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When making a cashless payment at checkout, you might be prompted to select whether you want the purchase processed as a credit or debit card transaction. Some debit cards with a credit card network logo can be processed as a credit payment, but the reverse — processing a credit card as a debit transaction — isn’t possible.

Still, it can make sense to use credit cards like a debit card. Understanding the difference between a credit card and debit card can help you to make strategic purchasing decisions with your credit card.

Recommended: What is a Charge Card

Can You Use a Credit Card Like a Debit Card?

In terms of being a convenient, cashless payment method, a credit card can be used in-person or online in a similar way as a debit card. Credit cards require you to insert, swipe, or tap the card on a payment processing device to initiate a transaction. If used online, you can enter your credit card information into the payment field at checkout in the same way you would with a debit card payment.

However, there are also significant differences between a credit card and debit card. The most notable distinction is where the funds come from. When you use a credit card, the money is drawn from your card’s available credit line, and you might get charged additional fees and interest on your purchase.

In contrast, a debit card draws the funds you already have in an associated checking or savings account. Also, in certain situations where the final total amount might vary, such as at the gas pump, the processor might request that your card issuer place a temporary hold on your debit card funds to ensure you have enough funds to cover the transaction.

Recommended: How to Avoid Interest On a Credit Card

Reasons You May Want to Use a Credit Card Like a Debit Card

Although credit cards offer numerous advantages when used responsibly, there are valid reasons to prefer using a credit card as a debit card. This may include:

•   To avoid overspending. Debit cards, particularly when you’ve opted out of overdraft protection, help you to avoid spending more than you can afford to pay back. With a debit card, you can only use the funds already in your associated account, which is a tactic you could try with a credit card as well.

•   To avoid finance charges or extra fees. Debit cards generally incur few charges. Additionally, they do not accrue interest since debit transactions are immediately pulled from your deposit account, in contrast to how credit cards work.

•   To amass rewards without debt. The potential to earn rewards is an appealing part of what credit cards are, but “chasing points” can be a risky game if you overspend. The ability to use a credit card like a debit card can help keep your spending in check while earning rewards.

Recommended: Tips for Using a Credit Card Responsibly

Tips for Using a Credit Card as a Debit Card

You can’t technically process a credit card payment as a debit card purchase. But if your purchasing strategy is to use a credit card as your go-to payment method instead of a debit card, remember the following tips and credit card rules:

•   Don’t spend more than you can afford.

•   Do pay your monthly credit card statement in full.

•   Don’t be late or skip a payment.

•   Do explore credit card rewards programs to earn incentives on purchases you already make.

•   Don’t forget to review annual percentage rates (APR) and fees associated with your card.

•   Do use a credit card for online payments for greater fraud protection.

Recommended: When Are Credit Card Payments Due

Pros and Cons of Using a Credit Card Like a Debit Card

The benefits of credit cards in comparison to debit cards vary since they’re two distinct banking products. However, each payment option has its own pros and cons.

	Pros	Cons
Credit Card	•   Offers greater purchasing power •   Can buy items now and pay for them later •   Helps build your credit •   Potentially zero liability for unauthorized charges	•   Can accumulate burdensome debt •   Late and missed payments adversely affect your credit score •   Can incur interest charges and fees
Debit Card	•   Avoids debt by using cash you already have •   No additional interest charges on purchases •   Can request cash back at checkout	•   Buying power is limited to the funds you have •   Insufficient funds may lead to overdraft fees •   Doesn’t help build credit •   Fewer protections with fraudulent charges

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

Alternatives to Using a Credit Card Like a Debit Card

If you’re averse to using a credit card in a traditional sense, there are a few alternatives payment options that are akin to a debit-style transaction:

•   Prepaid credit card. A prepaid credit card requires you to “load” the card with funds, which then becomes your card’s available credit line. It gives you the convenience of a credit card, but taps into cash you already have, which is similar to a debit card. Note that prepaid cards often incur fees for various types of activity.

