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Those moments right after a car accident deliver some of the worst stress imaginable. You’re figuring out if anyone is hurt and how bad your car’s been damaged. And before too long you’re asking yourself this stomach-churning question: “How much will my insurance go up after an accident?”

There are many factors at play, including who was at fault, how serious the injuries and damage, your driving record, what state you live in, and the policies of your chosen insurance company.

Understanding these factors and digging into the forces controlling car insurance rates can help you pursue the best options possible.

Why Do Rates Go Up After an Accident?

Auto insurance is a highly competitive business, and that competition plays a role in keeping rates low. But it also means that when an accident happens, there can be quite a jump in what you pay for coverage.

When you’ve had a car accident and you are at fault, your insurer now assumes you drive in a way that could cause an accident. That may sound unfair, but that’s part of how car insurance works. They are assuming a higher risk, and that is passed on to you in the form of a higher rate.

If you are found not at fault in the accident, your insurance rate may go up by a small percentage. California and Oklahoma are two states, however, that mandate insurance companies cannot raise insurance rates after an accident where the driver was not at fault.

This is yet another reason why it’s important to go over policies carefully when making your choice. It’s smart to compare the rates among top insurers and even look at how much insurance increases after an accident with various insurers.

There is one bright spot in the insurance landscape when dealing with an accident. If your insurer offers and you elect to pay for accident forgiveness, your insurance rate will not go up after your first at-fault accident. Driving record and driving experience requirements must be met before this benefit is available.

Recommended: Auto Insurance Terms, Explained

Average Rate Increases by State

After an at-fault accident, yes, your car insurance is likely to go up. Rates can increase by about 45% a year on average after an accident, according to 2025 MarketWatch research. But as the analysis below shows, just how much your rate jumps can depend on the state in which you’re insured.

How Do I Keep My Rates Low After an Accident?

If you’ve had a car accident, there are some things you may be able to do to keep your car insurance rates from rising.

First, explore discounts that you may have overlooked. Check with your insurer to make sure you’re receiving discounts you’re eligible for.

•   If you haven’t already signed up for paperless billing, now might be a good time to take advantage of the discount you may receive with this option.

•   The number of miles you drive annually is one factor that goes into calculating your insurance rate. Check with your insurer to make sure your rate correctly reflects your annual mileage.

•   Consider a usage-based insurance that tracks different elements of your driving habits and sets your rate accordingly. Better driving habits typically equate to lower rates.

•   Ask about multi-policy discounts if you have all your policies with one insurer.

•   Check into military and government employee discounts.

Another tactic that might be worth pursuing if you’ve had an accident but are looking for ways to decrease your car insurance rate is to increase your deductible. The higher your deductible, the lower your premium.

Look into how much insurance you’re carrying on the car. It’s worth your time to determine how much coverage you need. If your car is worth less than the deductible plus your annual total for car insurance, it could be time to rethink your coverage.

And another thing to scrutinize is what kind of car you drive. Some cars are cheaper to insure than others.

💡 Recommended: Average Cost of Car Insurance in Arizona

When Does Car Insurance Go Down After an Accident?

Generally speaking, it takes three to five years for car insurance to go down following most at-fault accidents. The insurers are going by the statistical wisdom that if you’re in one accident, the chances are higher that you will be in another. Some insurers also take into account the seriousness of the accident and whether impaired driving was a factor in the accident.

One tactic people employ to lower their rates is to shop around for a new insurer. While the record of the accident and claim will be visible to a second insurer, you may still be able to get better deals.

Your insurance rates will also be affected by your credit. Merely being involved in an accident will not damage your credit, but an improvement in your credit score can be used as leverage in getting a lower premium.

Don’t rule out getting a brushup on your driving to improve those skills. Some insurance companies will discount your rates if you complete a defensive driving or driver education course.

Recommended: Car Insurance Guide for New Drivers

The Takeaway

that can seem hard to figure out. Rates can go up by about 45% a year on average after an accident. But that figure may fluctuate depending on a variety of factors including who was at fault, the seriousness of the accident, your driving record, and to a surprising degree, the state in which you live.

Taking the opportunity to compare car insurance companies before committing to a policy can be a smart move that might save you money on your insurance rate.

When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

Photo credit: iStock/simpson33

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

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.

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.

