A Guide to How a Credit Score Simulator Works

A Guide to How a Credit Score Simulator Works

A credit score simulator is an online tool that can help you see how certain behaviors and decisions might impact your credit score in the future. It might take your existing credit history into account and how certain actions could affect your credit score.

For example, perhaps you open a new credit card or have an account sent to collections. A credit score simulator would take these marks into consideration and help you estimate the impact they may have on your credit score.

What Is a Credit Score Simulator?

A credit score simulator is an online, interactive tool that can help you assess how certain decisions or events will affect your credit score. Because everyone has a unique credit history, these tools can only help you to estimate the impact of changes to your credit score, rather than making this determination for certain.

Nevertheless, credit simulators can be useful, especially if you are working to improve your credit. There are many actions you could take that may affect your credit score — here are just a few examples:

•   Financing a home or car

•   Using a balance transfer credit card to consolidate your debt

•   Closing a credit card

•   Declaring bankruptcy

These are just a handful of the ways your credit score could rise or fall; there are many more examples. With so many possibilities, it can be difficult to predict how changes to your credit history will affect your credit score. Once you know what a credit card is, it quickly becomes apparent how a credit score simulator can help.

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

How Does a Credit Score Simulator Work?

After gaining an understanding of how credit cards work, you can start to understand how a credit simulator works. Each credit score simulator is different, but there are some commonalities in how they work.

Some start with your current credit score provided by a credit reporting bureau, then let you see how some of the changes mentioned previously would affect your score if you were to make them. While there’s no guarantee they will be completely accurate, they should give you an idea of the potential impact on your credit score.

Other credit score simulators might guide you through several questions about your credit profile. The result estimates your current credit score based on your responses. For example, the myFICO credit score estimator asks you about things like how many credit cards you have, how long ago you opened your first card, and whether you’ve missed a payment.

Recommended: When Are Credit Card Payments Due

How Your Credit Score Is Calculated

Credit score simulators generally use popular credit scoring models to estimate your current or future credit score. For instance, they might use FICO® Score 8 or VantageScore 3.0. These models use certain credit factors to calculate your score.

While each credit scoring model is different, certain behaviors tend to have a positive influence on your credit score, regardless of the model. Typically, some of the factors affecting credit score are:

•   Payment history: This is usually one of the most important factors in the calculation of your credit score. To avoid a negative impact on your credit score, you’ll want to avoid being more than 30 days late on any credit card payments.

•   Credit utilization ratio: This ratio is simply the total outstanding balance on all of your credit cards divided by their total credit limit. One of the credit card rules is that you should aim to keep this ratio below 30%.

•   Derogatory marks: These are items like bankruptcies, tax liens, and collections. It’s best to avoid these altogether if possible, especially since they can stay on your credit report for seven to 10 years.

•   Credit age: Creditors like to see that you have a long history of responsible credit use. Thus, your credit score may be slightly more favorable if your oldest credit card is decades old. The same holds true for loans.

Recommended: Tips for Using a Credit Card Responsibly

What a Credit Simulator Can Do

A credit score simulator can help estimate either your current credit score or what your credit score might be in the future. The result is that they can help you better understand how different actions will increase or decrease your score.

Thus, they can help you prioritize which actions to take. Should you pay off your credit cards quickly, or should you focus more on your loans for now? Credit score simulators can help you answer these questions when the answer isn’t so obvious.

What a Credit Simulator Cannot Do

The main thing that credit simulators cannot do is tell you exactly what credit score you should expect to have at a given point in the future. There are simply too many variables at play to know with absolute certainty what your score will be.

For one, your credit card issuer might use a different credit scoring model. Another possibility is that there are other changes to your credit profile that could impact your score. Perhaps you finish paying off a credit card six months from now, but an emergency suddenly arises that results in you taking out a personal loan.

The fact that there are so many possible scenarios is why we say credit simulators can only help you estimate your score rather than tell you exactly what it will be.

When It Makes Sense to Use a Credit Simulator

It makes sense to use a credit simulator in certain situations. For example, suppose you plan to finance the purchase of a new car. That will certainly have some impact on your credit, but the effect will vary depending on your credit history. A credit simulator can help you estimate what that impact will be.