•   Cash-back rewards debit cards. If you want the perks of a credit card, like cash-back incentives, but in the form of a debit card, a cash-back debit card might be an option. These limit you to spending the funds you already have on deposit, but let you earn cash back when you use the card.

Recommended: Can You Buy Crypto With a Credit Card

The Takeaway

Using a credit card like a debit card ultimately boils down to only spending on your card with funds you already have. Since a credit card is essentially a loan, it’s easy to accumulate overwhelming debt, plus interest charges, if you’re overspending. If you can comfortably afford to repay your credit card transactions in full each month, using your credit card in lieu of a debit card can provide access to valuable benefits, like earning rewards, enhancing fraud protection, and positively impacting your credit.

A great place to start is using a credit card that lets you earn rewards, like the SoFi credit card.

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

Can I transfer money from my credit card to my bank account?

No, you can’t transfer money from your credit card to your bank account. A bank account is a deposit vehicle for your available cash; this cash can be accessed using a debit card. Conversely, a credit card is a financial tool that lets you access a credit line that you need to repay.

Can I use my credit card like a debit card at an ATM?

Yes, you can use your credit card like a debit card to get a cash advance at an ATM. Be warned that this is a costly option. Credit card cash advances typically have a different limit compared to your purchase limit, and charge a higher APR with no grace period. Plus, you’ll owe a cash advance fee.

Can I use a credit card as a debit card with no interest?

Possibly. You might be able to use a credit card like a debit card for everyday transactions without incurring interest, if you pay every billing statement in full each month. Rolling over a balance month to month, however, will cause you to incur interest charges.

Is it better to use a debit or credit card?

Whether using a debit or credit card is a better option depends on the types of purchases you’re making and your borrowing habits. For example, credit cards are generally safer when shopping online, but buying on credit can get out of control quickly, if you’re not careful.

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Photo credit: iStock/filadendron

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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A perfect storm is brewing for credit card holders right now. Record inflation means that absolutely everything is more expensive. As a result, more consumers are seeing their credit card balances balloon. This has led to even people who never carried a balance before finding that they’re struggling to pay their bill in full each month.

At the same time, many cardholders are seeing their credit card interest rates creep up in line with the Federal Reserve’s recent rate increases. Translation: Interest payments are gobbling up a bigger share of credit card balances.

Indeed, credit card debt surged by $46 billion from April to June 2022 — a record 13% jump from the prior year, according to data from the Federal Reserve Bank of New York. If you’re one of the cardholders who can’t pay credit card debt in full, here are five steps you can take to address it.

Step 1: Check your Credit Card Interest Rate

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

The average credit card interest rate for the second quarter of 2022 was 18.89%, according to WalletHub’s Credit Card Landscape study published in July. (Depending on what type of credit card you have, your credit score, and your credit history, you may have a higher or lower interest rate than the average.)

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

Recommended: What is a Charge Card

Step 2: Understand How Your Grace Period Works

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

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

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

Recommended: When Are Credit Card Payments Due

Step 3: Look at Changing Your Due Date

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

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

Recommended: How to Avoid Interest On a Credit Card

Step 4: Explore Ways to Pay Off Your Balance Faster

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

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

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

Recommended: Tips for Using a Credit Card Responsibly

Step 5: Consider Using a Budgeting Tool

Higher prices on everything from gas to groceries, plus higher interest rates, can make it harder than ever to make your credit card payments. That’s a signal it’s time to take a close look at your spending, perhaps with the help of one of the many online budgeting tools available.

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

Recommended: Can You Buy Crypto With a Credit Card

The Takeaway

Runaway inflation and high interest rates are big contributors to ballooning credit card balances. If you’re struggling with a larger balance, understanding how credit cards work as well as taking steps to pay off credit card debt faster and budget smarter can help.

Using credit cards wisely can be a helpful weapon in the battle against higher prices and skyrocketing interest rates.

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.

