallet was once considered a status symbol. Today, however, more card issuers have added credit card metal options to their card offerings for customers who prefer a sleek — and heavier — plastic alternative.

But beyond being metal instead of plastic, you may wonder what is a metal credit card exactly and are they better? We delve into the similarities and differences between plastic and metal credit cards, as well as how to get a metal credit card if you’re looking to add some heft to your wallet.

What Is a Metal Credit Card?

A metal credit card functions much in the same way as its plastic cousin. You can swipe a metal card at a point-of-sale terminal, or if the card is chip- or RFID-enabled, you can insert or tap it for payment.

Additionally, cardholders who have a metal credit card but prefer to use their digital wallets, can use their digital metal card the same way as other credit cards in their digital wallet. To use a credit card in this manner, simply tap your device toward the card reader to activate the transaction.

A key distinction with metal credit cards, however, is the material that the physical card is made of. They’re typically composed of some type of hard, durable metal.

Recommended: When Are Credit Card Payments Due

A Brief History of Metal Credit Cards

The credit card issuer to spark buzz with its metal credit card was American Express. In 1999, it launched the Centurion Card — colloquially called the Black Card — which was the first metal card of the time.

The innovative, invite-only card was offered to the highest spenders of AmEx’s Platinum Card. Its exclusivity, coveted benefits, and unique credit card metal material set an impressive bar for the luxury credit card market moving forward.

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

What Are Metal Credit Cards Made Of?

The transition from traditional, lightweight plastic to various metals is why some credit cards are heavy. Specific materials that are used for metal credit cards vary across card issuers, with many companies keeping information about their credit card metal materials under lock and key.

As an example, the metal used for the Apple Card is titanium, while some cards use stainless steel, metal alloys, 24 karat gold, palladium and other metals, as well as hybrid cards that have a metal exterior with a plastic core.

Why Metal Credit Cards Are Popular

Since AmEx launched its metal Centurion Card, metal cards have oozed a sense of luxury and prestige. This premium metal card phenomenon went mainstream when Chase announced its metal Sapphire Reserve credit card in 2016.

The heavier material of metal credit cards has a noticeable in-hand feel that some cardholders prefer. Metal credit cards are also generally associated with elite status. For some, the perk of carrying a card that feels and looks special can be attractive.

Differences Between Metal and Plastic Credit Cards

Although metal credit cards have grown in popularity in the market, traditional credit cards made out of plastic are still commonly available. Below are the main differences to know between a metal versus plastic card:

Metal Credit Card

Plastic Credit Card

Made of various metal materials Commonly made of PVC plastic
Weighs more (10.5 grams and up) Weighs less (approximately 5 grams)
Some have a higher barrier of entry Can be more accessible to consumers
Highly durable Less durable
May need to mail back to the issuer for safe disposal Can dispose of using commercial-grade tools

Similarities Between Metal and Plastic Credit Cards

As mentioned earlier, how a credit card works doesn’t vary whether it’s metal or plastic. You can add both metal and plastic cards into a digital wallet for convenience and use them in the same way to make purchases.

Further, both options offer the same bank-level security features you’ve come to expect from a credit card since encryption isn’t dependent on the material of the card. Rather, it’s contained within other features of the card, like the magnetic strip or chip-and-PIN technology.

Finally, despite the noticeable added weight of a metal credit card, their dimensions are roughly the same as those of a plastic credit card. Both a metal and plastic credit card fit into a standard wallet’s card slot, although metal cards might be slightly thicker.

How to Get a Metal Credit Card

Various card companies offer credit card products that issue a metal card, if you qualify. A good credit card rule of thumb to find the right card — whether metal or otherwise — is to compare various features, such as annual fees, rewards programs, sign-up bonus incentives and minimum required spend, and other card benefits.