Credit simulators can also help you decide which actions to prioritize if you have a bad credit score. Many of these possible actions might improve your score, but chances are, some will help more than others. Over time, you can gain a better understanding of which kinds of actions tend to have the largest impact.

Other Tools to Monitor Your Financial Health

Credit simulators are not the only thing that can help you monitor your financial health. Here are some other tools to consider:

•   Credit score monitoring: While credit simulators can help you estimate how changes to your credit report will affect your score, credit monitoring tools give you credit score updates on an ongoing basis. They can also give you a breakdown of your credit factors and how your score has changed over time.

•   Budgeting tools: Budgeting tools are useful because they often let you sync all of your bank accounts and credit cards in one dashboard. You can then see all of your balances in real-time.

•   Identity theft protection: If your identity is stolen, it can have a major impact on your credit and your finances as a whole. Thus, it’s not a bad idea to have this protection just in case.

What Makes a Good Credit Score?

It’s tough to overstate the importance of having good credit. Nevertheless, what constitutes good credit will vary from person to person. The general idea is you must show creditors that you are a responsible borrower and that you aren’t going to default on your debt (in this case, your credit card).

This is why things like late payments and high credit utilization can drastically lower your credit score. Late payments suggest you may not be able to reliably make your payments. And a high credit utilization suggests you may have a higher risk of default as you are using a high percentage of the credit available to you.

The Takeaway

Credit score simulators are one tool that can help you assess how different behaviors can affect your credit score. Because they are just simulators, they may not be completely accurate. Still, they can give you an idea of what to expect and help you reach your financial pals.

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

Are the changes made by a credit score simulator guaranteed?

In short, no. Credit scores are complex and other factors could affect your score in the meantime. Nevertheless, credit simulators can help you better understand how various changes may affect your credit score.

How long do credit score changes usually last?

How long changes to your credit score last depends on reporting to credit bureaus. Each bureau has its own schedule, but credit card updates usually happen every 30 to 45 days. However, some changes — such as a bankruptcy declaration — can remain on your credit report for as long as 10 years.

How accurate is a credit score simulator?

Credit score simulators should be relatively good at estimating credit score changes based on the information provided or available to them at any given moment. However, credit reports can change frequently, and simulators can’t usually predict what will happen with your credit a day, a week, or a month from now.


Photo credit: iStock/millann

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

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

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

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Leveraging Credit Cards to Build Wealth

Leveraging Credit Cards to Build Wealth

If you have strong credit, leveraging your credit cards as part of your wealth-building strategy might be possible. Whether you’re looking to use them toward shrewd investments or through tactically accumulating rewards, your credit card can be a powerful tool.

However, before you worry about how to leverage credit to make money, it’s crucial that you understand the high risk involved in leveraging your credit line as investment capital. If you don’t have cash flow ready to immediately repay large credit card purchases, you’re putting yourself in danger of getting buried in debt.

Strategies for Leveraging Credit Cards

Depending on your risk tolerance, how much cash you have on hand for repayment, and your financial goals, you have a few options for how to leverage credit cards. Here’s a look at some of the ways you could leverage your credit to help pave your path toward building financial freedom.

Upgrading Your Property

If you’re looking for new investment options outside of your online trading platform, you could leverage credit cards toward your existing home. Using your card as a cash flow tool to fund renovations and upgrades can help you increase your property’s value.

According to Realtor.com, homeowners who update their kitchen can typically expect a return on investment (ROI) of about 83%. The approximate ROI on a bathroom remodel is 66%. Your ROI will depend on many factors, such as the quality of materials and appliances used, but in general, updating your home can improve its value.

Utilizing 0% Credit Promotions

If you’re wondering how to use good credit to make money, another option is a 0% promotional offer. A 0% APR credit card promotion lets you leverage your credit line at no additional cost for a limited period of time. The temporary promotion is typically reserved for those with excellent credit and is available for a short time frame, such as from six months to 18 months.

You can use your card toward other wealth-building strategies and repay your purchases within the promotional period to avoid interest charges. The main caveat is ensuring that you can realistically afford to repay your card charges within the promotional period. If you don’t, some cards charge deferred interest on any remaining balance after the promotion expires.

