CB3 Archives

Nov

2024

What Is a Black Credit Card? How It Works

By Jennifer Calonia | Credit, credit card, Financial Independence | Comments Off

A black credit card is a financial product extending a line of credit to wealthy, high-spending consumers. Colloquial references to a black credit card typically refer to the American Express Centurion Card that launched in 1999. It quickly developed a reputation for being more than a credit card — rather, it became a status symbol of ultra wealth and almost limitless spending power.

Here’s a look at what a black credit card is in detail, how to get one, and the card’s benefits and drawbacks.

Key Points

• Black credit cards are designed for wealthy, high-spending individuals and are typically invitation-only.

• These cards have high fees, such as a $10,000 initiation and $5,000 annual fee.

• Benefits include no credit limit, VIP lounge access, travel perks, and personalized services.

• Qualification requires high income, net worth, and significant spending activity.

• These cards can serve as status symbols but come with high costs and stringent spending requirements.

What Is a Black Credit Card?

A black credit card is an ultra-luxury private banking credit card product that’s designed to support the credit needs of the world’s wealthiest individuals, which can include A-list celebrities, professional athletes, and multi-millionaires. These are individuals who likely spend six figures a year using their credit card.

Although the black credit card meaning was originally derived from the AmEx Centurion Card, it now includes other luxury cards that have since come to the market. The list of exclusive card products include the Dubai First Royale Mastercard and the J.P. Mortgage Reserve Card.

Although the Mastercard Black Card might have the phrase “black card” in its name, it’s more accessible and arguably not in the same caliber as the aforementioned cards. That’s because consumers can submit an application online for this card without first being invited, which is more in line with typical credit card rules.

How Black Credit Cards Work

Unlike other consumer credit cards, the most exclusive black credit cards aren’t available for online applications. Card issuers publish very limited details — if any at all — about how to apply for the card or what it takes to receive an invitation. All of the elusiveness can enhance the allure of black cards.

Aside from their exclusiveness, black cards are generally known for having no credit limit, allowing members to spend freely. However, credit card issuers have already determined who they feel is financially capable of wielding the black card’s limitless buying power.

Requirements for Getting a Black Credit Card

Specific black credit card requirements and thresholds vary between black card products. However, they generally include the following factors:

• Minimum annual spending

• Income and/or net worth

• Creditworthiness

If you believe that you meet the criteria for a black credit card, you can reach out to the card issuer directly to see if you’re eligible. American Express, for instance, may offer existing members an online form for its Centurion Card for those who want to request consideration.

Worth noting: The Centurion Card is currently said to have a one-time $10,000 initiation fee and an annual fee of $5,000 thereafter.

Recommended: The History of Credit Cards

What Kinds of Perks Do Black Credit Cards Offer?

Whether you’re still learning how credit cards work or are experienced with credit, you likely know that different cards offer varying benefits, including rewards, travel and shopping credits, and more. The perks of a black credit card also differ depending on the type of black card.

For example, the AmEx Centurion Card, offers the following black card benefits:

• VIP airport lounges. Access to AmEx’s Global Lounge Collection, including the coveted The Centurion Lounge.

• Travel accommodation enhancements. Upgraded bookings and credits through AmEx’s Fine Hotels and Resorts program, with 900 hand-selected, iconic properties, and elite status with additional hotel programs.

• Airline loyalty status. Complimentary top-tier status through airline partner loyalty programs.

• Unique experiences. Access to one-of-a-kind travel experiences around the world.

• Travel inconvenience credit. Up to a $2,000 credit per traveler for carrier-related inconveniences, like delays, and up to $10,000 for canceled trips.

• Travel insurance. Up to $100,000 in travel medical assistance, and up to $1 million in travel accident insurance.

• Rental car insurance. Up to $75,000 in car rental loss and damage insurance.

• Saks Fifth Avenue credit. Quarterly $250 shopping credit, up to $1,000 per year.

• Equinox fitness club membership. Access to clubs in multiple countries.

• Additional buying protection. Purchase protection, return protection, and extended warranty for goods purchased on the card.

• Personalized support. Access to personal shoppers and 24/7 personal concierge service.

As noted above, fees, benefits, fees, and spending requirements will vary among different types of credit cards, including those that fall into the ultra-luxury category.

Recommended: What Is a Charge Card?

Pros and Cons of Using a Black Card

As a card that’s not intended for the masses, the card’s pros and cons highly depend on which side of the eligibility spectrum you fall under. Here’s a closer look at black credit card benefits and drawbacks:

Pros of Using a Black Card	Cons of Using a Black Card
No credit limit	Accessible by invitation only
Status symbol	High initiation and annual fees
Luxury perks	High spending requirement
Tailored service experience	High income requirement

Is a Black Credit Card Worth It?