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Photo credit: iStock/Sneksy

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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Whether you’re interested in switching credit cards because you found one with better rewards or due to another reason, such as wanting to change to an option with no annual fee, it can make sense to do so. Also called a credit card product change, some banks allow you to make a switch without much consequence.
But before doing so, it’s best to understand how changing credit cards works and how to switch credit cards properly.

What Is a Credit Card Product Change?

A credit card product change is where a cardholder switches from one credit card to another credit card offered by the same bank or issuer. Because each credit card offered by an issuer is referred to as a different product, a product change is simply switching credit cards.

In theory, switching credit cards within the same bank won’t affect your credit as you’re not applying for a new credit card. Typically, your credit limit will stay the same for your new card as it was for your previous card.

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

How Does a Credit Card Product Change Work?

When you undergo a product change, you’re not canceling a credit card. Rather, you’re either making a switch to an equivalent credit card, upgrading to a card with more benefits, or downgrading to a card with fewer benefits. In many cases, your bank may send you targeted offers for different credit cards, and you may be able to switch to one of these credit cards.

Once you switch credit cards, you’ll no longer be able to use the credit card you previously had and can start using the new credit card instead. Features and benefits will most likely differ, and in some cases, so may your credit limit.

Recommended: What is the Average Credit Card Limit

Rules for Credit Card Product Changes

When it comes to following the credit card rules, each credit card issuer will have its own rules regarding product changes. For instance, some won’t allow you to change to certain credit cards, while others may allow a product change only if you’re switching to a similar type of card.

In general, though, there are some rules that are usually the same across the board. For one, cardholders can’t switch from a business credit card to a personal one and vice versa, since these are considered different classes of cards and may have different credit limits.

Additionally, issuers typically only let you change credit cards as long as they’re within the same family of cards, as this can impact how credit cards work. However, each issuer has a different definition of what that means.

For instance, if you have a travel rewards credit card and the bank offers two other cards that use the same travel portal to redeem points, all of those cards could be considered in the same family. Or, if you have a co-branded card with an airline, other co-branded cards with that airline may also count as within the same family of cards.

Unfortunately, it’s not easy to find information about whether you can switch your specific credit card to another. Even if you can find details from another bank, your card may not have the same rules and processes. Your best bet is to call your credit card issuer and ask them directly.

Recommended: Can You Buy Crypto With a Credit Card

Pros and Cons to Switching Credit Cards

There are certainly upsides to converting credit cards rather than closing out your account and starting over. However, there are downsides to take into account as well.

Pros of Switching Credit Cards	Cons of Switching Credit Cards
Generally won’t affect your credit score if the bank doesn’t conduct a hard credit inquiry	Not easy to find definitive information online about product change rules
Possible to get more benefits with the new card you switch to	May not be able to switch to your preferred card, depending on issuer’s rules
Won’t need to submit a new credit application	May lose existing credit card rewards or points

Guide to Switching Credit Cards

Switching credit cards can be a relative straightforward process, but it does involve contacting your bank or credit card issuer. Here are some best practices to keep in mind before making the switch.

Decide Which Card You Want

You want to make sure your new card will be a good fit for you. Before making moves to change your credit card, check your bank’s website to see what other products are currently on offer. In some cases, you may find that you’ll get upgrade offers in the mail or after logging into your bank account online.

Contact Your Bank or Credit Card Issuer

You’ll also want to contact your bank to ask whether you can switch to the card you’ve decided on. If you can get the credit card you want, ask the bank what else you’ll need to do before you can officially make the switch.

You’ll also want to ask about certain features and benefits you’ll receive if you do decide to change credit cards. Specifically, make sure to ask about the following:

•   Whether your credit limit will remain the same after switching cards

•   If you need to pay off the balance before switching

•   Whether you’ll be subject to a hard credit inquiry

•   Whether you can keep existing rewards you’ve earned with your current credit card

•   What your new APR will

•   If you’re eligible for credit card bonuses with the new card

Learning these answers will help you to make an informed decision and avoid getting caught off guard after making the switch. You may even be able to negotiate for things like bonuses or perks that you may not have gotten otherwise.

