SoFi

The average cost of college tuition varies widely based on location and whether the school is public or private. The average cost of college for in-state students at a four-year institution in 2024-25 is $11,610. Students at private nonprofit four-year institutions paid over $43,000, on average.

Read on for more information about average tuition costs and other expenses facing college students.

The Average Cost of College

According to the College Board’s annual “Trends in College Pricing” report, the average cost of attending a four-year college as an in-state student at a public university during the 2024-25 school year is $11,610. For an out-of-state student attending a public four-year college, the average rose to $30,780.

The average cost of attending a private four-year institution is $43,350. These averages are based on the published price at a college or university. This includes tuition, fees, and room and board.

Cost is a major factor for students deciding which school to attend. According to the annual Sallie Mae survey “How America Pays for College 2024,” 81% of parents and students eliminated a college based on cost.

Historical Average Cost of Tuition

The cost of tuition has increased dramatically over time. For the 2004-05 school year, the average cost of college tuition at a public four-year institution was $5,132 for a student receiving in-state tuition. In 20 years, tuition rose to $11,610 for the 2024-25 school year.

U.S. News reviewed tuition costs at 436 ranked National Universities, those universities included as part of the annual college rankings. According to their data, the average tuition and fees at private National Universities increased by 126% in 20 years from 2004 to 2024. During the same period, at four-year public National Universities, tuition for out-of-state students increased by 112%, and for in-state students it rose by 133%.

Average Total Cost of College

A traditional undergraduate college degree takes four years to complete, which means four years of tuition costs. According to EducationData.org, the cost of college has risen, on average, about 7.0% annually since 2000.

Year-over-year changes can fluctuate greatly, however, so it can be challenging to predict exactly how much a student will pay in tuition costs over the course of their degree. For example, the “Trends in College Pricing” report found that in-state tuition costs at public four-year institutions increased just 2.7% from the 2023-24 to the 2024-25 school year. For that same time period, tuition increased 3.9% at private nonprofit four-year institutions.

To get a rough estimate of how much college will cost in its entirety, you can take the current tuition rate and multiply it by four. Keep in mind this won’t account for any increase in the cost of tuition.

Average Additional College Expenses

Tuition generally makes up the majority of a student’s college expenses. But there are other fees and costs to factor in, including room and board, books, and other supplies. As you plan how to pay your tuition, students might also consider general living expenses.

What Is the Cost of Room and Board?

Some colleges charge “comprehensive fees,” which reflect the total for tuition, fees, and room and board. Other schools charge room and board separately from tuition and fees. The cost of room and board typically accounts for the cost of housing (i.e., a dorm room or on-campus apartment) and the meal plan.

The average cost of on-campus room and board for the 2024-25 school year is $12,917 for four-year public institutions for both in-state and out-of-state students, and $13,842 for four-year private nonprofit institutions.

The actual cost will vary depending on the type of housing you live in and the meal plan you choose. Housing can be another determining factor for students. About 73% of students attend college in their home state, and 36% live at home or with relatives to save on housing costs.

The Cost of Extra Classes

Tuition at some schools covers the cost of a certain number of credit hours. Your credit hours can vary each term depending on the classes you enroll in. If you exceed the number of credit hours covered by tuition, you may pay an additional fee.

Books and Supplies

On top of those expenses, don’t forget to budget for books and supplies. The average college student attending a public, four-year college spends $1,220 on textbooks per year.

Transportation

Transportation is another major category of expenses for college students. Will you have a car on campus? If so, plan to pay for gas, insurance, and a parking permit. How often do you plan to go home? Will a trip to visit your family require airfare?

Other Living Expenses

Then there are additional personal expenses like eating out, laundry, and your monthly cell phone bill. To get an idea of how much you’ll actually spend every month, it helps to review your current spending.

College may be the first time you’ve had to learn how to budget. Consider sitting down with your parents, an older sibling, or a trusted friend who has already navigated their first year of college to get an idea of the expenses you may encounter.

Paying for College

There are, of course, options available to help you finance your education. Whether you’re going to college for the first time or returning for further education, consider looking into the following options:

First Thing’s First: The FAFSA

A common first step for students interested in securing federal financial aid is to fill out the Free Application for Federal Student Aid (FAFSA®). As you get ready to apply, pay attention to deadlines, as they vary by school and state. After you fill out the FAFSA, you’ll receive an offer letter detailing the type of aid you qualify for. This may include scholarships and grants, work-study, and federal student loans.