Recommended: What is a Charge Card

Turning Your Credit Card Debt Into Good Debt

Credit cards can be used as a tool to increase your credit profile. A higher credit score earns you access to lower, more competitive interest rates and a higher borrowing limit when you need a loan in the future.

Practicing sound borrowing habits on a credit card, like maintaining an on-time payment history, keeping your credit utilization ratio low, and not opening too many new accounts in a short period are some factors that can positively impact your score. Keep in mind that the better your credit, the better the terms you may receive to then use toward investments.

Recommended: When Are Credit Card Payments Due

Flipping Items for More Cash

Retail arbitrage is one way people leverage credit cards to increase their wealth. As an example, let’s say you purchased a vintage Windsor chair from a thrift store for $20 using your credit card. If you successfully sell it on Etsy or eBay for $250 before interest accrues on the purchase, you’ve effectively leveraged your credit to earn a $230 profit.

Before you leverage your credit card in this way, do your due diligence by researching high-value items that can be flipped in a short period of time. Having inventory that’s taking up space in the corner because it’s not a hot item, or too niche, might result in getting hit with interest charges before a profit is made.

Recommended: How to Avoid Interest On a Credit Card

Making Use of Available Discounts

Another way to leverage credit cards is by using a credit card to save money on planned purchases. Many rewards and travel credit cards offer discounted rates on vacation packages or trip costs like flights and accommodations.

Taking advantage of discounts that already come with your card is another way to save money. You can then reallocate this discretionary cash flow toward more lucrative investments.

Maximizing Big Welcome Bonuses

Some credit cards offer lucrative sign-up bonuses for consumers who open a new account. For example, a credit card might offer 60,000 bonus points (that’s valued at $750) to new cardholders who make a minimum of $4,000 in purchases within the first three months of opening the account.

Keep in mind that this option is likely best for cardholders who have a large purchase coming up, or already use a card for everyday expenses that will allow them to hit the minimum purchase requirement.

If you meet the requirements of the sign-up bonus offer, you can use your earned rewards toward a statement credit, travel, and more, effectively freeing up cash flow that otherwise would have come out of your pocket.

Recommended: Can You Buy Crypto With a Credit Card

Racking Up Cash Rewards

You can also strategically leverage credit card rewards. If your card offers cash-back rewards, use that card to cover your day-to-day expenses rather than your debit card. That way, you can earn money back on each dollar you spend.

For example, you can use a cash-back rewards card for groceries, school supplies, gas, dining, entertainment, vacations, and more. Depending on your rewards program, you could accumulate a sizable amount of cash back that could end up covering a portion of your monthly statement balance or even a trip. Or, you could get your rewards as cash that you then put into the market, allowing you to effectively invest with credit card rewards.

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

Investing in Yourself

Buying stocks with a credit card may seem like the more obvious investment opportunity, but using your credit card to enhance your skills or education can actually be a powerful way to leverage your credit. For example, learning additional coding language might make you a more competitive candidate for a higher paying job.

In this situation, using your credit card toward online courses could potentially boost your long-term wealth and career opportunities.

The Takeaway

Responsible credit card habits are key to leveraging credit cards to build your wealth. If you can confidently repay your credit card charges in full every month, a credit card can earn you rewards while leveraging your credit toward investment opportunities.

When leveraging credit cards to build wealth, it’s important to avoid credit card fees and take advantage of any perks offered.

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 mean to leverage your credit card?

Leveraging your credit card to increase your wealth means using your card as a cash flow tool. It’s best when used by cardholders who practice responsible borrowing habits, such as paying off monthly balances in full to avoid finance charges.

How do you make money leveraging credit cards?

Different ways to leverage credit cards include using your card toward a home remodel that increases your home value, or capitalizing on credit card rewards on purchases you already make.

Is leveraging credit a good idea?

Leveraging your credit can be a good strategy if you maintain positive financial habits, like making on-time payments and paying off your full credit card balance each month. If you don’t have the cash to pay back your purchases, this strategy can quickly backfire through accumulated debt and interest charges.

What is credit card arbitrage?