Recommended: How to Avoid Interest On a Credit Card

Effects of a Product Change on Your Credit Score

It’s important to determine whether switching credit cards will have an adverse effect on your credit score. When it comes to your credit utilization, as long as you’ll have the same credit limit with your new card, you should be able to maintain it. This is unlike closing a credit card, where you’ll lose that credit limit, which could result in an increased credit utilization ratio and a negative impact to your credit score.

In some cases, your card issuer may require a hard credit pull before allowing you to switch credit cards, which could temporarily ding your credit score. Your issuer may make this request for a variety of reasons, including to ensure your credit profile is still good and to determine whether to continue offering you the same amount of credit (especially if you tend to max out your card). You’ll be asked permission before the hard inquiry is conducted, so you’ll know it’s coming.

Effects of a Product Change on Your Credit Card Rewards

Depending on what card you want to switch to, you may be able to keep your existing credit card rewards. For instance, if you’re switching to a credit card that has the same rewards structure or program, you’ll probably be able to keep the points or miles you’ve earned.

However, if you’re going from a travel rewards card to a cash back program, for instance, your bank may not allow you to keep your existing rewards. That means you’ll have to use up your rewards or forfeit them, though it may still be worth speaking with a customer representative to see what they can do.

If you want to get sign-up bonuses on a credit card that you plan on switching to, check with your bank to see whether you’re eligible. Some cards don’t allow bonuses for existing customers.

The Takeaway

Requesting a credit card product change can be an easy way to switch to a new credit card without going through the full application process. Before you make any moves, however, take the time to confirm whether or not converting credit cards will impact your credit and whether you’ll be able to keep the rewards you’ve earned using your existing credit cards. After all, valuable credit card rewards aren’t something you want to lose out on.

FAQ

Does a product change reduce your credit score?

A credit card product change may affect your credit score if your issuer requires a hard credit inquiry to make the switch. This should only impact your score temporarily though.

How do I request a product change?

To switch credit cards, you’ll need to contact your bank or credit card issuer to determine whether you can switch the card you want. From there, it will inform you of the other steps you need to take.

What are the downsides of a credit card product change?

You may lose the rewards you’ve earned on your current card if you decide to switch credit cards. Your credit score could also be temporarily affected if your issuer conducts a hard credit check when you switch cards.

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Photo credit: iStock/RgStudio

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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When debt accumulates on a high-interest card, interest starts to add up as well, making it harder to pay off the total debt — which, in turn, can become a credit card debt spiral. If you end up with mounting debt on a high-interest credit card, a balance transfer is one possible way to get out from under the interest payments.

A balance transfer credit card allows you to transfer your existing credit card debt to a card that temporarily offers a lower interest rate, or even no interest. This can provide an opportunity to start paying down your debt and get out of the red zone. But before you make a balance transfer, it’s important that you fully understand what a balance transfer credit card is and have carefully read the fine print.

How Balance Transfers Work


The basics of balance transfer credit cards are fairly straightforward: First, you must open a new lower-interest or no-interest credit card. Then, you’ll transfer your credit card balance from the high-interest card to the new card. Once the transfer goes through, you’ll start paying down the balance on your new card.

Generally, when selecting to do a balance transfer to a new credit card, consumers will apply for a card that offers a lower interest rate than they currently have, or a card with an introductory 0% annual percentage rate (APR). Generally, you need a solid credit history to qualify for a balance transfer credit card.

This introductory period on a balance transfer credit card can last anywhere from six to 21 months, with the exact length varying by lender. By opening a new card that temporarily charges no interest, and then transferring your high-interest credit card debt to that card, you can save money because your balance temporarily will not accrue interest charges as you pay it down.

But you need to hear one crucial warning: After the introductory interest-free or low-APR period ends, the interest rate generally jumps up. That means if you don’t pay your balance off during the introductory period, it will start to accrue interest charges again, and your balance will grow.

