pink credit cards on orange background

10 Credit Card Rules You Should Know

If you’re like the roughly 45% of credit card holders known as “revolvers,” you probably carry at least some debt from month to month. Indeed, the average credit card balance in the U.S. is currently $5,733.

Unfortunately, many consumers are uninformed and unprepared for the responsibility of paying with plastic. Credit card issuers don’t require you to take a class before they hand you that first card — or the next one, or the next. But the consequences of getting in over your head can be troublesome.

What else should you know about credit cards? Here are some do’s and don’ts to keep in mind:

Just Because You Can Get Another Credit Card Doesn’t Mean You Should

Once you prove your creditworthiness, you’ll likely receive other credit card offers in the mail. Retail stores you shop in often ask if you’d like to apply for their card, offering things like special discounts, partnerships, and card-holder shopping days to draw you in.

But unless the rewards are high and the annual percentage rate (APR) is low, you may want to pass, especially if you’re in a store and won’t have time to focus on the terms and fees in the agreement.

Remember: When you apply for a credit card, it can create a credit inquiry on your report because of the hard pull on your credit report. Unless your credit inquiry qualifies as rate shopping, too many inquiries in a short time period could have a negative impact on your credit score.

A Credit Card Can Be Convenient — If You Keep Your Balance In Check

The clock starts ticking whenever you make a purchase using your credit card. Many credit card companies will give you a period of interest-free grace, but if you don’t pay off the balance within the grace period, you’ll start racking up interest.

Of course, using cash instead of credit for purchases is an option, especially for purchases made in person.

Thinking Twice Before Just Paying The Minimum

It’s easy to get into the mindset that you’re on track for the month because you paid the minimum payment due on your credit card statement. But that amount is typically based on a small percentage of your balance, typically between 1% and 3%, or a fixed dollar amount.

Unless you have a 0% credit card rate, letting your balance carry over can rack up additional interest.

Checking Your Statements Every Month

A thorough monthly review of credit card statements makes it possible to find billing mistakes and be sure your purchases and returns are accurately reflected.

It’s worth reviewing your statement for any subscription services you might be making automatic payments or renewals for. You could be paying for a service or app you don’t want anymore.

Reviewing your charges can also help you determine if you’ve been the victim of identity fraud. The faster you move to report any problems , the better off you typically are. The Fair Credit Billing Act (FCBA) instructs consumers to report unauthorized charges within 60 days after the statement was mailed. So making it a habit to check your statements as they come in — or reviewing them online at least once a month — can help you be aware of any issues and report them quickly.

If you’ve made late payments or missed a payment, your interest rate may have gone up — and you could be paying a much higher rate than you thought. Keeping track of this information will give you a more complete picture of the amount you owe.

Credit card statements also include information about how long it will take to pay off the bill if you send only the minimum payment each month, as well as how much you’ll pay in interest. Think of this information like nutrition facts on food packaging — it could be an encouragement to be financially healthier.

Reporting Misplaced, Lost, or Stolen Cards

Under the FCBA , a consumer’s liability for unauthorized use of their credit card is limited to $50. However, the FCBA also says if you report the loss before your credit card is used to make unauthorized purchases, you aren’t responsible for any charges you didn’t authorize.

If your credit card account number is stolen, but not the card, the FCBA also says you won’t be liable for unauthorized use. Credit card companies are generally quick to provide customers with new account numbers, passwords, and cards.

Using a Credit Card To Get Cash

Another piece of information available on a credit card statement is the APR charged for cash advances. Most likely, the interest rate charged for cash advances is several points higher than the rate charged for purchases.

If a credit card is used at an ATM, there may also be an additional fee charged by the machine’s owner.

So unless it’s an unavoidable emergency, it’s probably much better for your wallet to stick to your debit card or go old-school and cash a check.

Using a Credit Card for Purchases Just to Get the Rewards Points

Cash back and other perks make some cards more appealing than others. But that probably shouldn’t be an excuse to use a credit card if you’re not in a solid financial position. The trade-off probably isn’t worth it if you carry a balance.