Credit card arbitrage is a strategy that involves borrowing credit from your card, and then using those funds toward a higher-interest investment vehicle. This is commonly seen using promotional 0% APR credit cards. After you’ve earned dividends from your investment during the temporary no-interest period, you’d repay your credit card balance, and keep the investment profit.

How do I turn my credit into cash?

One option to turn your credit into cash, without costly cash advance APRs, is if you have a friend who needs to make a large purchase and has cash in hand. You can offer to make the purchase using your credit card in exchange for the cash, which you can then put toward the investment purpose of your choice. Similarly, you could purchase gift cards using your credit card for the balance you need. Just make sure you can realistically repay your credit card statement at the end of the month.


Photo credit: iStock/Delmaine Donson

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.

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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Paying a Credit Card Early: What to Know

Paying a Credit Card Early: What to Know

Making on-time payments is not only financially responsible, but it can help you with building and maintaining a high credit score. But what about paying your credit card early? Far from being bad, paying your credit card before the due date, or even making extra payments each month, might offer some benefits — including a positive impact on your credit score.

To decide if you should pay your credit card early, consider the benefits and weigh whether it’s financially worth it for you to pay your credit card bill before the statement closing date.

What It Means to Pay Your Credit Card Early

In a nutshell, paying your credit card early means you’re making your monthly payment before your due date. Or, it could mean putting extra payments toward your credit card before the billing cycle ends.

For instance, let’s say you check your credit card transactions online a few days before your billing cycle ends. You decide you want to pay about half of the balance right then, so you make a bank transfer through your online account, constituting an early credit card payment. Then, once you received your credit card bill after the grace period, you’d pay off the remaining balance.

Recommended: Tips for Using a Credit Card Responsibly

Understanding Your Credit Card Billing Cycle

Your credit card due date falls on the same date every month. Once you reach the end of your billing cycle, your credit card issuer will send you a statement letting you know the total amount that’s due, the minimum amount you’ll need to pay, and the credit card payment due date.

From the point your billing cycle ends up until your payment due date, you’re in what’s known as a grace period. During the grace period, you won’t be charged interest, assuming you’re paying off your balance in full by the due date of each billing cycle. This is a big perk, given how credit card debt is hard to pay off.

To determine the length of your credit card’s billing cycle, you can check your cardholder agreement or contact your issuer. You can also calculate the number of days between the start and end dates of the billing cycle — you should be able to find that on your credit card statement. In general, however, billing cycles last around 28 to 30 days.

Recommended: What is a Charge Card

Potential Benefits of Paying Your Credit Card Early

If you’re wondering, ‘Is it bad to pay your credit card early?,’ there’s no need to worry.

In most cases, the decision to pay off your credit card bill early is beneficial to your credit.

Reduce Interest Charges

Credit card companies tend to charge their cardholders interest when they carry a balance from month to month. If you pay off your credit card early — especially if you pay off the balance in full before the end of the billing cycle — that means you could pay less in interest (or even no interest at all).

Every little bit can help, because the higher your credit card balance, the more interest you could end up paying. If you’re unsure of how much paying off your credit card early can help, consider using a credit card payoff calculator to help you determine your potential savings.

Recommended: How to Avoid Interest On a Credit Card

Reduce Credit Utilization

Credit utilization is the percentage of your total available revolving credit you’re using. A lower credit utilization means that you’re not using as much credit, which could signal to creditors that you’re financially stable enough that you don’t need to rely on credit. In other words, your credit score could go up when your credit utilization is low, and the opposite could happen when it’s high — it’s generally recommended to keep it below 30%.

By making an extra credit card payment earlier than when your current billing cycle ends, you may be able to lower your credit utilization ratio. Even if you’re making a payment before the due date, you could still lower your credit utilization which can positively impact your credit scores.

To calculate your current credit utilization, add up all of your current credit card balances and divide that amount by your total credit limit. For example, if you have three credit cards each with a limit of $5,000 — $15,000 in total — and respective balances of $1,500, $800, and $2,000 from using your credit cards. In this example, your credit utilization would be around 28%.