With a reputation of having excessively high annual fees and high minimum spending criteria, a black card can carry a high price tag. It’s important to consider that you can afford this kind of credit card — that is, assuming you’ve received an invitation in the first place.

Weigh the black card benefits, and consider if you’d actually be using a credit cardin such a way that it would be worth it for your needs.

Recommended: When Are Credit Card Payments Due?

The Takeaway

Black cards are typically reserved for wealthy customers who have demonstrated the ability to spend hundreds of thousands on a credit card and repay that amount with ease. If you’re an everyday consumer or it’s your first time getting a credit card, a pricey black card probably isn’t a practical credit card solution.

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.

🛈 While SoFi does not currently have a black credit card, we do offer credit cards that may suit your needs.

FAQ

What does it mean to have a black credit card?

Being invited as a black card member means that you’ve met the card issuer’s underwriting criteria in terms of having a high income, high net worth, high spending activity, and more. It’s perceived as being a card that’s only accessible to ultra-wealthy individuals.

How much does a black credit card cost?

Black credit card fees vary between card products but often cost hundreds to thousands of dollars in annual fees each month. The AmEx Centurion Card, for example, has a $10,000 initiation fee and a $5,000 annual membership fee thereafter.

Are black credit cards actually black?

Generally, black credit cards are designed with a black color scheme. However, some of these cards that fall into the exclusive black card category aren’t black. For example, the J.P. Morgan Reserve card is made of brass and palladium and has a silver metal finish.

What is the difference between a black card and a platinum card?

The AmEx Platinum Card is more accessible to consumers than the AmEx Centurion Card, also dubbed the black credit card. Members who want to apply for a Platinum Card can do so on their own online, while the black card is offered by invitation only. The requirements and annual membership fees of both cards also vastly differ, with the black category charging higher fees and having higher spending requirements as well as more robust perks.

Photo credit: iStock/Lemon_tm

SOCC-Q424-019

Nov

2024

What Parents and Grandparents Really Want This Holiday Season

By Pam O’Brien | Credit, credit card, Family Finances | Comments Off

For those stumped about which presents to buy, a top gift that parents and grandparents really hope to find under the tree this season is a gift card, according to an exclusive survey.

If you’re like many people, you plan to spend a considerable amount on loved ones as you celebrate this winter. For instance, one recent Gallup poll revealed that Americans plan to spend over $1,000 on gifts (a new high) for the 2024 holidays. But there’s no need to stress or spend tons of time hunting because you’ll know exactly what to buy.

Here, in our exclusive survey of 1,000 individuals (250 of each — moms, dads, grandmothers, and grandfathers), you’ll learn the holiday present they really want this season — and what they don’t want. Get ready to find out and then get shopping!

Key Points

• A survey of 1,000 people revealed the ideal holiday gifts for mothers, fathers, and grandparents on your list.

• Gift cards were a favorite present to receive among all groups, since recipients can buy what they want most.

• Grandparents and parents said that fine jewelry was their least-desired gift.

• Parents and grandparents also expressed interest in receiving the gift of spending time with loved ones vs. material items.

• Survey respondents said spouses/partners were the best gift-gifters.

Source: Based on a What People Actually Want This Holiday Season survey of 1,000 U.S. adults from October 26, 2022 to October 27, 2022.

Gift Cards Are the Favorite Gift by Far

Parents and Grandparents Want Gift Cards More Than Anything This Holiday Season

The number-one gift requested by moms, dads, grandmothers, and grandfathers is … a gift card! And it wasn’t even close. Gift cards were the most-requested gift across the board.

Almost 33% of respondents picked gift cards as their most-wanted holiday gift. Here’s how it breaks down across the generations:

• Moms: 39%

• Dads: 31%

• Grandmothers: 34%

• Grandfathers: 27%

The Type of Gift Card You Give Makes a Difference

There are all kinds of gift cards to choose from, including gift cards for restaurants, stores, and airlines, to name just a few. So, as you get ready to shop and celebrate the holidays without blowing your budget, which type should you get for your parents and grandparents?

A gift card that can be used anywhere, like a Visa gift card, was the top choice, selected by:

• 45% of moms

• 44% of grandmothers

• 40% of grandfathers

• 38% of dads

The one group that wants a different kind of gift card? Moms ages 35 and up. They preferred a gift card to a retailer like Target, Amazon, or Walmart.

The way gift cards function is similar to how credit cards work, since your parents and grandparents can use them to buy whatever they like. Perhaps that’s why they were so popular in our survey: Your relatives can pick out exactly what they want.