Planning ahead is one way to set yourself up to successfully pay for college. If you’re not quite ready to fill out the FAFSA yet, you can use the Federal Student Aid Estimator at StudentAid.gov/Aid-Estimator/ to get an idea of how much aid you might qualify for.

Recommended: Important FAFSA Deadlines to Know

Scholarships and Grants

Scholarships and grants can be immensely helpful when it comes to paying for college, since that money doesn’t need to be repaid. In addition to filing the FAFSA, you can check to see if there are any other scholarships for which you may qualify. There are also online resources and databases that compile different scholarship opportunities.

The federal work-study program is another form of aid that can help students pay for college. If you are eligible for work-study and receive it in your financial aid award, you may still have to find your own employment at your university. Check with your school’s financial aid office to find out if your school participates and whether they will place you or if they have a work-study job board.

Of course, other jobs for college students are available, but students will have to pursue those on their own.

Recommended: Grants for College

Student Loans

Student loans offer another avenue for students to finance their college education. Unlike scholarships and grants, however, student loans must be repaid. There are two kinds of student loans — federal and private.

Federal Student Loans

Applying for student loans requires filling out the FAFSA. Federal loans for undergraduates can be either subsidized or unsubsidized. With a subsidized loan, borrowers won’t be responsible for paying the interest that accrues on the loan while they are actively enrolled in school at least half-time. With an unsubsidized loan, borrowers are responsible for paying the accrued interest during all periods.

Whether subsidized or unsubsidized, loan repayment generally doesn’t begin until after graduation (or a student drops below half-time) and a grace period.

Most grace periods for federal loans are six months. Interest rates on federal student loans are set by the government and are fixed for the life of the loan.

Federal loans aren’t guaranteed to cover your undergraduate or graduate school tuition costs. There are borrowing limits that restrict the amount of federal loans a student can take out each year. For example, a first year undergrad, dependent student is currently allowed to borrow $5,500 in federal loans. In some cases, private student loans may be used to fill in the gaps.

Private Student Loans

Private student loans are offered by banks, credit unions, and online lenders. Terms and conditions of a private student loan are set by the individual lender.

Private lenders will likely review a borrower’s credit history and other financial factors in order to determine what type of loan they may qualify for. If an applicant is applying with a cosigner, private student loan lenders will look at their financial background as well, which might include things like their credit score and current income.

While federal student loans come with fixed interest rates, private student loans can have fixed or variable interest rates. Variable interest rates may start lower than fixed rates, but they rise and fall in accordance to current market rates.

Private student loans don’t carry the same benefits and protections offered by federal student loans — such as income-driven repayment and loan deferment options. Some lenders may offer their own benefits, though.

The Takeaway

The average cost of college tuition for the 2024-25 school year was $11,610 for students paying in-state tuition at a four-year public institution. For out-of-state students, the average was $30,780. At a private four year institution it was $43,350. Paying for college usually requires a combination of financing options, including savings, scholarships, grants, work-study, federal student loans, and even private student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

How much does four years of college cost on average?

The average cost for four years of college varies based on the institution type. As of 2024, attending an in-state public college averages around $108,000, including tuition, fees, and living expenses. Private colleges are significantly higher, averaging over $230,000 for four years. Costs can vary further by location and program.

How much has college tuition increased in 2024?

In the 2024-2025 academic year, average tuition and fees increased by 2.7% for in-state students at public four-year institutions and by 3.9% at private nonprofit four-year institutions. These increases are below the general inflation rate of 3.1% for the same period.

What are ways to save money on college expenses?

There are many ways to save money on college expenses, including by attending in-state public colleges, starting at a community college, or enrolling in accelerated degree programs. You can apply for scholarships, grants, and work-study opportunities, use tax-advantaged 529 savings plans, minimize textbook costs through rentals or e-books, and reduce living expenses by commuting or sharing housing.

---

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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.

SOISL-Q424-048

Read more

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

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

What Is Credit Card Debt Forgiveness?

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

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

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

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

When Can Credit Card Debt Be an Issue?

Credit card debt can more technically be an issue when your credit utilization ratio — the percent of your available credit line used — is above 30%, which can signal to lenders you may be overextended. Practically, however, credit card debt is an issue when you’re unable to pay the minimums and struggling to pay down the balance.