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

Avoid Late Fees

Paying your credit card early — even if you’re not paying off your balance in full — means you’ll reduce your chances of getting charged a late payment fee. However, if you have a balance remaining from the previous billing cycle, note that early payments could go toward those previous charges first.

To be clear, you need to pay at least the credit card minimum payment stated on your credit card balance to avoid late fees. For instance, if you make extra payments but still have a balance leftover by the end of the billing cycle, your credit card could mail a credit card statement with the remaining balance due, plus a minimum amount you’re required to pay. In this case, you’d need to pay that amount before the due date to avoid paying late fees.

To make sure you’re still making on-time payments, consider scheduling payments, setting up autopay, or putting reminders on your calendar to help yourself remember to pay your credit card bill.

Recommended: When Are Credit Card Payments Due

When Is the Best Time to Pay a Credit Card Bill?

There isn’t a best time to pay a credit card bill, but it’s not a good idea to pay your credit card bill late — meaning after your due date has already come and gone.

There are a number of consequences of credit card late payment. Paying late means that you’ll get hit with late charges, and it could have a negative impact on your credit score. Depending on how late you are with paying your bill, your credit card issuer could also enact a penalty APR, which is higher than your regular one.

The Takeaway

Paying your credit card early can offer plenty of benefits. This includes potentially lowering your credit utilization, avoiding late charges, and reducing your interest charges.

To help you save more money when using your credit card, consider using a credit card that offers a competitive interest rate and allows you to earn rewards.

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

Will paying my credit card bill early affect my credit?

Paying your credit card bill early can help to boost your credit score because on-time payments are one of the major factors that affect your FICO score. Plus, it could lower your credit utilization ratio, another major factor that goes into calculating credit scores.

Is it ever bad to pay my credit card early?

It’s not bad to pay your credit card early since it shows that you’re a responsible cardholder. As long as you make at least the minimum payment, you won’t get hit with late fees or other types of consequences, such as a negative mark on your credit report.

What happens if I pay the credit card bill before it is billed?

If you pay your credit card bill before the end of your billing cycle, the payment will either go toward the previous month’s statement — if you carry a balance — or toward the current balance. In any case, paying a credit card early will lower your statement total and could boost your credit by lowering your credit utilization ratio.

Can I pay my credit card the same day I use it?

Yes, you can. However, you may want to wait until the payment has been posted to make sure the amount you’re putting toward your bill is correct.


Photo credit: iStock/andresr

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.

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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How Long Does a Credit Card Refund Take?

How Long Does a Credit Card Refund Take?

You made a purchase on your credit card and then decided you no longer wanted the item and returned it — but how long does a credit card refund take? Credit card refund times vary based on a number of factors. This includes the speed at which the merchant processes the refund, how soon you requested the refund, and the length of time it takes for your credit card issuer to credit the amount to your account.

If you’re feeling antsy about how long it takes for a refund to appear on your credit card, however, there are ways that you can speed up the process.

How Do Credit Card Refunds Work?

When you make a purchase on a credit card, your credit card issuer pays the merchant and the amount will go onto your account for repayment. Since the issuer technically paid for the purchase, any requests for a refund will go back to the credit card account. In other words, you won’t receive other forms of payment like cash for refunds when you use a credit card since you didn’t directly pay for the purchase.

There are two types of refunds — one for purchases and ones due to fraud.

In the case of purchases, you’ll deal with the merchant with whom you made the purchase. Once the merchant approves the refund, the credit card company will process it. Then, the amount refunded will show up on your credit card statement. The credited amount may not appear in the current billing cycle if you made a return in between billing cycles (the end of a billing cycle also tends to be when credit card companies report to credit bureaus).

As for fraud, these are charges to your account that you didn’t authorize. Most credit card companies will offer some form of fraud protection as long as you notify them within a certain period of time, usually 60 days. Once the issuer is notified of the fraudulent transaction, it will reverse the charges. You’ll then receive a credit for the amount charged, or the charge will get taken off your account completely, assuming you’re not falsely disputing a credit card charge.

Do All Credit Card Refunds Take the Same Amount of Time?