Here are some examples of where to get a metal credit card and its specific card product name(s):

•   Amazon: Amazon Prime Rewards Visa Signature Card

•   American Express: Gold Card, Platinum Card, Centurion Card

•   Apple: Apple Card

•   Capital One: Savor, Venture X

•   Chase: Sapphire Preferred, Sapphire Reserve

•   Citi: Citi / AAdvantage Executive World Elite MasterCard

•   HSBC: Elite World Elite Mastercard

•   JP Morgan: Reserve Credit Card

•   MasterCard: Gold Card, Titanium Card, Black Card

•   U.S. Bank: Altitude Reserve Visa Infinite Card

Factors to Consider Before Getting a Metal Credit Card

Flashing credit card metal when dining out might seem intriguing, but the bells and whistles of a premium metal card will also cost you. And, at the end of the day, a credit card’s material doesn’t affect what a credit card is and how it serves you.

Generally, credit card companies offer a metal credit card for its premium card products that charge steep annual fees. For example, for the privilege of using a swanky metal card, you might have to pay an annual fee of $95, with some cards charging up to a $550 annual fee.

If that’s within your budget, take a closer look at the benefits and incentives that the metal card offers, compared to non-metal cards. Whichever card you get next should serve your needs, whether that’s preference for high bonus reward categories in your top monthly spending categories or unique travel benefits and protections.

Also, consider that getting rid of your metal card takes a bit more effort than a standard plastic card. Whether you close your account or you’re issued a replacement for an expired card, you’ll usually have to mail your old metal card to the issuer for disposal. They’ll issue you a dedicated envelope to do so, but it’s an extra step that doesn’t exist with a plastic card.

Recommended: What is a Charge Card

Pros and Cons of Metal Credit Cards

As you can see, there are both upsides and downsides to metal credit cards. Here are the pros and cons to take into consideration before you get a metal credit card:

Pros

Cons

Sleek style Slightly bulkier in wallet
Less prone to damage May need to mail in for disposal
Typically offers premium card benefits Typically has a high annual fee
Associated with luxury Novelty is fading

How to Destroy a Metal Credit Card

If your existing metal credit card has passed its credit card expiration date, you won’t be able to destroy it using a standard pair of scissors, nor can you put it in a shredder that could typically handle your plastic cards.

To effectively destroy a metal credit card, you must either:

1.    Return it to your card issuer by mail. Your issuer will provide you with a prepaid mailing envelope.

2.    Drop it off at a local branch. If your issuer has a brick-and-mortar location, it might be able to dispose of it or mail it to the correct department.

Since the card is made of metal, it requires industrial-grade tools to dispose of securely. Additionally, shredding it yourself might result in injury. Consider relinquishing the metal card to your issuer for safe disposal.

The Takeaway

Metal credit cards might add panache to your credit card rotation, but their aesthetic appeal shouldn’t be the only reason to seek one out. A plastic card that has a generous rewards program might be more valuable in the long run than a metal credit card that has limited perks. Always consider your own credit card habits, the types of purchases you make, and the benefits that are most valuable to you when shopping for a new credit card.

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 anyone get a metal credit card?

Everyday consumers who meet a card issuer’s lending criteria can be eligible for a metal credit card. Unlike decades prior when metal credit cards were accessible to a select few by invitation only, today more card issuers offer their own metal credit card.

Are metal credit cards safe?

Yes, metal credit cards are safe to use. They have the same security features as their plastic credit card counterparts. The main difference is that the credit card metal material is more durable.

Can I request a metal credit card?

No, generally, a metal credit card is not a feature you can choose. Instead, metal credit cards are offered for specific credit card products that you can apply for.

Why are some metal credit cards heavy?

Credit card metal materials vary depending on the card. Some card companies use materials like stainless steel, aluminum, titanium, or a blended mix of metals to create the card. Different metals have different weights, some of which may feel heavier.

Are metal credit cards generally better?

No, metal credit cards aren’t better than plastic cards in terms of how the card functions or its features. Metal credit cards do have an edge when it comes to durability, however.


Photo credit: iStock/VioletaStoimenova

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

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

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Why Credit Cards Get Declined: 7 Common Reasons and Solutions

Why Credit Cards Get Declined: 7 Common Reasons and Solutions

There are several reasons why your credit card might get declined when trying to make a purchase. For instance, it could happen due to insufficient funds or because you’ve maxed out your card. Ultimately, the reason why your card is being declined depends on the particulars of your situation.