Skip the Fancy Jewelry

What Do Parents and Grandparents Want the Least for the Holidays? Fine Jewelry.

You might think mom would be thrilled with luxury goods like an expensive necklace, bracelet, or earrings, but jewelry is actually at the very bottom of her list. When asked the gift they wanted least, most moms (22%) said fine jewelry. Dads agreed — 21% chose fine jewelry, such as a watch, as their least favorite holiday gift.

Grandparents also said no thanks to fine jewelry:

• 26% of grandmothers picked it as their least favorite gift

• 21% grandfathers chose at gift they wanted least

Recommended: Secrets to Not Paying Full Price

Holiday Gift Ideas for Mom

What moms Want Most for the Holidays

Here’s what Mom wants most:

• A gift card: 39%

• No gift at all — she just wants to spend time with family: 14%

• An experience (like a concert or vacation): 10%

• Clothes or shoes: 9%

• A homemade gift like a photo collage: 7%

• Electronics: 6%

• Jewelry: 6%

• Home goods: 5%

• Donation to a charitable organization: 3%

• Beauty/health products: 2%

Holiday Gift Ideas for Dad

What Dads Want most for the Holidays

Here’s what dad wants most:

• A gift card: 31%

• Electronics: 14%

• No gift at all — he just wants to spend time with family: 12%

• An experience (like a concert or vacation): 12%

• Clothes or shoes: 10%

• Jewelry: 9%

• A homemade gift like artwork: 5%

• Donation to a charitable organization: 4%

• Home goods: 2%

• Beauty/health products: 2%

If you’re thinking about getting dad the electronics he wants, but you don’t have the cash to pay for the gift upfront, applying for a credit card, and charging the electronics to it, is an option you may want to consider.

Holiday Gift Ideas for Grandmothers

What Grandmothers Want Most for the Holidays

• A gift card: 34%

• No gift at all — she just wants to spend time with family: 22%

• An experience (like a concert or vacation): 12%

• Clothes or shoes: 8%

• A homemade gift like artwork: 6%

• Electronics: 5%

• Jewelry: 4%

• Donation to a charitable organization: 3%

• Home goods: 3%

• Beauty/health products: 2%

Holiday Gift Ideas for Grandfathers

What Grandfathers Want Most for the Holidays

• A gift card: 27%

• No gift at all — he just wants to spend time with family:14%

• Electronics: 12%

• An experience (like a concert or vacation): 10%

• A homemade gift like artwork: 10%

• Clothes or shoes: 8%

• Donation to a charitable organization: 8%

• Home goods: 5%

• Jewelry: 4%

• Beauty/health products: 2%

Recommended: 41 Charities to Support This Year

Who Buys the Best Gifts?

Who Gives the Best Gifts?

It’s unanimous: Moms, dads, grandmothers, and grandfathers all agree that their spouse or partner is tops when it comes to choosing holidays gifts. No other person even comes close.

Who Gives the Best Gifts?

• Spouse/partner: 37%

• Parents: 18%

• Friends: 10%

• Siblings: 9%

• Other relatives: 9%

Whose Gifts Rate the Worst?

Ranking at the bottom of the best gift-giver list: In-laws and bosses. Only 4% of respondents said their mother-in-law and father-in-law give good gifts, and just 1% said their boss does.

Regifting is Real — and It Can Be Pretty Awkward

How Many People Have Regifted a Gift?

There’s a lot of regifting going on: 41% of our respondents admitted they’ve done it. But when the tables are turned on them, things can get a little uncomfortable. Fortunately, many have a sense of humor about it.

Almost 1/3 of Moms Have Been Regifted a Gift They Gave First

• 68% thought it was funny

• 32% were hurt, annoyed, or mad

Yet this didn’t deter them from doing it themselves: 38% of moms have regifted what they didn’t want. Most of these unwanted gifts were from friends.

Almost Half of Dads Have Been Regifted a Gift They Gave

• 71% thought it was funny

• 28% were hurt, annoyed, or mad

Dads are even more likely than moms to regift: 47% of them have done it — mainly with presents from distant relatives.

Lots of Unwanted Gifts Are Sitting in a Closet Someplace

When they get a Christmas present they don’t want or need, the overwhelming majority of respondents said they hang onto them, rather than exchange them. This was the answer chosen by:

• 80% of grandmothers

• 79% of moms

• 74% of grandfathers

• 70% of dads

(Perhaps eventually they decide to sell their unwanted stuff, however. It can be a good way to bring in some cash.)

So Whose Gifts Do They Take Back?