Balance Transfer Cards Can Be Appealing, But…

Again, if you have solid credit, you may be getting offers for 0% balance transfer cards. And they may potentially save you a significant amount of money, if you can realistically pay off that balance in the designated period.

If not, the interest rate will increase after the introductory 0% interest period ends. And moving the remaining amount to yet another balance transfer card could ding your credit record, as every time you apply for a credit card a hard inquiry is pulled.

Negotiating Rates and Fees

Even the most attentive person might sometimes miss a credit card due date. This oversight, however, means a late fee and interest may be added to the account balance. If this happens more than once, you might incur a higher late fee than the first one and the account’s interest rate might increase.

It may be possible, however, to negotiate credit card interest rates and fees. If you’ve only had one late payment, it’s worth a call to customer service asking for the late fee to be waived. If there have been multiple late payments and you’re faced with an increased interest rate, it might take up to six months of on-time payments before a credit card issuer is willing to consider lowering the interest rate.

Recommended: How To Lower Credit Card Debt Without Ruining Your Credit

Knowing How Much Credit Is Being Utilized

The amount of debt owed is the second largest factor that makes up a person’s credit score. It accounts for 30% of the total score, and revolving credit accounts like credit cards are important in the calculation of a credit score. Someone who is using a high percentage of their credit card limit might be seen as potentially risky by lenders. But someone who uses a lower percentage of their credit card limit may be considered to be in a favorable financial position.

Credit card companies sometimes raise the credit limit of financially responsible customers. By keeping your account balance low, it can improve the credit utilization rate used to calculate your credit score.

The Takeaway

Credit card debt can feel overwhelming quickly. If you’ve racked up more debt than you can comfortably pay off, you might consider using a personal loan to consolidate that debt. If your financial history is solid, getting approved for a personal loan interest rate that’s lower than your credit card rates could make your outstanding debt easier to deal with. Using a debt consolidation loan to consolidate multiple credit cards would also mean just one bill to pay each month instead of keeping track of multiple payments and due dates. A consolidation loan with a respected lender can be part of a smart overall money management plan.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.


SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.


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


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 .

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Using Your Credit Card During a Crisis — Pros & Cons

When you’re in a crisis and economic circumstances feel anything but normal, you may wonder if you should rethink the way you’re using your credit cards. Here are some ins and outs of using — and rethinking how to use — credit cards during an emergency.

Is It Smart To Use Credit Cards During a Crisis?

Even during a crisis, credit cards aren’t magical “buy anything and worry about it much, much later” tickets. Many of the basics for using a credit card are in effect no matter what’s happening around you: Don’t make purchases just to get reward points, report missing or stolen cards immediately, be in the habit of checking your statements every month, etc.

That said, sometimes certain accommodations are made during a crisis. During the Covid-19 pandemic, for instance, many banks and lenders offered relief in the form of new policies to ease the burden for card holders who were struggling with their payments. Some waived fees, offered payment deferral or forbearance, or increased credit lines — some banks even offered these three forms of support, and more.

Of course, it’s unwise to assume a bank or credit card company is focused on looking out for you during an emergency situation. The better option might be to contact your card issuer for information and any fine print. And keep in mind that while the ability to increase your credit line might sound good, it could also cause more headaches down the road.

Making minimum payments on credit cards can cost you substantially more money over time. The interest — especially compounding interest, which is essentially interest on interest already due — can often be a big challenge with credit cards. But there are ways to potentially avoid interest on credit cards, such as paying off a balance in full each month.

During a crisis, it’s a good idea to continue using your credit cards responsibly. Of course, sometimes financial situations change, and you may need to use a credit card to pay for your daily essentials. While carrying some debt from one month to the next isn’t necessarily something to be thrilled about, it might be worth it if it means getting the things you need to live.