SOPRO-Q225-020

Pet ownership comes with an array of costs, and medical care can be one of the big ones. Does that mean you should get health insurance for your pet? Is pet insurance worth the cost?

Insurance policies for pets are more worthwhile for some pet parents than others. A policy that covers general pet wellness and preventive care may not make economic sense, but a policy that covers accidents and illness may be a good move for pet owners who would have trouble covering a hefty vet bill should their pet suddenly be injured or become sick.

But plans vary significantly on what they cover — and what they cost. Here are some key facts to consider when shopping for a pet insurance plan.

Average Cost of Pet Healthcare and Emergencies

Between food, daily care, equipment, and toys, the cost of owning a pet can be high. The cost of veterinary care can also stack up pretty fast.

Pet healthcare costs vary widely, depending on the region and what kinds of care your pet may need. But dog owners spend an average of $580 per year on routine vet visits, while cat owners shell out an annual average of $433 on routine care, according to the American Veterinary Medical Association.

Heartworm tests can tack on another $35 to $75 annually, with monthly preventive medications costing from $6 to $18 apiece. This means an annual cost that can range between $107 and $291 for heartworm prevention, while flea and tick prevention can cost from $65 to $150 or more per year.

Even a healthy pet may need emergency care, ranging from a few hundred dollars to thousands. Wound treatment and repair, for example, can run as high as $2,500 for a dog. Emergency surgery for a large dog can cost up to $5,000.

In fact, emergency room bills for pets can run as high as $10,000 when adding in hospitalization costs.

Recommended: 19 Tips to Save Money on Pets

What Is Pet Insurance?

Once a niche product, pet insurance policies have been steadily gaining in popularity. Indeed, many employers now offer pet plans as part of their benefit packages. But what exactly is pet insurance — and how does it work?

Like health insurance for people, pet insurance is intended to ease some of the costs of keeping your pet healthy. You can choose from different levels of coverage, with each plan costing a monthly or annual premium based on how much coverage you choose.

Some plans cover accidents and injuries, some only cover accidents, and others include wellness and preventive care. The more comprehensive the coverage, the higher you can expect the cost to be.

As with health insurance for people, pet policies include exclusions, various levels of coverage, copays, deductibles (a certain amount you must pay out of pocket before coverage kicks in), and payment limits.

Most pet insurance policies exclude preexisting conditions and hereditary or congenital conditions. Some carriers will not accept pets younger than 8 weeks or older than 12 years, and many policies have waiting periods before benefits for injury, illness, and orthopedic care begin.

Pet insurance typically uses a reimbursement model: You pay the full amount due when you take your pet in for care, then submit a claim to the insurance company.

What Pet Insurance Covers

Pet health insurance offers several types of coverage, each with its own list of coverage options and costs. The three most common types of coverage are:

•   Accident and illness. This typically covers treatments and tests for accidents and illnesses.

•   Accident-only. This coverage generally takes care of accidental injuries, such as poisoning or ingestion of a foreign object, being hit by a car, cuts, and other physical injuries. Accident-only coverage is often preferred by owners of older pets that have aged out of comprehensive coverage.

•   Wellness plans. Wellness plans tend to cover preventive-care visits, such as checkups and routine vaccinations, and you can buy one as a stand-alone policy or as an add-on to an accident and illness policy.

Before deciding whether you want to buy a pet insurance policy, it’s a good idea to download sample policies from insurers. You can then review each policy for limitations, exceptions, and copayments. You can also reach out to a rep with questions.

What Pet Insurance Doesn’t Cover

Some pet insurance options have breed-specific exclusions, or it could cost extra to cover specific breeds.

As mentioned, just about every pet insurance policy excludes coverage of preexisting conditions.

Many plans also limit the amount you can claim, either annually or over your pet’s lifetime.

Wellness plans likely will not cover any treatments having to do with accidents, common injuries, or any other emergency treatments.

Accident-only plans will likely not cover any cost associated with illness, while accident and illness plans will likely not cover any preventive care or any care related to preexisting conditions.

An accident and illness plan with a wellness add-on provides the most comprehensive coverage. But again, it will likely not cover any care for a preexisting condition and could come with breed restrictions. That’s why it’s essential to read the fine print of every policy option before deciding which one is right for each pet.