Of those parents and grandparents who return or exchange gifts:

• Moms are most likely to return gifts from friends

• Dads are most likely to return gifts from parents or other relatives

• Grandmothers are most likely return gifts from distant relatives

• Grandfathers are most likely to do return gifts from distant relatives or coworkers

Plenty of Moms and Dads Are Wishing for a Vacation

If you splurge and get your parents a trip as their holiday gift, expect them to waste no time in packing their bags. Of the moms and dads who chose an experience as the gift they most want for the holidays, taking a vacation was at the very top of the list.

While paying for a vacation can be expensive, you might want to think about splitting the cost with your siblings or putting it on your credit card to help cover the cost. This is one reason why getting a credit card can be helpful when you’re buying holiday gifts.

Time Together Might Be the Greatest Gift of All

You may not need to get your parents a lot of presents (besides a gift card, that is!). A number of moms and dads who took our survey said they wanted family time over the holidays more than anything. In fact, for moms, spending time with family is their second most-wanted gift.

For dads, family time came in third. Electronics like gaming systems edged it out slightly.

Grandmothers and grandfathers want to spend time with family most of all. Each of them chose it as their second favorite gift option.

The Takeaway

One specific holiday gift will please your parents and your grandparents this year: a gift card. Not only does this make your shopping easier, but it gives your loved ones exactly what they want. A gift card that can be used anywhere, like a Visa gift card, is what the respondents to our survey wanted most.

If you’re looking for other gift options, dads are partial to electronics, like gaming equipment, and both moms and dads would be happy to find airline tickets for a vacation in their stocking.

One way to fund holiday gifts can be by using a credit card.

Photo credit: iStock/seb_ra

SOCC-Q424-022

Nov

2024

Everything You Need to Know About Credit Card Holds

By Jackie Lam | Credit | Comments Off

If you’re someone who swipes your credit card for pretty much anything and everything, you know just how disruptive a hold placed on your card can be. This could happen at any time — when you fill up your tank at the gas station or when you pay for a hotel room during a weekend getaway. It can feel like the cash flow equivalent of the power getting shut off in your home.

The good news is that credit card holds are only temporary. And chances are, you’ll be able to tap into your credit card in no time. Learn what a credit card hold is, how long a credit card company can hold your payment, and more.

What Is a Credit Card Hold?

A credit card hold is a two-part process in which the merchant and credit card issuer communicate with one another electronically. On one side, a merchant checks with your card issuer ahead of time if you’re good for a specific, preset amount. On the other side, the card issuer locks in that amount on your credit card balance. That way, the merchant ensures it is paid for the purchase.

In turn, due to how credit cards work, you won’t have access to that amount that’s set aside until either the transaction or the issue gets resolved and the hold is released.

Types of Credit Cards Holds

Here’s a closer look at the two main types of credit card holds: authorization holds and administrative holds.

Credit Card Authorization Hold

A credit card authorization hold is usually the more complex of the two types of holds. They’re also known as “pre-authorizations,” and you can think of them as a security deposit.

A credit card authorization usually happens when you’re using a credit card to make a larger purchase or when the final amount of the transaction is unknown. Merchants in industries such as car rental companies, gas stations, and hotels commonly use these authorization holds. Other industries where a card isn’t present may also make a request.

How Does An Authorization Credit Card Hold Work?

Here’s how it works: When an authorization hold on a credit card is requested, the card issuer makes a portion of your credit card balance unavailable until the transaction is finalized.

For example: Say you book a hotel room, and the grand total is $1,000. The hotel asks the card issuer for a hold. In that case, the issuer will make that $1,000 of your credit limit unavailable. Once the transaction goes through, the authorization hold will be lifted.

Depending on the situation, there might be two authorization holds placed on your credit card. For instance, if you used your credit card to pay for a hotel stay, the first hold would be for accommodations. The second might be for the tab at the mini-bar in your room or for the restaurant bill.

Recommended: What is the Average Credit Card Limit

How Long Does an Authorization Credit Card Hold Last?

An authorization credit card hold can typically last anywhere from one to 30 days. Some holds might be released the same day, while others last for a few days after the transaction is settled. For instance, a hotel hold is usually released a few days after you checkout, while a hold placed by a gas station might be lifted the day you spend money at the pump.

If the transaction doesn’t settle before a hold reaches its expiration, the hold will fall off, and the amount that was held will become available again.

Credit Card Administrative Hold

The other main type of credit card holds are administrative holds. Administrative holds can be broken down into two types:

• Over-the-credit-limit administrative hold: As the name implies, if you go over your credit card limit, an administrative hold will be placed. And yes, you’ll be barred from using your card until you pay down your card so it falls below the credit limit. This is why it’s important to follow the credit card rule of spending within your limit.