Credit card interest rates averaged 22.30% in November 2025, and tend to be higher than other types of loans. Since credit card interest is often compounded daily, debt can snowball rapidly. In response to high rates, a bipartisan bill proposed a temporary 10% cap on credit card interest rates in early 2025, and more recently President Trump made headlines for his proposed 10% credit card cap. However, there are other options available, such as a fixed, non-revolving credit line, for pursuing lower interest rates and debt relief.

How Does Debt Forgiveness Work for Credit Cards?

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

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

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

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

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

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

Recommended: Charge Card Advantages and Disadvantages

When Does Credit Card Debt Forgiveness Work Best?

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

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

How Credit Card Debt Forgiveness May Affect Your Credit

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

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

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

💡 Quick Tip: Credit card interest caps have become a hot topic, as the total U.S. credit card balance continues to rise. Balances on high-interest credit cards can be carried for years with no principal reduction. A SoFi personal loan for credit card debt may significantly reduce your timeline, however, and could save you money in interest payments.

Pros and Cons of Credit Card Debt Forgiveness

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

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

Pros	Cons
Potentially avoid bankruptcy	Can harm your credit score
Repay only a portion of the debt you owe	Will remain on your credit report for up to seven years
Pay off debt in a shorter time frame	Must pay income tax on forgiven debt

Alternatives to Credit Card Debt Forgiveness

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

Debt Management

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

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

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

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

Debt Settlement

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

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

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

Debt Consolidation

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

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

Before you apply for a debt consolidation loan, compare your options to identify the loans with the most competitive terms and interest rates. While credit card APRs are usually higher and variable, personal loan APRs, for example, are generally lower and fixed, offering predictable payments.

Declaring a Chapter 7 or Chapter 13 Bankruptcy

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

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

The Takeaway

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

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

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

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

Enjoy unlimited cash back rewards with fewer restrictions.

FAQ

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

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

Does debt forgiveness hurt your credit score?

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

How do you get your credit card balance forgiven?

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

---

About the author

---

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

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

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

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

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

Photo credit: iStock/damircudic
SOCC0224024
3491509-04

Read more

Anyone who’s ever had a credit card knows they have an interest rate, which represents the cost consumers pay for borrowing money. What you may not know is that interest rates come in two forms: fixed and variable interest rates.

Fixed interest rates stay the same over time and are generally tied to your creditworthiness. Variable interest rates, on the other hand, may change over time and are connected to economic indexes. Read on to learn how to determine if the interest rate of a credit card is fixed or variable, as well as why it’s important to know.

What Is Credit Card APR?

A credit card’s annual percentage rate, or APR, represents the cost a consumer pays to borrow money from credit card issuers, represented as a yearly cost.

When a cardholder doesn’t pay off their credit card balance in full each month, they’ll owe credit card interest charges on the remaining balance, with the rate based on their APR.

Credit card APRs vary among credit card issuers, individual cardholders, and credit card categories. Currently, the average credit card interest rate stands at 22.8% APR.

Recommended: Pros and Cons of Charge Cards?

Types of Credit Card APRs

Your credit card payment is impacted by what type of APR your credit card has. Let’s have a look at how a fixed rate credit card and a variable rate credit card may affect your credit experience.

Fixed Interest Rate

Fixed rate credit cards have an interest rate that generally doesn’t vary over the course of your credit card contract. Rather than being tied to economic indexes, fixed interest rates are generally determined based on payment history and creditworthiness, as well as any ongoing promotions.

However, just because the term “fixed” is used, doesn’t mean a fixed interest rate can never change. While a fixed rate credit card’s interest rate won’t change based on factors like the prime index, increasing credit card APR can occur if payments are late or missed or if your credit score dips. If that occurs, the credit card company must notify the cardholder at least 45 days before the adjusted rate takes effect.

While fixed rate credit cards offer the benefit of predictability, one downside is that their rates are, on average, higher than variable credit card rates.

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

Variable Interest Rate

A variable rate credit card offers interest rates that can shift over time. There’s a reason for that, as variable card rates are tied to major benchmark interest rates, like the U.S. prime rate.

Since major benchmark rates change, so will variable interest rates. That’s why banks and other major financial institutions often shift rates for things like credit cards, home mortgages, auto loans, and student loans. When major interest indexes change, the rates for loans change with them.

What does that mean for a cardholder? For starters, there’s more risk with variable interest rates. Rates can go up, and credit card payments increase when interest rates rise. Conversely, variable rates may go down, which works in favor of the credit cardholder, who will then pay less in interest.