How Much Pet Insurance Costs

The cost of pet coverage varies widely, but the average accident and illness premiums cost $675 a year for a dog and $383 for a cat, according to the North American Pet Health Insurance Association’s latest figures.

Accident-only premiums — covering things like ingestion of a foreign body, lacerations, motor vehicle accident, ligament tears, and poisoning — average $204 for a dog and $116 for a cat, the association reported.

In a Consumer Reports survey of 3,583 pet owners who have pet insurance, 34% said the policies had saved them money, while 20% said they broke even. Still, 67% of respondents said they thought the insurance was worth the cost.

Keep in mind that costs can rise, depending on a number of factors:

•   Your pet’s breed (purebreds may cost more to insure because they are more susceptible to some hereditary conditions)

•   Age (plans tend to cost more as your pet ages)

•   Region (the higher cost of vet care in some areas is factored into your premium)

•   The coverage you choose

Note that once a pet reaches a few years old, most pet insurance providers will increase rates every year at renewal time.

Pros and Cons of Pet Insurance

Pet insurance can make pet treatments and services more affordable: As you make annual or monthly premiums, the insurance company bears the brunt of covered expenses.

Pet insurance also may help protect the emergency funds in a checking and savings account or savings account. If your pet is young or healthy, or you choose a lower tier, you can get accident and illness coverage for a fairly low cost.

But it’s important to read the details. Many plans limit the amount you can claim, either annually or over your pet’s lifetime. If your pet suffers a major medical problem, you could quickly max out your plan’s limit and find yourself paying the difference.

Depending on the cost of the premium, wellness-only plans and wellness add-ons may not be worth the price, since they can end up costing about the same as, or more than, paying out of pocket for routine care.

If pet insurance may be a possibility for your household, here are issues to consider before making a decision.

Research Which Pets Are Covered — and for What

Plans have different enrollment requirements. Typically, though, once a pet is enrolled in a plan, lifetime coverage is available — at least for as long as premiums are kept up. It’s a good idea to check to see if a plan requires a vet visit before enrollment.

Once plans have been identified that would likely accept your pet’s enrollment, find out what each of the policies covers. For plans that go beyond accident coverage, find out specifically what the benefits include. Will the policy, for example, cover ongoing treatment for a condition, or would a policyholder need to pay an add-on fee for continual care?

Investigate the Reliability of Pet Insurance Plans

Once a list of providers has been narrowed down to ones that would accept your pets, it’s a good idea to check the companies’ track records.

This includes the length of time they’ve been in business and how many policies they have in effect.

You may want to see which ones are rated by the Better Business Bureau and what those ratings are, and read online reviews. Who develops their policies? Are there veterinarians involved?

Compare Deductibles and Payout Limits

Pet policies come with deductibles. Sometimes it’s an annual deductible. Other times, it can be applied per illness or injury.

If that’s the case, then once a deductible is met for that condition, maximum reimbursements may be paid out for that particular injury or illness. If, though, a pet develops multiple conditions, a deductible would need to be met for each one individually.

If the deductible is applied per incident, monthly premiums may be lower. A low annual deductible may sound appealing but will have a higher premium than plans with a higher deductible.

Alternatives to Pet Insurance

Again, like humans, unexpected expenses can come up from time to time with a pet.

Another way a pet owner can pay for both expected and unexpected vet bills is to have an emergency fund earmarked for your pet. Stashing a little bit of cash each month into a pet care fund can slowly add up.

Whether you do or don’t spring for pet insurance, you may be able to avoid emergency care by monitoring your pet’s diet and exercise and staying up to date on vaccines and heartworm prevention treatments.

Even knowing the most common ailment associated with your pet can help keep a minor problem from turning into something major.

Finally, you may want to shop around for the lowest price on the veterinary services you need.

Recommended: Emergency Fund Calculator: Calculate Your Safety Net

The Takeaway

Is pet insurance worth the cost? Pet insurance that covers accidents and illness may be a reasonable hedge against a huge vet bill. The payoff for wellness coverage is less clear. If you do decide to take out pet insurance, be aware of all of the policy’s limits and exclusions.

Life is full of unexpected events. Insurance is meant to ease the burden of paying the full cost of an accident, illness, or loss.