• Late-payment administrative hold: If you’re behind on your credit card payment, your credit card issuer may place a late-payment administrative hold on your card. In this case, one of two things can happen. If you have a solid credit history, the card issuer might only report the late payment to the credit bureaus, and allow you to continue using your card. But if you keep making late payments or your credit is less-than-stellar, a late-payment hold might be placed until you make several months of on-time credit card payments.

Recommended: When Are Credit Card Payments Due?

When to Use an Authorization Hold

As a cardholder, an authorization hold isn’t really something you have control over. That’s because the merchant is the party that reaches out to the credit card issuer and requests a hold. This is done as a form of security to ensure the merchant gets paid for a purchase.

That being said, there are things you can do to prevent an authorization hold from happening in the first place. (More on that in a moment.)

When Not to Use an Authorization Hold

It’s up to the merchant whether or not to use an authorization hold. This might be requested if there’s a big question mark hovering over the final amount of the transaction.

Such holds are also requested when it’s worthwhile for a merchant to request a hold, given what a credit card is and how they work. This could include if the purchase is for a larger amount, or if the merchant works in an industry where there’s a high rate of non-payment for purchases.

Tips to Avoid Credit Card Holds

You can avoid credit card holds by doing the following:

• Use a card in-store. To avoid authorization holds, go inside the store and pay at the counter instead of paying online or at the pump.

• Check the policy beforehand. If you’re concerned about a hold being placed on your account, reach out to the hotel or car rental company ahead of time. See what their authorization hold policy is and what the typical amount and length of the hold is.

• Check your credit card balance. If you plan on booking a hotel room or car rental, do a quick check of your credit card balance and your card limit. If you’ve already used a lot of your current balance and might go past your limit, consider using another card, or looking for less-expensive options so you can stay within your limit.

• Pay your card balance. To keep your credit card limits low, aim to pay off your credit card balance. To stay out of late-payment territory and avoid late-payment holds, always make the credit card minimum payment.

Steps for Removing an Authorization Hold

While the merchant can release an authorization hold at any time, as the card holder you’ll need to jump through a few additional hoops to do so. Here’s what you need to do to lift an authorization hold:

• Request that the hold get lifted right away. As some holds linger a few days after the bill is paid, ask the merchant if the hold can get released as soon as the bill is paid and the transaction settled.

• Ask the credit card issuer if the hold can be removed. You can also reach out directly to the card issuer to see if a hold can be lifted. In this case, the issuer would contact the merchant and make the ask on your behalf.

The Takeaway

A credit card hold can be a nuisance, but you can also avoid one by taking a few steps. This includes checking your available balance before making a charge and always making sure to make the minimum payments. And if a hold is lingering for longer than you’d like, you can always request that the hold is removed.

FAQ

How do I remove a credit card hold?

You can remove a credit card hold by reaching out directly to the credit card company or to the merchant.

How long does a pending authorization hold take?

It depends. If it’s an authorization hold from a gas station, the hold can get lifted the same day. If it’s a hold from a hotel or car rental, where the amount you’ll be putting on the card is unknown, it can often take several days after you’ve settled the final bill for the hold to be lifted.

What can go wrong with an authorization hold?

There’s a chance that a hold can remain on your card after it’s been canceled or settled. In that case, the funds you have available through your line of credit will be limited. If this happens, you should reach out to the credit card issuer to have the hold released.

Can authorization holds prevent chargebacks?

A benefit of authorization holds is that they can prevent chargebacks for the merchant. (A chargeback is when the consumer disputes a charge and requests a refund, in which case the credit card company would withhold the funds from the merchant until the dispute is resolved.) Placing a hold would allow the merchant to avoid this scenario because they can delay processing the transaction.

Photo credit: iStock/Alesmunt

Nov

2024

Guide to Checking Your Credit Card Approval Odds

By Jennifer Calonia | Credit, credit card, Family Finances | Comments Off

Figuring out whether you will get approved for a credit card is seemingly simpler now with credit card approval odds calculators. These tools can offer guidance, highlighting credit cards with high approval odds in your favor. However, they are not always reliable.

It can be helpful to also understand the key factors that can help make you a more desirable borrower for credit card companies, thus increasing your future approval odds.

Key Points

• Credit card approval odds calculators estimate approval chances but are not always reliable.

• Factors affecting approval can include credit score, income, debt-to-income ratio, and credit utilization.

• Prequalification offers indicate better approval odds but do not guarantee approval.

• Comparing credit cards involves evaluating APRs, fees, rewards, and other features.