Planning for the Future — Starting Now

Conversations about using credit cards are often about responsible saving and spending. There is no blanket yes or no answer to whether it’s a good idea to use credit cards during a crisis, although it’s certainly possible to be a little wiser about using a credit card.

If you’re feeling spread thin financially during a crisis, however, it might be worthwhile to hunt for credit cards that can offer more reasonable rates than your current cards. A good place to start might be with your current card issuers and see if they can lower the interest rate.

Another alternative might be to consider a cash-back credit card that offers cash rewards in a small percentage back on each transaction. Depending on the issuer, the card might offer higher rates for certain categories of purchases, so it might be worth doing some research and strategizing if there is a big purchase you had already planned on making.

There are also balance-transfer credit cards, or a card you would transfer existing card debt to, usually at a lower annual percentage rate (APR). The rationale and incentive for these cards is to hopefully lock your credit card debt in at a lower rate than it would be currently, to therefore make it less burdensome to work on paying it down.

There can be wrinkles to employing this strategy, however, so be sure to read the fine print to avoid balance transfer fees or other charges. The idea is you can pay off that balance with no interest on a more compressed timeline. However, that lower rate might change after the introductory period, and you may be saddled with an APR that could be even higher than the one you had to begin with.

Putting the Cards Down — For Now

If the idea of getting more plastic feels more like a problem than a solution, you may want to consider taking out an unsecured personal loan. This type of loan is not backed by collateral and is likely to have higher interest rates and lower loan amounts than secure loans. They also typically require a higher level of creditworthiness than a secured personal loan does.

There are common uses for unsecured loans, including:

•   Paying off credit cards

•   Consolidating debt

•   Paying medical bills

•   Covering home renovation projects

The Takeaway

Dealing with a crisis can be unsettling, especially if your finances are less than stable. You may wonder if it makes sense to use your credit card to pay for everyday essentials. While there’s no one-size-fits-all answer, it’s important to continue using your card responsibly, whether you’re in an emergency or not.

If you’re stretched thin financially, there are strategies you can consider. One idea is to try to negotiate a lower interest rate with your current card issuer. Another option is to explore a cash-back credit card or a balance-transfer credit card, both of which could help increase your purchasing power during a crisis. Or you may also want to consider taking out an unsecured personal loan, which could help you get the funds you need to pay bills or consolidate debt.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.


SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.


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


Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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

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How to Combine Bank Accounts

There are times in life when you might wonder if you should merge bank accounts. One obvious trigger is marriage: You and your spouse may decide to combine all or some of your accounts into joint reserves. Or perhaps you simply have a number of bank accounts, and they are becoming unwieldy. Perhaps you opened one in college, then another when you moved to start your first job, and then yet another to get a special promotional bonus.

Whatever your goals, if you’re craving financial simplicity or otherwise need a fresh approach to your accounts, here’s what you need to know about:

•   How to combine bank accounts

•   The pros and cons of combining bank accounts

•   When to combine bank accounts.

How to Combine Bank Accounts in 4 Steps

If you decide that merging bank accounts is the right step for you, here’s how to make it happen:

1. Decide Where to Keep Your New Account

The first step — whether you are downsizing for yourself or joining two individuals’ finances together — might be to decide where you want to open your new account.

If you or your spouse have multiple accounts across different financial institutions, you could evaluate which institution offers the best benefits and lowest fees. You might stick with the one existing account you like best or start a joint account somewhere new.

If you are doing the latter, you could compare traditional vs. online banks or which institutions are offering a perk that appeals to you.

2. Start Shifting Accounts

Here’s the next step in how to combine bank accounts: If you’ve decided you want to combine accounts, you could start moving your direct deposits, automatic credit card payments, and other similar transactions over from your old accounts to the new one. You might also want to make sure any subscriptions or other deductions are switched over as well.

3. Check That Your Account Is Up and Running

After about a month, you might want to double-check and make sure that everything has transferred properly. You don’t want to end up paying a late fee or have a check bounce because you weren’t monitoring your accounts.