When the unexpected happens, it’s good to know you have a plan to protect your loved ones and your finances. SoFi has teamed up with some of the best insurance companies in the industry to provide members with fast, easy, and reliable insurance.

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.

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.

SOPRO-Q225-016

In our digital world we like things to happen immediately. Unfortunately, it can take days, if not weeks, for a credit card refund to appear on a cardholder’s account.

How long does it take for a refund to appear on a credit card? Keep reading for insight into how credit card refunds work, types of refunds, and tips for getting your refund faster.

What Is a Credit Card Refund?

Before we can properly explain what a credit card refund is, it’s helpful to understand how credit card purchases work and who the main players are.

For every credit card transaction, there are two companies that help facilitate the purchase: credit card issuers and credit card networks. The credit card issuer is the company that creates and manages the credit card. The company essentially lends money to the cardholder to make a purchase. The credit card network is the business that processes the transaction electronically. It does this by transferring the money from the credit card issuer to the merchant.

Whenever someone makes a purchase with a credit card, the credit card issuer is the one to pay the merchant. Later, the cardholder pays the credit card issuer back.

With credit card refunds, this entire process works the same way but in reverse. When a merchant refunds a purchase, the money goes to the credit card issuer. Then the credit card issuer returns that amount to the cardholder’s account.

Recommended: What Credit Score is Needed to Buy a Car

How Does a Credit Card Refund Work?

As briefly noted above, when a consumer requests a credit card refund through a merchant, the merchant issues the refund directly to the credit card issuer, and then the issuer pays the account holder back. This is why merchants don’t typically refund credit card purchases in cash.

If the cardholder pays off their balance in full before a refund hits their account, they may end up with a negative balance. In this case, a negative is a good thing: It just means you have a credit on your account instead of the usual charges. You don’t need to do anything about a negative balance.

Types of Credit Card Refunds

There is only one type of credit card refund that consumers are involved in. The merchant and the credit card issuer (with the use of a credit card network) will work together to complete the refund and to get the money to the consumer.

Potential Delays for Credit Card Refunds to Appear

Exactly how long does it take for a refund to appear on a credit card? The timeline can vary based on a few variables. It can take time to process a refund, and all the consumer can do is wait.

In general, the retailer’s return policy dictates how long a consumer will wait to get their refund. Most retailers have a policy of refunding a purchase within three to five business days. The return policy can usually be found on the retailer’s website.

Online returns can be particularly lengthy and usually take longer to process than in-store returns because shipping is involved. It can take over a week just for the returned package to arrive and be processed before the refund process is initiated. Then the cardholder has to wait for the refund to appear on their monthly statement.

Here’s a few examples of common issues that cause refund delays.

Billing Disputes

Getting a billing dispute taken care of can take longer than a standard refund. In that case, the customer must file a dispute with the credit card company to receive a credit. Some examples of issues that may require a dispute are:

•   Being billed for a product you didn’t receive

•   Getting charged twice for the same purchase

•   Failing to receive credit for a payment

Mistakes happen and billing disputes can take a while to resolve. In some cases, a credit card chargeback may be necessary.

Merchant Delays

All merchants have their own timeline for processing credit card returns. It can take a week or two depending on how slowly the merchant tends to process their refunds.

Cases of Identity Theft

If someone needs a refund for a purchase on their account that is a result of identity theft, it can take quite a while to fully resolve that issue.

How Does a Credit Card Refund Affect Your Credit?

If someone doesn’t pay off their credit card balance while waiting for a return to process, they will carry the balance on their credit card. In addition to expensive interest charges, carrying a balance affects the consumer’s credit utilization ratio, which can harm their credit score.

A credit utilization ratio compares how much available credit someone has to how much of it they’re using. Ideally, it’s best to keep the utilization ratio below 30%. Financial software like SoFi offer free credit monitoring, a debt payoff planner, and other handy tools to make sure you aren’t taken by surprise.

Recommended: What is The Difference Between Transunion and Equifax

Tips To Get a Faster Credit Card Refund

The best chance someone has at getting a quick refund is simply to make the return as soon as possible. If a consumer is in a rush to get their money back, they can request a store credit refund from the merchant, which will be issued immediately.

That means the customer will have to spend that money in-store, leaving the purchase amount on the credit card bill to be paid off. On the bright side, this method results in the cardholder getting to keep any cash back or rewards points that the purchase earned.