Recommended: How to Avoid Interest On a Credit Card

What to Look For in a Balance Transfer Card


There are a number of different balance transfer credit cards out there. They vary in terms of the length of no-interest introductory periods, credit limits, rewards, transfer fees, and APRs after the introductory period. You’ll want to shop around to see which card makes sense for you.

When researching balance transfer credit cards, try to find a card that offers a 0% introductory APR for balance transfers. Ideally, the promotional period will be on the longer side to give you more breathing room to pay off your debts before the standard APR kicks in — one of the key credit card rules to follow with a balance transfer card.

You’ll also want to keep in mind fees when comparing your options. Balance transfer fees can seriously eat into your savings, so see if you qualify for any cards with $0 balance transfer fees. If that’s not available, at least do the math to ensure your savings on interest will offset the fees you pay. Also watch out for annual fees.

Last but certainly not least, you’ll want to take the time to read the fine print and fully understand how a credit card works before moving forward. Sometimes, the 0% clause only applies when you’re purchasing something new, not when transferring balances. Plus, if you make a late payment, your promotional rate could get instantly revoked — perhaps raising your rate to a higher penalty APR.

Should I Do a Balance Transfer?

Sometimes, transferring your outstanding credit card balances to a no-interest or low-interest card makes good sense. For example, let’s say that you know you’re getting a bonus or tax refund soon, so you feel confident that you can pay off that debt within the introductory period on a balance transfer credit card.

Or, maybe you know that you need to use a credit card to cover a larger purchase or repair, but you’ve included those payments in your budget in a way that should ensure you can pay off that debt within the no-interest period on your balance transfer card. Again, depending upon the card terms and your personal goals, this move could prove to be logical and budget-savvy.

Having said that, plans don’t always work out as anticipated. Bonuses and refund checks can get delayed, and unexpected expenses can throw off your budget. If that happens, and you don’t pay off your outstanding balance on the balance transfer card within the introductory period, the credit card will shift to its regular interest rate, which could be even higher than the credit card you transferred from in the first place.

Plus, most balance transfer credit cards charge a balance transfer fee, typically around 3% — and sometimes as high as 5%. This can add up if you’re transferring a large amount of debt. Be sure to do the math on how much you’d be saving in interest payments compared to how much the balance transfer fee will cost.

Recommended: When Are Credit Card Payments Due

Balance Transfer Card vs Debt Consolidation Loan

Both a personal loan and a balance transfer credit card essentially help you pay off existing credit card debt by consolidating what you owe into one place — ideally at a better interest rate. The difference comes in how each works and how much you’ll ultimately end up paying (and saving).

A debt consolidation loan is an unsecured personal loan that allows you to consolidate a wider range of existing personal debt, including credit card debt and other types of debt. Basically, you use the personal loan to pay off your credit cards, and then you just have to pay back your personal loan in monthly installments.

Personal loans will have one monthly payment. Plus, they offer fixed interest rates and fixed terms (usually anywhere from one to seven years depending on the lender), which means they have a predetermined payoff date. Credit cards, on the other hand, typically come with variable rates, which can fluctuate based on a variety of factors.

Just like balance transfer fees with a credit card, you’ll want to look out for fees with personal loans, too. Personal loans can come with origination fees and prepayment penalties, so it’s a good idea to do your research.

How to Make a Balance Transfer

If, after weighing the pros and cons and considering your other options, you decide a balance transfer credit card is the right approach for you, here’s how you can go about initiating a balance transfer. Keep in mind that you’ll need to have applied for and gotten approved for the card before taking this step.

Balance-Transfer Checks


In some cases, your new card issuer will provide you with balance-transfer checks in order to request a transfer. You’ll need to make the check out to the credit card company you’d like to pay (i.e., your old card). Information that you’ll need to provide includes your account information and the amount of the debt, which you can determine by checking your credit card balance.

Online or Phone Transfers

Another way to initiate a balance transfer is to contact the new credit card company to which you’re transferring the balance either online or over the phone. You’ll need to provide your account information and specify the amount you’d like to transfer to the card. The credit card company will then handle transferring the funds to pay off the old account.