• If an application for a credit card is denied, options can include appealing the decision, building credit, or applying for a secured credit card.

What Are Credit Card Approval Odds?

Credit card approval odds inform you of the likelihood that you’d get approved for a particular credit card. How these approval odds are determined, including which details are assessed, can vary between services and card issuers.

For example, a credit card approval odds calculator might suggest that, based on your credit score and income, you have an 80% chance of getting approved for a credit card. It might also offer you a few credit cards with high approval odds to explore.

Checking Your Credit Card Approval Odds

Using a credit card approval odds calculator offers a glimpse of your approval chances, but not a promise. That’s because a credit card company or credit card marketplace can’t provide a 100% assurance of your approval without going through a formal underwriting process.

Underwriting is the step where a lender or issuer evaluates your credit portfolio and application details (like existing debt and income) to calculate whether it would be a risk to extend credit to you. Since this process can only happen after an application is submitted, a tool that states you have high approval odds doesn’t mean your eventual approval is guaranteed.

Prequalifying for a Credit Card Approval

There are a couple of ways to obtain a pre-screened credit card to gauge your approval odds: Receiving a prequalification offer or requesting a prequalification from a credit card issuer.

Using a Prescreened Offer

Based on your general information from the credit bureaus, card issuers might send you an unsolicited prescreened offer stating that you might be qualified for its credit card.

At this step in the process, the card company has only looked at limited markers, like whether you’ve met its minimum credit score requirement. It hasn’t performed a hard credit check nor evaluated your existing debt or income to base an approval on. However, if you receive a prequalification offer, this can be a positive sign that your approval odds are better than if you hadn’t received it.

Checking the Card Issuer’s Website

You don’t always have to cross your fingers in hopes that a card issuer will give you a prescreened offer. Some credit card issuers offer a prescreening form that you can fill out to see if you’re prequalified for its card. If your preferred card doesn’t let you request a prequalification, you might find more insight on the issuer’s website about what’s required for approval.

While you’re on the card issuer’s site, it’s helpful to review its response timelines so you can track your pre-qualification or application progress. This includes the timeline for an application decision, as well as how long it takes to get a credit card if you’re approved.

What To Do if You Prequalify

If you prequalify for a credit card, you can choose to submit an application. Doing so will require a hard credit inquiry before a decision is made, which can temporarily have an effect on your credit score.

Additionally, you can continue shopping around for different cards to see if another product offers a lower interest rate or better incentives.

Recommended: How to Avoid Interest on a Credit Card

What To Do if You Don’t Prequalify

If you don’t prequalify for a credit card, you can proceed in a few ways:

• Hold off on getting a new card. Too many hard credit inquiries might flag you as a high-risk borrower who’s reliant on credit. If you’ve recently had multiple inquiries on your credit, consider waiting a couple of months before re-applying for a new card.

• Build your credit score. Card issuers typically look at your credit score to see if it meets its minimum requirement. A higher credit score is a positive indicator that you’re a responsible borrower.

• Apply for a secured credit card. A secured credit card can be a credit-building card in which you deposit money or collateral in a certain amount. This amount acts as your credit limit.

• Appeal the decision. If you applied for a credit card and were denied, the issuer must legally inform you of the reason for the denial. If you can provide more information that might sway the issuer in your favor, you can ask them to reexamine your application.

Tips for Improving the Likelihood of Approval

Whether you’re getting a credit card for the first time or adding a new card to your rotation, there are a few steps you can take to improve your approval odds.

Reviewing Your Credit Report

Your credit report gives credit card issuers a comprehensive view of your borrowing habits to date. Since it’s a highly scrutinized factor when approving applications, review your credit report before submitting an application.

Check that all accounts, their statuses, and the amounts are accurate. If you spot an account that looks outdated or incorrect, reach out to the credit bureaus immediately to dispute it.

Taking a Look at Your Credit Score

In addition to ensuring your credit report is accurate, evaluate where your credit score stands today. Credit scores are the most common credit card requirements that influence your approval odds. For instance, if a card issuer explicitly states that its minimum credit score required is 720, but your score is 650, your credit card approval odds might be low.

Minimizing Your Debt

Keep your debt-to-income (DTI) ratio as low as possible. Credit issuers use this ratio as a way to determine whether you can afford to pay back potential purchases made on the card. The ratio is based on your aggregate monthly debt amounts divided by your gross monthly income.

Stating All of Your Income

As mentioned above, your income is one of multiple factors used to determine your credit card approval odds. A higher income can reduce your DTI ratio, making you a less risky customer to extend credit to.

You can include various types of income sources on your application. This might include your salary from your full-time job, earnings from a side gig, Social Security benefit payouts, and alimony.