Not all credit card refunds will take the same amount of time. To get an idea of how a particular merchant accepts and processes returns, you can look at the merchant’s refund policy. Some items to note in this statement include:

•   Types of refunds offered: Some merchants may be lenient on their return policies, while others may only offer store credit for returns, for instance.

•   Refund times: Merchants typically state when they’ll issue a refund, such as within a few business days or weeks.

•   How to make a return: Check to see whether you can make a return in person or if you can ship back the item. If you’re shipping, make sure to see if you or the merchant pays for shipping.

After the refund is processed, you’ll need to wait on your credit card company to post the refund or credit to your account. How long this takes will also vary depending on the issuer.

How Long Does a Credit Card Refund Take?

A credit card refund usually takes up to seven business days after the customer makes the request.

Keep in mind that the rules for refunds can vary depending on your credit card issuer and how long it takes the merchant to process the refund. The faster the merchant processes the refund, the faster it will hit your account.

However, the above timeframe assumes that the merchant agrees to process the refund. If you were to dispute a credit charge, the process of getting a refund could take much longer. Notifying your credit card company as soon as you can is helpful because it could take some time for them to complete their investigation — they have up to 90 days to do so.

Recommended: What is a Charge Card

Factors That Determine How Long a Credit Card Refund Takes

The two main factors that determine how long a credit card refund takes is the type of refund you’re requesting and where you made the purchase.

The Type of Refund It Is

As mentioned before, credit card disputes — whether for fraud or a credit card chargeback request for a product you never received — may take longer compared to refunds for purchases. Plus, you’ll need to make sure you contact the credit card company within 60 days of the billing or fraud dispute. From there, the issuer should have the dispute resolved within two billing cycles, or up to 90 days.

Where You Made Your Purchase

Different merchants have varying refund policies — the longer it takes the merchant, the longer it will take for the refund request to reach your credit card issuer. Here’s a sampling of some of the refund policies at popular retailers:

•   Amazon: It can take up to 30 days to process a refund. After an item arrives at the fulfillment center, credit card refunds are typically processed within three to five days. Once a return is processed, the funds will appear in your account, usually within three to five business days.

•   Square: Any merchant that uses Square to accept purchases will take two to seven business days to process a refund. It can then take an additional two to seven business days for the refunded amount to appear in your account, resulting in a total credit card refund time of nine to 14 business days.

•   Walmart: Refunds tend to take up to 10 business days to process.

How to Speed up the Refund Process

The good news is that there are some ways you can help to speed up the refund process.

Get It There Faster

Some retailers have multiple ways to return items, and certain methods have faster processing times than others. For instance, many major retailers process refunds faster (in some cases, immediately) if you make a return in-person at one of their store locations instead of mailing back the item.

Make Use of Loyalty Benefits and Store Credit

You may be able to receive expedited shipping for returns or faster refund processing times if you belong to a merchant’s loyalty program. Often, you also may be able to get a refund faster if you opt to receive a store credit instead of getting a refund issued to your credit card.

How Does a Refund Affect Your Credit Card Account?

Refunds are typically treated as an account credit. There’s no credit card refund issued in the form of cash since you borrowed the money from the credit card issuer to make the purchase in the first place.

While the purchase is still billed to your account, you’re technically responsible for payment. If you made the purchase, paid it off once the billing cycle ended, and then requested a refund, you’d get a credit to your account. Due to credit card rules, the refund does not count as a partial payment.

No matter how long you wait for a refund, it’s important to manage your account wisely and make sure you’re using a credit card responsibly so you don’t end up overextending yourself. As long as you pay your bill by the due date, you won’t risk hurting your credit score while you’re waiting for your refund.

Recommended: When Are Credit Card Payments Due

Refunds on Rewards and Fees

Credit card companies usually won’t refund any interest or fees you may have paid because you carried a balance for a purchase that you’re now trying to get a refund for. Similarly, if you made a purchase while you were overseas and were charged a foreign transaction fee, you most likely won’t get a refund for that either.

When it comes to rewards, whatever you earned for the purchase will get deducted from your earnings after the refund is processed and posted to your account. You end up with a negative rewards balance if you redeemed all of your points before requesting a refund.