The Takeaway

Whether you should consider a balance transfer credit card largely depends on whether the math checks out. If you can secure a better interest rate, feel confident you can pay off the balance before the promotional period ends, and have checked that the balance transfer fees won’t cancel out your savings, then it may be worth it to make a balance transfer.

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.

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

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In a perfect world, you’d be able to zap away debt in a flash. But the reality is, sprinting through payments on high-interest debt isn’t exactly easy to do. That’s because you’ll still need to juggle staying on top of bills and covering daily expenses, among other financial obligations.

If you’re wondering whether it’s better to pay off your credit card or keep a balance, the answer largely depends on your particular set of circumstances. Let’s take a look at the pros and cons of paying off credit cards in full vs. over time to help you determine if you should pay off your credit card in full or space payments out a bit.

Recommended: When Are Credit Card Payments Due

Does Paying Down Credit Cards Slowly Affect Your Credit Score?

Paying off credit cards slowly can impact your credit score because it can affect your credit utilization, which makes up 30% of your consumer credit score. When you’re slow to pay off your credit card balance, your credit utilization — or how much of your total credit you’re using — can be higher. A higher credit utilization rate can adversely affect your credit score.

What Is Credit Utilization?

Credit utilization measures how much credit you have against how much credit you’ve used. This ratio is expressed as a percentage. You can find your credit utilization ratio by dividing your total credit card balances by your total credit limits across all of your cards.

How Credit Utilization Works

As we discussed, credit utilization is expressed as a percentage, and you can find it by dividing your credit card balances by your credit limits. As an example, let’s say you have three credit cards, and your total credit limit across those cards is $30,000. The total of your credit card balances on all three cards is $9,000.

In that case, your credit utilization is 30%, as demonstrated by the math below:

Credit limit on Card 1: $8,000
Credit limit on Card 2: $12,000
Credit limit on Card 3: $10,000

Total credit limit: $8,000 + $12,000 + $8,000 = $30,000
Total balances across Cards 1, 2, and 3: $9,000

$9,000 / $30,000 = 0.30, or 30%

Recommended: What is the Average Credit Card Limit

How Credit Utilization Can Affect Your Score

The lower your credit utilization, the better it is for your credit score. It’s generally recommended to keep your credit utilization ratio under 30% to avoid negative effects on your score. Keeping your score below this threshold indicates to lenders and creditors that you aren’t stretched financially, are a responsible user of credit, and have available credit that you can tap in to.

If you’re wondering, do credit card companies like it when you pay in full? The answer is that it certainly helps with your credit score, as a low credit utilization ratio can positively impact your credit score, and credit card companies generally look more favorably upon higher credit scores.

Recommended: Tips for Using a Credit Card Responsibly

Differences Between Paying a Credit Card in Full vs Over Time

Trying to determine whether you should pay off your credit card in full? Here are some of the key differences between paying off credit cards in full compared to making payments over time:

Paying a Credit Card in Full	Paying a Credit Card Over Time
Might need to spend less or earn more to speed up payments	Can make payments based on current income and budget
Can save money on interest charges	Costs more in interest payments
Frees up money sooner for other financial goals	Continue juggling debt payoff with other financial goals for longer
Can lower credit utilization, potentially improving your credit score	Won’t make as much of an impact in lowering credit utilization

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Reasons to Always Pay Off Your Credit Card in Full

When it comes to paying off your credit card in full, there are a handful of reasons why it could be a good idea:

•   Helps with your credit score: As we talked about, paying off your card balance means keeping a lower credit utilization, which can help keep you maintain a solid score.

•   Frees up money for other goals: By paying off your credit card bill sooner than later, you’ll free up that money you were putting toward debt payments. In turn, you’ll have “extra” cash to put toward savings, retirement, and your short-term and long-term goals.