Awkward? Frustrating? Embarrassing? You bet. And in some instances, having your card get declined — especially when you have money — can be worrisome and costly. Let’s take a look at seven common reasons why your credit card may get declined and what you can do if it happens to you.

What Does It Mean for Your Credit Card to Be Declined?

When a credit card is declined, something went awry, and your transaction wasn’t processed. In turn, you won’t be able to make a purchase with that card. That’s because the credit card issuer did not provide authorization on your account — an essential component to what a credit card is and how credit card transactions function.

Sometimes, your credit card is declined due to what turns out to be an easy fix — for instance, a simple blunder like punching in the wrong ZIP code or a chip malfunction. In other cases, the reason might be something more complex and require steps to resolve before you can resume using a credit card.

7 Reasons Why Your Credit Card May Have Been Declined

Standing at the register wondering, ‘Why is my card being declined?’ Knowing the reason can help prevent the situation from happening again and ensure that future transactions go through smoothly.

1. You’ve Met Your Credit Limit

If you’ve maxed out your card — meaning you reached your credit limit — the issuer might block further purchases from going through.

Your credit limit is how much credit a card issuer extends you on a particular card. This amount varies from cardholder to cardholder, and it hinges on a handful of financial factors. You can find your credit limit on your credit card statement as well as in your cardholder agreement.

You’re more likely to reach your upper credit limit if you’re carrying an existing credit card balance. Beyond causing your credit card to get declined maxing out on your card — or getting close to it — can ding your credit. That’s because it increases your credit utilization rate, which is a factor in determining your credit score. It’s generally recommended to keep your credit usage below 30%.

What to do: Pay down your balance. You can also request a higher credit limit, but this could open the door to racking up more debt.

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

2. Your Transaction Was Flagged as Suspicious

Wondering ‘why is my card getting declined when I have money?’ In this scenario, it could be due to something entirely out of your control. For instance, the card issuer might block a transaction from going through to protect you from fraudulent activity.

Fishy purchases might include a transaction for a big-ticket item or a first-time purchase from a website or app. Or, it may raise a red flag to the card issuer if you use a card after a long dormant, or if there’s a cascade of purchases made in different locations within a short period of time.

What to do: Often, the card issuer will contact you to let you know that there’s been suspicious activity on your card and that your card has been temporarily blocked. You’ll be asked to review the last few transactions to make sure they’re indeed legitimate and that they were made by you. You can also reach out to the credit card company to see why your card has been blocked.

3. There’s a Large Transaction Pending

A merchant might request a credit card hold on your account if you make a large-ticket purchase. That’s because the merchant wants to ensure it will get paid what it’s owed. If there’s a hold on your card, that means that a portion of your credit limit is set aside, which could prevent further transactions from being authorized.

Holds are also common for transactions where the grand total might not be determined when you make an initial payment — think hotels, resort fees, purchases on cruise ships, and car rentals. The hold is usually lifted a few days after a transaction is cleared, if not sooner.

What to do: You can clear a hold by either reaching out to your credit card issuer or the merchant and requesting that it’s lifted. While there are no guarantees, it’s worth asking.

Recommended: What is the Average Credit Card Limit

4. You Provided Incorrect Payment Details

Punching in incorrect payment details — think your billing address, card number, credit card expiration date, or security code — can result in your card not going through. And when you’re trying to use your card at the gas pump or at a brick-and-mortar store, entering the wrong ZIP code on the keypad can also trigger a “card declined” message.

What to do: Double-check all information before attempting to resubmit payment. Or, if you’re making an in-store purchase, consider using a mobile payment platform.

5. You’ve Defaulted on Payment

One of the significant consequences of a credit card late payment is that your card issuer might block you from making further purchases. A single late payment usually won’t trigger this result, but if you’re late for several months in a row, you might default on your card. In turn, your transactions might not go through.

Not only does falling behind on your payments impact your ability to tap into your card to pay for things, but it also dings your credit. Plus, it can trigger late fees.