Credit card consumers should check their credit card contracts for the specific conditions that can trigger a variable rate change. Credit card issuers don’t have to notify you of interest rate changes with variable rate cards, so it’s up to the consumer to keep a sharp eye out for changing interest rates.

Recommended: When Are Credit Card Payments Due

When Do Variable APRs Change?

As mentioned, the interest rate on a variable rate credit card changes with the index interest rate, such as the prime rate. If the prime rate goes up, so will your credit card’s APR. Similarly, if the prime rate goes down, your APR will drop.

How often your interest rate changes will depend on which index rate your lender uses as a benchmark as well as the terms of your contract. As such, the number of rate changes you may experience can vary widely, often multiple times a year.

Details on how a card’s APR may fluctuate over time will appear in a cardholder’s agreement, which you can generally find on the card issuer’s website. If you’re unable to locate it, you can request a copy from your card issuer.

Differences Between Fixed and Variable Credit Card Rates

Both fixed and variable credit card rates have pros and cons. Here’s a look at the major differences with a credit card with a variable or fixed interest rate.

Fixed Interest Rate	Variable Interest Rates
The interest rate usually remains the same	Variable rates change on an ongoing basis
Fixed rates are calculated with payment histories in mind	Rates are based on a benchmark index, like the U.S. primate rate
The card provider is required to let you know when the rate does change (usually for late or missed payments)	The credit card issuer is not required to let you know when rates shift

How Credit Card Interest Rates Are Determined

Credit card interest rates are generally determined based on your creditworthiness — meaning, your payment history and credit score — as well as prevailing interest rates and the card issuer and card type.

For instance, a basic card may have a lower rate than a premium rewards card. Additionally, credit cards can have different types of APRs, such as an APR that applies for credit card charges and another rate for cash advances or balance transfers.

Another factor that can impact credit card rates is promotional offers. Sometimes, credit card issuers may offer low or no interest periods. After that period ends, the card’s standard APR will kick in, and the card’s rate will go up.

Once determined, how and why a credit card’s interest rate changes over time depends on whether the interest rate is fixed or variable. A fixed rate will generally stay the same, though it may increase if payments are late or missed, or if the cardholder’s credit score takes a dive. Meanwhile, variable rates fluctuate depending on current index rates.

Recommended: Tips for Using a Credit Card Responsibly

Reducing Interest Charges on Credit Cards

Perhaps the easiest way to reduce interest charges on credit cards is to pay your statement balance in full each billing cycle. By doing so, you’ll avoid incurring interest charges entirely.

Of course, this isn’t always feasible. If you may end up carrying a balance and want to decrease how much a credit card costs, there are ways to do so. For one, you can call your credit card issuer and request a lower rate. Of course, for this to be successful, you’ll likely have needed to stay on top of payments and have a history of responsible credit card usage.

Perhaps the surest way to secure a better interest rate on your credit card is to build your credit score. In general, lower interest rates are awarded to those who have higher credit scores and follow the credit card rules, so to speak.

You can build your credit score by making your payments on time, every time, and by keeping your credit utilization ratio (how much of your available credit limit you’re using) well below 30%. You might also avoid applying for new credit accounts, which results in hard inquiries and temporarily lowers your score.

And if you simply feel in over your head with credit card debt and a skyrocketing APR, you may choose between credit card refinancing or consolidation as potential solutions.

💡 Quick Tip: Credit card interest rate caps have recently been proposed in response to rising interest rates. However, one option already available to borrowers is securing a fixed, lower-interest rate loan. A SoFi credit card consolidation loan may offer a lower interest rate, set terms, and a transparent pay-off plan.

Fixed vs Variable Interest Rate Cards: Which Is Right for You?

In a word, choosing between a fixed rate or variable rate credit card comes down to whether you prefer stability or risk versus reward.

A fixed rate credit card offers a known quantity — a rate that stays the same over time, as long as you pay your credit card bill on time. On the other hand, a variable rate credit card offers an element of risk and reward. If the rate goes up, the cardholder usually spends more money using the card. If card rates go down, however, the cost of using the card usually goes down, too, as interest rates are lower.

Of course, cardholders can largely negate the impact of credit card interest rates by paying their bills in full every month. Of, for those who don’t quite feel ready to tackle the responsibility, there’s always the option of becoming an authorized user on a credit card of a parent or another responsible adult.