Managing Payment History and Credit Utilization

Staying on top of your existing loan and credit card payments keeps your credit score healthy. This means paying at least the minimum amount due, and making those payments on time every month.

Additionally, be aware of how much of your total credit limit you’re using, compared to how much credit you have access to. This ratio is called your credit utilization ratio. The lower it is, the better. Many financial experts say that no more than 30% or, better still, less than 10% is a good number.

Recommended: When Are Credit Card Payments Due?

Comparing Cards Carefully

With so many credit card products on the market, choosing a credit card that suits your borrowing needs and qualifications can help you find the right card.

Ensure you’re comparing credit cards with the same credit card features between different cards to accurately determine their pros and cons. Some considerations to make when comparing credit cards include:

• APRs. The annual percentage rate, or APR, is how much you’ll pay in interest if you carry a balance on the card. The lower the interest rate, the better.

• Balance transfer costs. Some issuers offer a zero-interest balance transfer promotion for a limited period, while others don’t. Similarly, some credit cards charge an additional balance transfer fee.

• Penalty APRs. If your account becomes delinquent, some card issuers impose a higher penalty APR on your existing balances and future transactions. Make sure you understand how a credit card works and which rules apply.

• Fees. Certain cards charge an annual fee just for the privilege of carrying the card. This fee is in addition to interest charges you might pay for rolling over a balance, month over month.

• Rewards program. If you’re after credit card rewards, compare the details of each card’s program. For example, look at whether rewards points or miles are tiered or offered for specific categories or if there’s a flat rewards rate for all purchases.

• Incentives. You might encounter special promotions, like a welcome bonus or promotional 0% APR. These added perks can factor into your decision.

The Takeaway

Although a credit card approval odds tool can offer broad guidance about whether you’ll be approved for a credit card, it doesn’t replace a card issuer’s underwriting criteria. The credit card company relies on its own underwriting team and algorithms to ultimately decide whether your application is approved. This decision is based on the specific information on your application and your creditworthiness.

FAQ

Does getting rejected for a credit card hurt my credit?

It depends on the specifics of how you are rejected. A credit card preapproval rejection typically doesn’t hurt your credit since preapprovals usually involve a soft credit check. However, if you move forward with a credit card application that involves a hard credit inquiry, your credit score might temporarily drop, regardless of whether you were approved or denied.

Are credit card approval odds accurate?

Generally, credit card approval odds calculators don’t provide a 100% guarantee that you’ll be approved. There have been reported cases of tools claiming that a consumer has high approval odds for a card, only to get denied upon applying. The card issuer is the only entity that can accurately say whether you’re approved for a credit card.

How can I improve my credit card approval odds?

The best way to get good approval odds for credit cards is to minimize high-risk borrowing practices. One way to achieve this is by building your credit score. Keep your credit balances low, make timely monthly payments, maintain long-standing credit accounts, and avoid opening multiple new lines of credit in a short period.

How do you guarantee credit card approval?

There’s no way to absolutely guarantee credit card approval to any particular card. Card issuers base their decisions on a number of factors, like your credit history, credit score, income, credit utilization, debt-to-income ratio, and more.

Photo credit: iStock/akinbostanci

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.

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

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

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Aug

2024

How Does Being an Authorized User Affect Your Credit Score?

By Jennifer Calonia | Credit, credit card, Family Finances | Comments Off

If you’re new to credit or want to rebuild your credit, becoming an authorized user on another person’s credit card account can help. As an authorized user on a credit card, your credit score can be positively impacted when the account and its activity are managed well and reported to the credit bureaus. The card’s activity is still also reported under the primary account holder’s credit profile, in addition to yours.

Being an authorized user does have its share of responsibilities. You’ll want to make sure to maintain responsible credit card habits as an authorized user to help your credit, as well as to avoid adversely impacting the primary account holder’s credit.

What It Means to Be an Authorized User

When you’re an authorized user, you have a credit card that’s attached to another person’s account. This duplicate credit card, also known as a supplementary credit card, will have your name on it, and you’ll be able to use it to make purchases. Since you’re not the primary account holder, you won’t have the authority to make changes to the account.

As an authorized user, you’re not legally responsible for making a payment after each billing cycle. That responsibility remains solely with the original cardholder, which marks a major distinction between an authorized user relationship and a joint credit card account. Since you’re not liable for repaying the charges as an authorized user, you might not get a monthly statement.

In terms of getting started as an authorized user, be aware that some issuers impose an annual fee to add authorized users to a card account. Additionally, some credit cards have limits for the maximum number of authorized users permitted on an account.