You also want to be sure that your direct deposits are on time.

4. Close the Unnecessary Accounts

Once you see the correct payments and deposits coming in and out of the new combined account, then you could take the last step in how to merge bank accounts, which is to start closing your old accounts.

This might involve a trip to a branch in person, and if there is anything left in your old account, the bank will issue you a check or cash payment for the remainder.

Recommended: Guide to Reopening a Closed Bank Account

Benefits of Combining Bank Accounts

If you’re wondering whether to merge bank accounts, it can be helpful to consider the pros and cons of combining accounts. Here, the upsides:

•   A shared account gives each person in the relationship access to money when they need it. Joint accounts usually offer each person a debit card, a checkbook, and the ability to make deposits and withdraw money.

This also includes online access to account information, which might help when it comes to paying bills together or other when making shared financial decisions.

•   Even those who are not looking to combine finances with someone else could benefit from merging their own money into fewer accounts. How many bank accounts should you have? For most single adults, just one checking and one savings account at the same bank should cover your financial needs.

This could help cut down on confusion and simplify your spending, so that you’re not trying to balance your budget across multiple accounts. Minimizing the number of accounts you hold could mean fewer fees, since many banks charge monthly fees or require a minimum balance.

•   Another advantage to a joint bank account is that you are less likely to run into financial surprises with your partner. With money going into (and out of) one account that you both have access to, it might be easier to keep tabs on your monthly budget and spending.

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!


Drawbacks of Merging Your Accounts

Now, consider the downsides of merging accounts:

•   Some couples may prefer to keep their financial independence. In fact, rather than combining all your finances, you might decide to create a new joint account but also keep some accounts separate. Or you might decide to keep your finances totally independent of each other, and instead come up with a budget to figure out which expenses each person will pay.

•   Combined accounts may not suit your big-picture financial needs and money goals. Before you decide that a combined bank account is your goal, you might want to have a big-picture conversation about what each partner brings to the table.

For instance, what if one partner is entering the marriage with student loan debt, past loans, or other financial burdens? Will the new shared account be used for those payments? Or is it up to the individual to pay off their own debts?

•   A joint account could also become a problem in some states if the relationship ends, because without any other agreement in place, that shared money might get split up evenly in a divorce. Or, even worse, one spouse might clear out the account, leaving the other without money.

If you’re concerned about only having a joint account, you could open a joint account specifically for shared bill management with each person depositing a specific amount every month.

You could even have three separate checking accounts — yours, mine, and ours — maybe if one person is a spender and one is a saver. That way, both people manage their checking accounts on their own.

Opening a Bank Account With SoFi

Whether you decide to combine bank accounts, keep them separate, or something in between, it’s important to choose an account that meets your needs. SoFi offers a checking and savings account with a competitive annual percentage yield (APY) and no account fees, which can help your money grow faster.

Plus, with a SoFi Checking and Savings Account, you can save, spend, and earn all in one place. Plus, joint accounts are available with SoFi.

Bank smarter and simpler with SoFi.

FAQ

Can you merge two bank accounts together?

Yes, you can combine bank accounts. You might be able to transfer an account into another existing one or open a new account to accomplish this.

When should you combine bank accounts?

You can combine bank accounts when you marry, if that suits your and your spouse’s financial needs and style. You might also merge accounts if you find you have multiple accounts and want a simplified financial life.

How do you link two bank accounts from different banks?

You can link accounts between two different banks without merging them. Typically, you can do this on your financial institution’s website or app. You’ll look for the option that says “link external accounts,” and you’ll need the bank routing and account numbers handy.


SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.


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

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Breaking Down the Different Types of Credit Cards

With so many credit card options out there, it may be hard to choose a new one.

Are you loyal to a particular airline or hotel chain? Perhaps you want to redeem credit card points as statement credits. Or you’re a big grocery or gasoline spender. Savvy consumers may be interested in innovative uses like paying down loan debt or investing. Is the interest rate important, an annual fee a dealbreaker?