The Takeaway

It can take anywhere from a few days to a few weeks for a refund to appear on a credit card. The exact timeline varies based on the merchant and credit card issuer involved, as well as other factors that can cause delays (such as slow shipping times). Patience is key, but it helps to be aware of what the merchant’s and credit card issuer’s return policies and expected timelines are.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

How long do refunds take to show up on credit cards?

It can take as little as three days for a refund to show up on a credit card. That said, it can take longer depending on the merchant and credit card issuer involved. Returns that require shipping back merchandise can take the longest, because the consumer has to wait for the merchandise to arrive and be processed before a refund can be initiated.

Why is my refund not showing up on my credit card?

A refund can take days, if not weeks, to show up on a credit card. Don’t be afraid to check in with the credit card issuer on the status of a refund. Instead of waiting for a new statement to come in the mail at the end of the month, it can be more expedient to review an online account statement.

Why do card refunds take so long?

Credit card refunds can take a while for a few reasons. To start, all merchants and credit card issuers have different refund timelines. Other things like slow shipping times (for online purchases) or issues with identity theft can cause additional delays.

About the author

Jacqueline DeMarco

Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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.

SORL-Q224-1945468-V1

A credit card annual fee is the price that some cardholders pay to use a certain credit card. While there are plenty of credit cards on the market that don’t come with an annual fee, the credit cards that charge an annual fee tend to have better cardholder perks that can outweigh the cost of the annual fee if the card is used optimally.

Keep reading for more insight into annual fee credit cards.

What Is a Credit Card Annual Fee?

Annual fees are costs charged by many (but not all) credit card issuers to help finance their service, including cardholder perks, such as travel credits and free checked luggage on flights.

The amount of an annual fee factors into how much a credit card costs overall, and it varies from card to card. Credit card annual fees can start as low as around $39 and go as high as thousands of dollars for luxury credit cards.

Usually how credit cards work is that cards with sky-high annual fees also offer a lot of extra perks to make the credit card worth the money. For instance, the cardholder may gain exclusive access to airport lounges, credits towards rideshares, or be able to tap into competitive introductory reward bonuses.

However, there are cases where an annual fee is charged for credit cards designed for consumers with low credit scores. These credit cards don’t offer great rewards, and instead give consumers with poor credit a chance to build their credit by using credit cards responsibly. Eventually, the goal is for the cardholder to positively impact their credit so they can qualify for credit cards with lower interest rates and better perks.

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

How Do Credit Card Annual Fees Work?

When you pay the annual fee on a credit card varies depending on your card issuer. Credit card issuers either charge annual fees on either a yearly basis, or they may divide the fee up into smaller monthly installments.

If your fee is charged once a year, then it usually will appear on your first statement after you open your account. You’ll then get charged every 12 months thereafter. In the instance an annual fee is divided into smaller monthly payments, these will get included on the monthly statement the cardholder receives.

You pay your credit card annual fee just like you’d pay any other credit card charges listed on your monthly statement.

Which Credit Cards Typically Have an Annual Fee?

There are three main types of annual fee credit cards you might consider.

Reward Cards

Credit cards that can offer a high-value rewards structure or that have a strong introductory bonus often come with an annual fee. If the card is used strategically, it’s possible to earn enough credit card rewards to cancel out the cost of the annual fee and other cardholder fees. You may earn rewards like cash back, travel points, or discounts on specialty purchases.

Premium Credit Cards

A premium credit card that offers luxe perks like private airport lounge access or a travel concierge is likely to charge an annual fee to use the card. If you’re considering one of these cards, make sure to crunch the numbers to make sure you’ll use enough of the perks to offset the cost of the annual fee.

Secured Credit Cards

A secured credit card is designed to help consumers with bad credit scores build their credit. These cards require a deposit to “secure” the card, and that amount also usually serves as the card’s credit limit. On top of the deposit, secured credit cards often carry an annual fee.

For some, the cost of a secured card may be worth it for the opportunity to build their credit score, which can make it easier to qualify for lending opportunities in the future. Still, make sure it’s within your budget.

Recommended: What Is the Average Credit Card Limit?

How Are Credit Card Annual Fees Charged?