The Takeaway

As you can see, it’s important for a number of reasons to know whether a credit card is fixed or variable. Fixed interest rates offer more predictability (though there’s no guarantee they’ll never change), but rates also tend to be higher compared to variable rates. With variable rates, your interest rate will fluctuate over time based on market indexes.

As you shop around for credit cards, interest rate is critical to pay attention to. It can have an impact on your ability to pay your credit card bill and use credit responsibly.

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

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

Enjoy unlimited cash back rewards with fewer restrictions.

FAQ

Do all credit cards have fixed interest rates?

No, actually most credit cards come with variable interest rates tied to major interest rate indexes. That connection to interest rate changes enables card companies to keep rates competitive on a regular basis.

How do I get notified of an interest rate increase?

By law, credit card companies must notify cardholders in writing at least 45 days ahead of an interest rate change taking effect. Card companies are not allowed to change interest rates during the first year an account is open.

Can I control whether I have a fixed or variable interest rate?

Yes, you can opt for a fixed or variable rate credit card, but know that most credit cards come with variable rates. It’s tougher to find a fixed rate card, but banks and credit unions, which are more likely to offer both, are a good place to start your search.

---

Photo credit: iStock/AlekseiAntropov

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

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

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

SOCC-Q224-1883585-V1
3491509-07

Read more

If you don’t pay your credit card bill, you could face more severe consequences than you might think. Though it will depend on your credit card issuer, you can generally expect to be charged a late fee as well as a penalty interest rate which is higher than the regular purchase annual percentage rate, or APR.

Life happens, and, from time to time, payments are missed, especially if you’re dealing with emergencies such as losing a job or a family crisis. In the event you have skipped a credit card payment, it’s crucial you understand what consequences you may face. That way, you can take steps to reduce the odds of it having a major impact on your financial health.

What Happens If You Don’t Pay Your Credit Card?

Consequences for missed credit card payments could include being changed late fees and possibly losing your grace period. It may also negatively affect your credit score since issuers report your payment activity to the credit bureaus — in most cases after 30 days.

There may be other consequences depending on how late your payment is and whether it’s your first time missing a payment.

Accruing Interest

When you don’t pay your credit card, interest will accrue and will continue to do so as long as you have a balance on your card. In essence, you are paying more for your initial purchase thanks to that interest.

The longer you go without paying your credit card, the more you risk your rate going up. Your credit card issuer may start imposing a penalty annual percentage rate (APR), which tends to be higher than your regular purchase APR. If this happens, you’ll end up paying more in interest charges. The penalty APR may apply to all subsequent transactions until a certain period of time, such as for six billing cycles.

Collections

Depending on your credit card issuer, your missed payments may go into collections if it goes unpaid for a period of time. You’ll still continue to receive notices about missed payments until this point.

More specifically, if you don’t pay your credit card after 120 to 180 days, the issuer may charge off your account. This means that your credit card issuer wrote off your account as a loss, and the debt is transferred over to a collection agency or a debt buyer who will try to collect the debt.

Once this happens, you now owe the third-party debt buyer or collections agency. Your credit card issuer will also report your account status to the major credit bureaus — Experian®, TransUnion®, and Equifax®. This negative information could stay on your credit report for up to seven years.

It’s hard to tell what third-party debt collectors will do to try and collect your debt. Yes, they may send letters, call, and otherwise attempt to obtain the money due.

Some collections agencies may even try to file a lawsuit after the statute of limitations expires. In rare cases, a court may award a judgment against you. This means the collections agency may have the right to garnish your wages or even place a lien against your house.

If your credit card bill ends up going to collections, take the time to understand what your rights are and seek help resolving the situation. Low- or no-cost debt counseling is available through organizations like the National Foundation for Credit Counseling (NFCC).

Bankruptcy

You may find that you have to declare bankruptcy if you still aren’t able to pay your high credit card debt and other financial obligations. This kind of major decision shouldn’t be taken lightly. You will most likely need to see legal counsel to determine whether you’re eligible.

If you do file for bankruptcy, an automatic stay can come into effect, which protects you from collection agencies trying to get what you owe them. If you successfully declare bankruptcy, then your credit card debt will most likely be discharged, though there may be exceptions. Seek legal counsel to see what your rights and financial obligations are once you’ve filed for bankruptcy.