Further, card issuers often have a minimum age requirement that you must meet as an authorized user. The age requirement depends on the issuer. For example, SoFi requires authorized users to be at least 15 years old, while the minimum authorized user age for an American Express Platinum Card is 13 years old.

Recommended: What Is the Average Credit Card Limit?

How Being an Authorized User Affects Your Credit Score

There are a couple of ways that being an authorized user on a credit card can affect your credit score.

If the Lender Reports Authorized Users to Credit Bureaus

If your main goal in becoming an authorized user is establishing credit or rebuilding your credit history, this can be a viable option to pursue. Card issuers don’t require a credit check to become an authorized user.

Your credit score can be positively affected if the issuer reports satisfactory payment activity and usage to the credit bureaus for all persons named on the account. Keep in mind that not all credit card companies send activity data to the bureaus for authorized users, though. So before going this route, ask the primary user to confirm whether the issuer does.

How You Use the Shared Account

If the bank reports the card’s positive activity to credit bureaus for all users, it will also report unsatisfactory activity. Being an authorized user can hurt your credit if a late or missed payment is reported and included on an authorized user’s credit profile, for example. On the flipside, on-time payments or a low credit utilization rate can help the credit of both the primary and authorized users.

Since the card data that’s included for an authorized user depends on the credit bureau, ask the credit issuer to specify which credit agency it reports to. That way, you’re aware of the factors that affect credit scores.

Risks Associated With Being an Authorized User

A major risk of becoming an authorized user on a credit card is that it can adversely affect your credit score. If the primary user fails to make at least the minimum monthly payment on time, for instance, that will also impact your score, assuming the bureau reports payment history for authorized users.

Additionally, the purchase behavior of all users on a card could put a strain on the account’s limit, pushing balances near or at the borrowing limit. This will affect the credit utilization on the account, which also can impact the credit score of all users on the account.

With so many factors that need to be in balance, each user associated with the card must have a clear understanding of purchase and repayment expectations. If an individual drops the ball, it can put a strain on the relationship in addition to the users’ credit scores.

Who Should You Ask to Add You as an Authorized User?

Asking another person to add you as an authorized user on their credit card is significant. It requires the utmost mutual trust, which is why this individual is typically someone who’s very close to you. This might include your:

• Spouse or partner

• Parent

• Grandparent

• Adult child

• Adult sibling

• Aunt or uncle

It’s helpful to clarify expectations around payment before being added as an authorized user. For example, do they want to cap your spending power on the card? When do they want payment for your charges? What’s the expectation if, for any unforeseen reason, you can’t cover your part of the bill?

Even though the primary cardholder is liable for the payments, it’s helpful to come to an agreement about how you two will settle your purchases, one-on-one.

Using Your Credit Card Responsibly

Receiving authorized user status on a credit card is a convenient way to build your credit profile. It also can help you practice responsible borrowing habits. A few sensible practices when using a credit card as an authorized user include to:

• Avoid overspending. Examine your budget before using your card to verify that you can afford the purchase.

• Ensure payments are made on time. Communicate with the primary cardholder to confirm that at least the minimum payment is made by the credit card due date. If you’re covering your portion of the charges, make sure to get the money to the primary cardholder by the date you agreed upon.

• Be mindful of the card’s limit. Avoid keeping an ongoing high balance close to the credit card limit, which can negatively affect credit. Authorized users might not have access to the account history or statements, so regular communication with the primary user is essential.

The Takeaway

As an authorized user, your credit score could be built from the positive borrowing activity on the card, assuming the the issuer reports the account activity to the credit bureaus. Additionally, the card must be managed responsibly — otherwise, your credit could be negatively impacted. Getting added to a card that doesn’t charge an authorized user fee can be a good way to get started.

FAQ

Can authorized users affect your credit?

If an authorized user racks up charges, it might adversely affect your credit utilization ratio, which in turn can lower your credit score.

Additionally, you’re legally liable for all charges the authorized user makes on the card. If they’re unable to pay and you also can’t keep up with the payments, missed or late payments can negatively impact your credit.

Does an authorized user get a hard inquiry?

Typically, authorized users who are added onto an existing account don’t undergo a hard inquiry. Since the primary cardholder is the person who opened the account and is still 100% liable for all charges made to the card, credit issuers usually don’t need to verify the authorized user’s credit background or ability to repay the debt — even if they make charges.

What is the minimum age to be an authorized user?

The minimum age for authorized users on a credit card will vary with the card’s issuer. In some cases, the user must be aged 13, 15, or 18. In other situations, there may be no age restriction at all. Check with the issuer to know for sure.

Photo credit: iStock/tolgart

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

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

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

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