As briefly mentioned above, some credit card issuers charge the annual fee once a year, while others split up the annual fee into smaller monthly installments.

The annual fee shows up on the credit card statement alongside normal credit card charges, and the cardholder pays the annual fee as part of that month’s credit card bill. Remember that even if you have an authorized user on a credit card, it’s still the primary cardholder’s responsibility to make payments, which includes any fees.

Avoiding Credit Card Annual Fees

If you’re trying to avoid credit card fees, it’s entirely possible to avoid paying annual fees. There are plenty of credit cards on the market that don’t charge an annual fee at all.

If someone is interested in a credit card with an annual fee, such as a premium rewards card, they can try to get the first year’s annual fee waived. Some credit card issuers offer to do this from the get-go. However, if someone is an existing cardmember with the issuer and their introductory offer doesn’t include waiving the first year’s fee, they can request a one-time waiver.

Before signing up for a credit card with an annual fee, it’s important to evaluate your spending habits. You want to ensure that you can comfortably afford to cover the annual fee for the credit card. Also investigate whether you’ll earn enough benefits from the card to justify the cost of the annual fee.

The Takeaway

Annual fees are often charged by credit card issuers to cover the cost of their services and perks. Fees can range from around $39 to thousands of dollars for ultra-premium cards, and it can be wise to review them carefully and make sure you are comfortable paying them. It may be possible to avoid these fees by negotiating with your card issuer or qualifying for this reward.

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

FAQ

How do you pay the annual fee on your credit card?

If someone has an annual fee credit card, the annual fee will appear on their credit card statement. The fee may appear every 12 months or in smaller increments on a monthly basis. The cardholder then pays this fee as a part of their monthly bill in addition to any other purchases they made with the credit card during that billing cycle.

How can I avoid paying annual fees on my credit card?

Alongside choosing a credit card that doesn’t charge an annual fee (there are plenty of options on the market), a consumer may be able to get the first year of an annual fee waived as a new cardholder incentive. It only makes sense to open a credit card with an annual fee if the account holder’s spending habits line up with the rewards structure of the credit card. That way, they can earn enough cash back, miles, or other perks to outweigh the cost of the annual fee.

Do all credit cards have annual fees?

There are tons of great credit cards on the market that don’t come with annual fees. There’s never a reason to pay an annual fee if someone decides that’s not a good use of their money.

About the author

Jacqueline DeMarco

Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.

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-Q224-1910778-V1

Saving money is a good thing, but it’s important to find the right kind of account for your cash. Both savings accounts and certificates of deposit (CDs) can be a safe spot to keep your money, but they have differences. A savings account can be more accessible, meaning you can typically withdraw funds at will, while with a CD, you are supposed to let your money sit for an agreed-upon period of time. Also, interest rates may vary. CDs typically offer higher rates than traditional savings accounts do. However, high-yield savings accounts may offer rates close to (or possibly even exceeding) those of CDs.

Depending on your needs and preferences, you may discover that one option is a better fit for you. Read on for details on what these accounts offer and how they differ. Once you know the pros and cons of each, you will likely be better prepared to make a decision.

Certificate of Deposit (CD) vs HYSA Savings Accounts

A certificate of deposit (CD) and savings account are both vehicles that can help you grow your money thanks to interest earned. A key difference, however, is that a savings account is more accessible, while, with a CD, you agree to keep the funds on deposit for a period of time. You may, however, be rewarded with a higher interest rate for doing so.

That said, high-yield savings accounts can offer competitive interest rates vs. CDs and provide more flexibility. You can withdraw funds as needed, without being hit with penalties.

To understand more about the difference between a CD and a savings account, it’s a good idea to first learn in depth how each type of account works.

What Is a Certificate of Deposit (CD)?

A certificate of deposit (CD) is a specific type of savings account that pays interest. You agree to keep the money on deposit for a specific term, which can range from a few months to several years, and you are promised a specific interest rate (usually, but not always, a fixed rate). CDs are also known as time deposits for this reason. A couple of points to note:

•   Generally, the longer the term you choose, the higher the interest rate may be. You may also find a promotional CD with a higher than usual rate.

•   You may find some variable-rate CDs offered. With these, the interest can fluctuate with the market.

•   Typically, you will pay a penalty if you withdraw funds before the end of the term. There are some no penalty CDs on the market that don’t involve a penalty for pulling money out early. They may, however, offer lower interest rates.