•   Allows you to save on interest: The longer you stretch out your payments, the more you’ll end up paying in interest. By paying off your credit card in full each statement cycle, you won’t owe interest, given how credit card payments work.

Reasons to Pay Down Your Credit Card Over Time

While it may be ideal to pay off your credit card all at once, credit card debt is hard to pay off — especially when you’re spinning a lot of plates money-wise. Let’s take a look at why you might opt to pay down your credit card over time instead:

•   Allows for a more manageable debt payment schedule: Paying down your credit card over time won’t put pressure on you to cut back on your living expenses, or find ways you earn more so you can pay off your credit card balance more quickly. Depending on your situation, gradually making payments might feel like the more reasonable route.

•   Frees up money now: By not focusing on aggressively paying off your credit cards, you can potentially work on other money goals, such as saving for retirement or creating an emergency fund. Still, you’ll want to at the very least make your credit card minimum payment to avoid the consequences of credit card late payment.

Strategies for Paying Off Credit Card Debt

If the idea of paying off your credit card debt feels overwhelming, here are a few popular strategies to consider for crushing your debt.

Debt Avalanche Method

With the debt avalanche method, you focus on paying off the card with the highest interest rate first. Meanwhile, you’ll continue making the minimum payments on all of your other accounts.

Once your account with the highest interest rate is paid off, you’ll move on to focusing on the account with the next highest rate, continuing to make minimum payments on the others. You’ll continue this cycle until all of your debt is paid off.

The major benefit of this method is that you’ll save on interest payments.

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Snowball Method

In this strategy, you make the minimum payments on all your cards by the credit card payment due date. Then, you put any remaining funds toward paying off the card with the lowest balance. Once that’s paid off, you move on to the card with the next lowest balance.

The main advantage of the snowball method is that it keeps you motivated to continue to pay off your debt. That’s because it feels good to get a card paid off, which is easier to do with a card that has a lower balance.

Debt Consolidation

With debt consolidation, you take out a new loan that you then use to pay off all of your outstanding debts. This effectively rolls all of your credit card payments into a single fixed payment each month.

In turn, debt consolidation can simplify your payments, and potentially lower your payments. However, depending on the new payment schedule and terms, you might end up paying more in interest over the course of the loan. Also keep in mind that you’ll generally need a decent credit score to qualify for debt consolidation.

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When Carrying a Balance Hurts Your Credit Score

Carrying a balance on your credit card hurts your score if it pushes your credit utilization too high. You’ll want to keep your credit utilization under 30% to avoid adverse effects.

Keeping a low balance, which decreases your credit utilization, can help your credit score. Besides paying off your cards, other ways to lower your credit utilization are to open a new credit card or request a credit limit increase. Both of these actions will increase your overall credit limit, thus potentially improving your credit utilization rate.

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The Takeaway

While paying a credit card in full can help with your credit utilization, which also can improve your score, it’s not always realistic. You’ll want to weigh the pros and cons of both paying off credit cards in full and making payments over time to see which one is right for your current situation.

While making credit card payments is one way to lower your credit utilization, another option is opening a new credit card.

If you’re looking for a new credit card, you might apply for a credit card with SoFi.

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

Is it better to pay off your credit card or carry a balance?

While paying off your credit card in full can help with your credit utilization ratio and save you on interest, spreading out your payments over time might make debt payoff more manageable. Which approach is best depends on your financial situation and preferences.

Does completely paying off a credit card raise your credit score?

Paying off a credit card can lower your credit utilization, which can positively affect your credit score.

Why did my credit score go down when I paid off my credit card?

Paying off your credit card doesn’t usually bring down your credit score. However, your credit score may drop if you closed your account after paying it off, as that can impact your credit mix or the average age of your accounts. It could also decrease your available credit, which can drive up your credit utilization.

Do credit card companies like it when you pay in full?

Paying in full shows creditors that you’re a responsible cardholder and that you have the financial means to pay off what you owe. It can also help to improve your credit score, which credit card companies look upon favorably.

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Photo credit: iStock/Foxyburrow

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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