Recommended: Understanding Purchase Interest Charges on Credit Cards

Making Minimum Payments

A minimum payment is typically found in your credit card statement and outlines the smallest payment you need to make by the due date. Making the minimum payment ensures you are making on-time payments even if you don’t pay off your credit card balance. Any balance you do carry over to the next billing cycle will be charged interest. You can also avoid late fees and any other related charges by making a minimum payment vs. not paying at all.

If you find you’re regularly struggling to make the minimum payment, or preferably, more than the minimum payment, it may be time to consider finding a lower interest rate. Carrying a balance longer-term on a high interest credit card can cause your debt to spiral.

💡 Quick Tip: Credit card interest rate caps have recently been proposed in response to rising interest rates. However, one option already available to borrowers is securing a fixed, lower-interest rate loan. A SoFi credit card consolidation loan may offer a lower interest rate, set terms, and a transparent pay-off plan.

What Happens if You Miss a Payment

If you can’t pay your credit card for whatever reason, it’s best to contact your issuer right away to minimize the impact. Let them know why you can’t make your payment, such as if you experienced a job loss or simply forgot. For the latter, pay at least the minimum amount owed as soon as you can (ideally before the penalty or higher APR kicks in).

If this is your first time missing a payment but you have otherwise paid on time, you can try talking to the credit card company to see if they can waive the late fee.

Some credit card issuers may offer financial hardship programs to those who qualify, such as waiving interest rates, extending the due date, or putting a pause on payments (though interest may still accrue) until you’re back on your feet.

Recommended: Breaking Down the Different Types of Credit Cards

15/3 Rule for Paying Off Credit Cards

The 15/3 payment method can help you keep on top of payments and lower your credit utilization — the percentage of the credit limit you’re using on revolving credit accounts — which can impact your score.

Instead of making one payment when you receive our monthly statement, you pay twice — once 15 days before the payment due date, and the other three days beforehand. This plan is useful if you want to help build your credit history and pay on time.

The Takeaway

Missing your credit card payment may not be a massive deal if it just happens once or twice, but it can turn into one if you continue to ignore your bill. Late fees, a higher penalty APR or, worse still, having your account go to collections could result. That’s why if you are having trouble paying your bill (or simply forget to), you should contact your credit card issuer ASAP.

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

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

Enjoy unlimited cash back rewards with fewer restrictions.

FAQ

How long can a credit card go unpaid?

The statute of limitations, or how long a creditor can try to collect the debt owed, varies from state to state, which can be decades or more.

What happens if you never pay your credit card bill?

If you never pay your credit card bill, the unpaid portion will eventually go into collections. You could also be sued for the debt. If the judge sides with the creditor, they can collect the debt by garnishing your wages or putting a lien on your property.

Is it true that after 7 years your credit is clear?

After seven years, most negative remarks on your credit report, such as accounts going to collections, are generally removed.

---

Photo credit: iStock/MStudioImages

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.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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

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 .

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

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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

SOCC-Q225-010

Read more

A credit card’s annual percentage rate (APR) represents the cost of borrowing money from a lender, typically stated as an annual interest rate. Thus, the APR on a credit card is an important number to know before charging a purchase — especially if you plan on carrying a balance on your credit card account.

Read on to learn more about credit card APRs and how they are determined.

What Is a Credit Card’s APR?

A credit card’s APR refers to the annualized cost of using your credit card to borrow funds. When an individual charges a purchase from a merchant that accepts credit card payments, they’re actually borrowing money from the credit card issuer. The credit card issuer pays the merchant, and the cardholder pays the credit card issuer based on the terms of their credit card agreement.

Depending on the type of transaction and when it’s paid back, some purchases may be subject to interest given how credit cards work. For instance, the purchase APR applies to any balance remaining after the statement due date. Interest is determined based on the credit card’s APR.

How Is APR Determined?

Because actual interest charges are calculated based on the credit card APR, it’s a good idea to get familiar with how APR is determined.

An integral part of how a credit card works, credit card APR is not a set rate that’s the same for every credit card and credit card holder. Rather, the interest rate on a credit card will depend on a number of factors, such as the cardholder’s credit score, what type of credit card it is (for example, whether it’s a rewards card or a card for people with low credit ratings), how the card is being used, and the current economic conditions (such as the prime rate).

In the U.S., the average credit card interest rate is currently 22.25%, per the most recent data released by the Federal Reserve. High interest rates have even prompted recent calls for credit card interest rate caps, though opinions on the potential impact of credit card caps are under debate.

That being said, there is a great deal of variance in APRs. A good APR for a credit card is one that results in the lowest interest charges — which means the lower, the better.