CDs are considered to be a very safe savings option, provided they are held at a bank with Federal Deposit Insurance Corporation (FDIC) insurance. If so, you will be covered up to $250,000 per depositor, per account category, per insured institution. That means even in the very rare instance of the bank failing, you wouldn’t lose funds up to that amount. (If you open a CD at a credit union, you would likely be insured by the National Credit Union Administration, or NCUA, in a similar way.)

How Does a CD Work?

Here’s how a certificate of deposit works:

•   When you open a CD, you typically commit to leaving the money in the account for a set period of time such as six months or three years. In exchange for locking up your funds in this way, the bank issuing the CD will pay out a certain amount of interest.

•   Many financial institutions give account holders the option to collect interest at intervals during the term of the CD or at the end of the term.

•   However, if you withdraw funds from the CD before its term is over (also known as its maturation date), you will likely be charged a penalty.

•   When the agreed upon period of time is over, you can get your original deposit back, along with the interest earned and not yet paid out, or you can roll it over into a new CD.

What Is an HYSA Savings Account?

A savings account, which you can open at a bank, credit union, or other financial institution, is a place where you can save money without locking it away for an extended period of time. Opt for a high-yield savings account to help your money grow even faster.

•   A savings account is a good fit for money you want to protect and grow while still being able to access it — say, for an emergency fund or a down payment for a car you plan to buy in the coming months.

•   The funds in your account are accessible when you want them, without a penalty, though some financial institutions do limit the number of transactions per month.

•   Similar to CDs, savings accounts generate interest, but traditional savings accounts may offer a lower rate. A high-yield savings account, or HYSA (most often found at online banks), can come with a higher interest rate, sometimes a multiple of what traditional accounts offer. For example, as of September 2024, the average interest rate for traditional savings accounts was 0.46% and the rate for high-yield savings accounts could be several times that.

Most savings accounts at major banks offer FDIC insurance. If the savings account is held at a credit union instead of a bank, then the NCUA vs FDIC insures the money with similar guidelines.

How Does an HYSA Savings Account Work?

High-yield savings accounts, like traditional savings accounts, work by putting money in your account, where it earns interest. You can then withdraw funds as needed (though some financial institutions may put a limit on how many transactions they allow per month). The difference is, however, that you’ll earn a more robust interest rate.

Someone might put money in savings to:

•   Earn interest and help their money grow

•   Save money for a short-term financial goal

•   Create an emergency fund

•   Keep their money safe vs. having cash at home

•   Separate the money they want to save from the money they want to spend

Recommended: Savings Account Calculator

3 Similarities Between a CD and HYSA Savings Account

If you’ve ever thought of a CD and a savings account being almost the same thing, there’s a good reason why: There are a few similarities between them.

1. Insured

Typically, a CD or savings account is insured by either the FDIC or the National Credit Union Administration (NCUA) which helps protect the money in these savings vehicles.

2. Earns Interest

Both CDs and savings accounts earn interest on the money deposited into them, unlike checking accounts which often offer no interest. While CDs may earn a higher interest rate than traditional savings accounts, a HYSA may offer a competitive interest rate vs. a CD, but it won’t charge you an early-withdrawal penalty.

3. Good Ways to Save Money

You know the saying: Out of sight, out of mind. By putting money into a CD or savings account, you may find it easier to save money and resist the temptation to spend it.

Differences Between a CD and HYSA Savings Account/2>

Of course, there are some key differences between these accounts worth understanding. Knowing these points could help you decide between a high-yield savings account vs. a CD.

1. Accessibility

With a CD, you can’t remove your money until the date of maturity without being penalized. With a high-yield savings account and traditional ones as well, you can usually make either up to six withdrawals a month or unlimited withdrawals. (Check with your financial institution for specifics.)

2. Amount of Interest Earned

Traditional savings accounts generally earn less interest than CDs. However, a high-yield savings account may offer a rate that’s competitive with a CD. Comparison-shop to see what’s offered.

When to Use a CD Instead of an HYSA Savings Account

Here’s some guidance on when you might opt for a CD vs. a savings account.

•   A CD is a good fit if you don’t need to access your money in the near future. If you can agree to leave the money untouched for a number of months or years in a CD, you could earn a higher interest rate vs. a savings account.