Recommended: Can You Buy Crypto With a Credit Card

The Takeaway

Being aware of how credit refunds work helps you to understand how to keep better track of your credit card statements and rewards earnings. It can also help you to determine which credit cards are better used for certain situations.

Earning rewards is a great way to maximize your credit card purchases.

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 happens to my rewards if I request a refund?

Your rewards will be deducted from your current balance after your request for a refund is processed.

How long does it take for a refund to appear on a credit card?

A refund may take up to seven days to appear on your credit card statement. However, this timeframe can vary depending on your card issuer, the merchant, and what type of refund request it is.

Are credit card refunds instant?

Credit card refunds typically aren’t instant. This is because it takes time for the merchant and credit card company to process it.

Will a delayed refund hurt your credit?

A delayed refund typically won’t hurt your credit as long as you continue to make on-time payments and are generally responsible with your credit card usage.


Photo credit: iStock/MBezvodinskikh

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.

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.

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 Buying Real Estate With a Credit Card

Guide to Buying Real Estate With a Credit Card

Investing in real estate can be a lucrative endeavor, especially in today’s hot real estate market. But if you don’t have hundreds of thousands of dollars saved in cash to put toward a property, using a credit card to secure a real estate investment might be an option.

There are ways to execute this investment approach. However, there are also serious caveats to consider before moving forward with using a credit card to invest in real estate.

Can You Buy Real Estate With a Credit Card?

You can’t purchase a physical real estate property outright with a credit card the way you would when using a credit card to buy lunch or a new television. One reason for this is because a typical consumer credit card likely doesn’t offer a credit line large enough to cover the entire home price.

Even if you do qualify for a credit line to cover all or a significant portion of the home price, you’ll face another challenge. The title company or real estate agency that’s facilitating the deal requires that payment is provided using bank-certified funds — such as a cashier’s check, certified bank check, or wire transfer — to finalize your investment transaction. Given what a credit card is, it won’t meet those standards.

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

How to Finance Real Estate Investments With a Credit Card

While you can’t swipe your credit card to purchase real estate, there are ways that you can leverage your credit card to help fund your real estate investments.

Recommended: When Are Credit Card Payments Due

Through a Cash Advance

If you have a high enough credit limit, a viable way to buy real estate with a credit card is by getting a cash advance against your card. By doing this, the funds you borrow from your credit card will become quickly available for use on a real estate investment, which might be helpful if you’re buying real estate in a red-hot market.

Keep in mind that fees typically apply for cash advances. Typically, you’ll pay a fee in the range 3% to 5% of the transaction amount, depending on your particular card.

Also know that cash advances typically come with interest rates that are higher than the card’s standard annual percentage rate (APR). Plus, interest begins to accrue immediately rather than at the end of the grace period like it does on regular credit card purchases.

Recommended: What is the Average Credit Card Limit

For Related Real Estate Costs

Some investors also use credit cards to invest in real estate by using their card for renovation project expenses. If you purchased a low-cost investment property and want to update it for passive rental income, for example, you might be able to invest in your property by putting charges for contractors and materials on your credit card.

Recommended: What is a Charge Card

By Using Credit Card Rewards

Another unconventional approach to buying real estate with credit cards is directly redeeming earned rewards as cash. Cash redemption values are typically lower compared to redeeming rewards toward travel, for example, but this approach can still unearth the capital you need to invest in your next property.

This strategy is particularly effective if you’ve already amassed years of rewards through a business credit card, and are willing to pool earned rewards from your personal credit card rewards programs, too.

Recommended: Can You Buy Crypto With a Credit Card

Advantages of Using a Credit Card to Invest in Real Estate

Although buying real estate with a credit card is an unconventional approach, there are some benefits in doing so. In particular, the advantages include that:

•   You can invest faster: If you don’t have a lump sum of cash savings ready, it might take years to save up enough capital to get your foot into real estate investing. Using a credit card to invest in real estate can help you realize your investment goals faster.

•   You’ll have fewer costs at closing: Since you’re not financing through a mortgage lender, there are fewer fees to worry about. Unlike when buying a home as your primary residence through a mortgage loan, costs like origination fees, appraisals, and escrow fees aren’t a required part of a real estate investment transaction done in cash.