💡 Quick Tip: Credit card interest caps have become a hot topic, as the total U.S. credit card balance continues to rise. Balances on high-interest credit cards can be carried for years with no principal reduction. A SoFi personal loan for credit card debt may significantly reduce your timeline, however, and could save you money in interest payments.

Types of Credit Card APR

The concept of charging interest on borrowed money is not unique to credit cards. From car loans to mortgages, all types of loans have an interest rate attached. But one way credit card APR differs from the interest rates on some other lending products is that the interest charges on credit card transactions may vary depending on the type of transaction a cardholder makes.

Understanding the different types of credit card APRs can help an individual better anticipate actual interest costs before they apply for a credit card. Here are some common types of APR on credit card purchases.

Introductory APR or Promotional APR

It’s not uncommon to see credit card offers touting no interest — though it’s important to note that 0% APR is not usually a permanent credit card feature.

•   If a credit card offers an “introductory” or “promotional” APR, that generally means that the rate offered is only applied for a limited time. After that, the interest reverts to another (typically higher) APR.

•   How interest is applied to an introductory or promotional APR period will depend on the specific wording of the offer. For example, if a credit card offers a zero-interest promotional period (“0% APR for X months”), that means no interest is charged during that specified offer period. These periods are typically between six and 18 months.

Once the offer period ends and the APR reverts to the standard rate, interest is only charged on any outstanding balances from the date the promotional period ended. (Other terms, such as always making the credit card minimum payment by the due date, may also apply in order for the promotional rate to be valid.)

•   A promotional APR that defers interest doesn’t work in quite the same way. With deferred interest, the promotional or introductory rate only applies if the balance is paid in full by the end of the offer period. But interest on any remaining balance will be calculated based on the date of purchase, not the end of the offer period.

That’s why it’s important to be mindful of whether your spending is within your budget, even if it is technically within your credit card limit.

While the specifics of a promotional or introductory APR offer should be clearly spelled out in the terms and conditions, one way to spot such an offer is to look out for conditions — for example, “no interest if paid in full within 12 months.”

Recommended: 10 Advantages of Credit Cards

Cash Advance APR

It may be possible to draw cash from a credit card at an ATM or using convenience checks. However, credit card cash advances are often subject to a different (usually higher) APR and may begin to accrue interest starting from the transaction date.

Balance Transfer APR

Some credit cards may offer a lower APR rate for balances transferred from higher APR cards, which can be helpful if you’re looking to pay off high-interest debt. The balance transfer APR will usually only apply on a promotional or temporary basis, as noted above.

Purchase APR

This is the standard APR that is applied to most regular purchases charged to a credit card. It applies on any balance that remains after the statement due date. This is why, even if you’re disputing a credit card charge, for instance, it’s smart to pay off as much of your balance as you can to avoid interest accruing.

Penalty APR

Just as it sounds, penalty APR is a penalty fee. It’s higher than the regular purchase APR and kicks in as a result of payments that are more than 60 days late. The terms associated with penalty APR are disclosed in the credit card agreement.

Recommended: What Is a Credit Report?

The Takeaway

While credit cards can be a useful tool for managing cash flow (and even earning rewards and perks), it’s important to understand the costs involved. This includes understanding how credit card interest works and how credit card APR applies to credit card balances. Credit card APRs can vary widely, and it can be important to know what rate applies when so you can use your cards responsibly.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

Enjoy unlimited cash back rewards with fewer restrictions.

FAQ

What does the APR not include?

Although the interest rate and when it’s applied may vary depending on the type of transaction, APR typically applies to any funds that are drawn from one’s credit card.

Do you pay credit card APR monthly?

Whether APR is charged depends on the type of transaction and when it’s paid off. For regular purchases, there is no credit card APR at all so long as the balance is paid in full by the statement due date.

Is APR based on current balance?

Like other types of interest, APR is a percentage of the balance owed on a credit card. How APR is applied to various types of purchases and when interest begins to accrue typically depends on the type of transaction and is detailed in the credit card agreement. Most regular balances only begin to accrue interest if any amount is remaining after the statement due date.

What happens if you pay more than the minimum balance on your credit card each month?

Purchase APR typically is applied to any balance remaining after the statement due date. By paying more than the minimum balance, an individual will reduce the amount of funds that are subject to interest.

---

Photo credit: iStock/Eva-Katalin

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

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

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 Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOCC-Q425-005

Read more