For instance, say you got a bonus at work and aren’t quite sure what you want to do with it. Putting it in a CD will keep it safe and earning interest while you decide how you might want to use it.

•   Another scenario in which a CD could be a wise move is if interest rates are expected to fall. Locking in your rate with a CD before that happens could help your money grow.

When to Use an HYSA Savings Account Instead of a CD

A savings account can be a better option if you need your money to be easily accessible in the near future.

•   A savings account can be a good place to store an emergency fund (since you never know when you might need to withdraw some funds) or when saving up for a short-term financial goal.

•   Putting money in a savings account can be a wise move if interest rates are expected to rise. That way, you can enjoy higher earnings as rates climb. That wouldn’t be the case if you locked in to a fixed-rate CD.

How to Open a CD

To open a CD, you can choose a financial institution, and pick the type and term of CD you want. This can mean deciding between a no-penalty or traditional CD. You’ll also determine how often you want to collect your interest payments (say, monthly or when the CD matures, meaning when it reaches the end of its term).

You can likely open a CD in person or online. The process also typically involves sharing your government-issued photo ID, personal details (name, address, Social Security number, and so forth), and other credentials.

The final step will be to fund the CD: That happens by transferring the money online, via a phone transfer, handing over cash if you’re at a branch, or by using a check.

How to Open an HYSA Savings Account

The first step for opening a savings account, including a high-interest savings account, is to compare financial institutions and account options and make your decision.

You may find options depending on minimum opening deposits and minimum balances; interest rates will likely vary between standard and high-yield accounts. You may also find a variety of fees relating to the accounts available, so consider how those might impact your savings.

Next, you will likely have to provide personal information (such as name, address, and SSN), government-issued photo ID, and other details in order to complete the process. This holds true whether you are opening an account in person at a brick-and-mortar location or online.

Lastly, you’ll need to add cash to open the account, whether by handing over money in person or otherwise transferring funds. A typical deposit requirement for a basic savings account might be $25 to $100; you might find some that don’t need any deposit. For a HYSA, you could see minimums ranging from similar levels to thousands of dollars in some cases.

Recommended: Different Types of High-Interest Accounts to Know

The Takeaway

Both certificates of deposit and savings accounts are secure, low-risk places to keep money and earn interest. With a CD, you may earn higher interest than with a standard savings account, but you agree to keep your money on deposit for a specific term or else be penalized for an early withdrawal. With a savings account, your funds are accessible without that kind of penalty, so you can dip in as needed. With a high-yield savings account, you might earn as high an interest rate as a CD. Which financial product is the right choice will depend on your particular needs and goals.

If a savings account seems like a good option to you, SoFi might be the right bank.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Is a certificate of deposit the same as a savings account?

No, a certificate of deposit (CD) is not the same thing as a savings account. Money placed in a CD is not easily accessible like a savings account; you agree not to touch it for a period of time, usually from six months to a few years. CDs are also known as term deposits.

Is a high-yield savings or CD account better?

Whether a high-yield savings account or CD is better for you depends on your unique financial needs. If you have money you don’t need to access anytime soon and can find a higher interest rate for a CD vs. a savings account, then a CD is likely a better fit. If, however, you need to be able to access your money and make withdrawals, a savings account will probably better suit you. And you might find a HYSA that has a rate that’s as good as a CD’s.

Does a certificate of deposit give you better interest than a savings account?

In general, a CD can provide a better interest rate than a traditional savings account, but it pays to research exactly what is being offered. It’s possible that a CD’s interest rate might not be high enough to outweigh the downside of not being able to access your funds the way you can with a savings account. Or you might find that a high-yield savings account offers an interest rate on a par with that of a CD, plus greater accessibility.

Is a certificate of deposit safer than a savings account?

CDs and savings accounts can be equally safe. Most major banks and credit unions are insured by either the FDIC or NCUA, protecting consumers in the very unlikely event of the financial institution

What is the biggest negative of putting your money in a CD?

The biggest negative of a CD is lack of access. You are locking up your money for a set period of time, or term. If you withdraw funds before the CD’s term of deposit is up, you typically face financial penalties.

About the author

Jacqueline DeMarco

Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.

Photo credit: iStock/Moyo Studio

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