What to do: Make a credit card payment as soon as you can. Once your payment is posted, your card should be unblocked and you can start using it again.

Recommended: When Are Credit Card Payments Due

6. Your Credit Card Is Deactivated or Expired

Cards usually expire three to five years from its issue date, after which point you can no longer use the card. Because the period until expiration varies, don’t forget to glance at the expiration date on a credit card if it’s been some time since it’s gotten some use.

You also won’t be able to use a credit card that’s been idle for a long stint or deactivated entirely. How long it takes for your card to be deactivated due to a lack of use will vary.

What to do: If you’re juggling multiple credit cards, remember to routinely check the expiration dates. You might also consider keeping a log of when each card expires, or when you last used it.

7. Your Purchase Was Attempted While Traveling

If a purchase was made in Prague and you live in Pittsburgh, this could alert the card issuer of potentially suspicious activity. In turn, a temporary freeze might be placed on your account.

What to do: Set a travel notification before you depart. Some card companies make it easy for you to set a notification on its mobile app. Otherwise, give the issuer a call to give them a heads-up of your travel dates and planned destinations.

What to Do if Your Credit Card Is Declined

The steps you’ll need to take to get to the bottom of a credit card getting declined largely depends on why it happened. In general, however, here are some moves you should make if your card was declined.

Contact the Credit Card Company

Reaching out to the credit card company can help you figure out exactly why your card was declined. If it was due to reasons such as suspicious activity or because you were traveling, you can verify the transactions. In turn, your hold can get lifted.

Verify Account Details

Incorrect information stored on retailer accounts, payment platforms, and your digital wallet could result in a failed transaction. Check to make sure the details on the cards on file are accurate.

Make a Card Payment

If you’re behind on your payments, make a credit card minimum payment as soon as possible. Once the payment goes through, the card issuer will likely unblock your card.

Preventing Your Credit Card From Being Declined

To avoid a declined credit card in the first place, mind these steps:

•   Set card alerts. Signing up for email or text alerts for your credit card transactions will help you stay on the lookout for suspicious activity. You can get notifications when purchases are made over a certain threshold or for any in-store, online, or over-the-phone purchases.

•   Keep tabs on your card balances. Monitor your spending and check how much of a balance you have on your cards. Stay below your credit limit to remain in the clear. As discussed previously, maxing out your cards — or nearing the threshold — will put you in danger of a declined credit card.

•   Stay on top of your payments. Make it a priority to stay on top of paying off your cards. Pay at least the minimum amount required by the credit card payment due date. Consider putting your card payments on autopay, which will help you ensure you make your payments on time. On-time payments will also help boost your credit score and avoid late or returned payment fees.

•   Set travel notifications. Some credit cards have a travel notification feature on their app. Before you depart, reach out to your card issuer to let them know when and where you’ll be traveling.

The Takeaway

Having your credit card declined while trying to pay for something can feel frustrating. It’s important to figure out why your card is being declined, whether it’s due to late payment or an expired card. From there, you’ll know what steps to take to prevent it from happening again and ensure that you can use your card when you need it.

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 a credit card be unblocked?

Yes, you can unblock a credit card. How you’ll do so depends on the reason it was blocked in the first place. As such, you’ll first want to get to the bottom of why your credit card was blocked. Then, you’ll need to take the necessary steps to release the block. For example, if your card was blocked due to suspicious activity, you’ll need to call the card issuer and confirm you made the last few purchases.

How long does it take to unblock a credit card?

It depends. If it’s a temporary block, your card can get unblocked immediately. But in other instances, it can take a couple days or even a couple weeks to unblock a credit card.

How can I check the status of my card?

You can check the status of your card by logging onto your account via a computer or mobile app. You can also check its status by calling the customer service number listed on the back of the credit card and inquiring.

How long does it take for a declined transaction to come back?

It depends on the card issuer and the reason why the transaction was declined. In some cases, it can take a few days. And in other cases, it can take longer.


Photo credit: iStock/bernardbodo

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 .

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