•   You might earn rewards in the process: Most card issuers don’t let you earn credit card rewards from cash advances. However, you can accelerate your rewards earnings by using your card for spending associated with your property investment. For example, materials and contractor costs for renovation projects, like a kitchen update or a room addition, can help you rack up rewards faster.

Downsides of Using a Credit Card to Buy Real Estate

There are major disadvantages to using a credit card to invest in real estate. If you’re considering how to buy rental property with credit cards, keep in mind the following drawbacks:

•   You’ll have a hard time using credit cards directly to invest in real estate: A notable downside to buying real estate with credit cards is that you’ll likely be unable to throw a credit card onto the table to close a real estate transaction. You’ll have to undergo the extra step of getting a credit card cash advance. But be aware that card issuers might set a lower available limit for cash advances and will impose a higher APR. Plus, you’ll pay cash advance fees.

•   You’ll face high interest rates: If you have to draw a cash advance against your credit card to buy real estate, you’ll face expensive APRs, compared to other financing sources, like a personal loan. According to the latest Federal Reserve data, the average credit card rate across all account types is 15.13%. By comparison, the average personal loan rate for a 24-month term is 8.73%.

•   You’re taking on a lot of risk: How credit cards work is that they let you purchase goods and services, even if you don’t have the cash to cover the full amount, immediately. The caveat, however, is that you’ll need to repay the amount either in a lump sum when your statement is due or over time.

   If you successfully buy real estate with a credit card, you’re legally liable for that debt and must repay it based on the rate and terms of your credit card agreement. This holds true regardless of whether your investment turns a profit. Plus, if you choose to pay back the funds you borrowed over many months, you’ll incur exorbitant interest charges in addition to the principal balance.

Recommended: How to Avoid Interest On a Credit Card

Factors to Consider Before Using Your Credit Card to Invest in Real Estate

After assessing the pros and cons of investing in real estate using a credit card, also consider the following factors that might impact your investment:

•   Whether you’ll need additional funding sources: If your credit card doesn’t provide a sufficient amount for your real estate investment, you’ll need to seek funds elsewhere.

•   What the local real estate market is like: Whether your goal is buying a property to flip and sell, or buying rental real estate, do your homework. This includes finding a desirable neighborhood and a suitable property, as well as assessing renovation projects and other repairs necessary to set your investment up for profitability.

•   If you can repay your credit card bill: At best, consider your credit card as a short-term loan tool. Plan to put profits you’ve earned toward paying down your debt ASAP.

Alternatives to Buying Real Estate With Credit Cards

If you don’t have hard cash stowed away for your next real estate investment, but aren’t ready to leverage your credit cards for the investment, you have a couple of other options:

•   Personal loans: A personal loan is another financing option, particularly if you have strong credit. It offers a higher borrowing limit and longer repayment timeline compared to a credit card. Also, as mentioned earlier, personal loan interest rates are generally lower than credit card APRs.

•   Personal savings: Another option is using cash and avoiding credit cards and other methods of borrowing altogether. If you have personal savings that you can tap into or are willing to hold off on investing in real estate until you’ve built up enough savings, you can potentially avoid costly finance charges.

The Takeaway

Tread carefully when using a credit card (i.e. borrowed money) to fund any investment, including real estate. Adhering to important credit card rules — like staying on top of your credit utilization and paying your credit card statements in full — can help you avoid going into debt for your investment.

If you’re looking for a possible real estate investment card, a SoFi Credit Card lets you earn rewards from eligible purchases.

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

How can I buy rental property with a credit card?

If done strategically, you can use a credit card to buy rental property either through a credit card cash advance or by using the credit card to finance renovations on an investment property flip.

Can I use a business credit card to buy real estate?

Yes, you may be able to use a business credit card to invest in real estate. Doing so separates the debt from your personal credit profile, so the high credit utilization on the business credit card doesn’t affect your personal credit score.

Is it a good idea to buy real estate with a credit card?

Whether buying real estate with credit cards is a good idea depends on your investment risk tolerance. A credit card might work as a short-term funding option, but plan on repaying the debt with your profits quickly to avoid an underwater investment.


Photo credit: iStock/SDI Productions

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.

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.

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