If you can responsibly manage more than one credit card — and if you’re like most Americans, you have more than one — you can use different cards to optimize rewards (cash back, points, or miles), annual statement credits, and 0% and low introductory APR offers.

When deciding on a new credit card that is best for you, it boils down to two basic questions: What do you want from a card? And how strong is your financial history?

Here’s a glance at the credit card options available and provisos to consider.

Recommended: What Is the Average Credit Card Limit?

Rewards Credit Cards

If you are good about paying off your card every month and never incur interest, you might consider a rewards card. These cards may offer sign-up bonuses and give consumers rewards in the form of miles, cash back, or loyalty points.

There are variations on a theme, such as:

•  Bonus offer + 0% period for purchases

•  A set dollar amount in travel or bonus miles if you meet the initial spending requirements

•  Flat-rate cash back

•  Customizable rewards

A few cards offer an eye-opening 5% cash back in rotating categories, up to a limit (such as 5% back on $1,500 spent quarterly, after which all other purchases earn 1% cash back), and you’ll usually have to manually activate the offer each quarter.

But you can often lessen the work involved and earn more in total cashback rewards with a flat-rate cashback credit card, when all purchases earn the same amount.

Frequent travelers lured by premium travel rewards cards will want to weigh the perks against an annual fee of $450 to $550.

New reward offerings have bubbled up, such as allowing cardholders to put cash back toward loan payments, and are brewing, like increasing card acceptance for rent payments and offering cryptocurrency-related rewards.

When choosing a rewards card, think about your spending habits and redemption preferences, be aware of your credit score (these cards usually require a good score), and pay off your balance each month — rewards cards typically have higher APRs than balance transfer cards.

If you fall behind on payments or carry over balances, all the perks and rewards are unlikely to be worth it.

Recommended: What Is a Charge Card?

Cards for Those With Limited or Damaged Credit

For college students with little or no credit history, there are student credit cards.

If you don’t have great credit, there are also secured credit cards. Generally, they require a deposit from the user. A secured credit card functions like a normal credit card except that it has a backstop: The user puts up an amount of money that the issuer will then use if the cardholder defaults.

The lender offers a certain amount of credit based on the promise that the user will pay off the balance in full every month.

If your account is upgraded to an unsecured account, thanks to good habits, or is closed in good standing, your deposit is returned.

Both of these options can help someone build credit and could lead to a card with more perks if the holder is diligent about paying off the balance every month.

Then there’s at least one brand of card that considers an applicant’s banking history in lieu of their credit score, has no annual fee, and comes with rewards.

Recommended: Tips for Using a Credit Card Responsibly

Prepaid Debit Cards

A secured credit card is primarily intended for building credit, whereas a prepaid debit card is good for budgeting and convenience but does not affect your credit.

A prepaid debit card is preloaded with your own money, typically through direct deposit, cash or check deposits, or online transfers from a checking account.

The card is used for transactions until the money runs out. Since there is no line of credit, you cannot run up debt on the card.

This is a great option for a young person who needs to learn how money works or for adults with a bad credit history, though it will not improve their credit scores.

Credit Cards That Save You Money on Interest

If you’re prone to carry a balance month to month, you might want to consider a low-interest card. While these types of credit cards don’t come with bells and whistles like airport lounge access, it is the financially prudent option if you have an irregular income or you carry a balance each month.

It might be best to look for a card that offers an initial APR of 0% and then an ongoing low interest rate.

Keep in mind that low-interest credit cards usually require a good credit score to qualify. Generally, the better your credit score, the lower your interest rate. The lowest advertised APR isn’t always what an applicant gets.

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

Balance Transfer Credit Cards

If you are in credit card debt, a balance transfer credit card could help you pay off your debt at a lower interest rate.

Interest rates and terms vary widely with balance transfer credit cards. A balance transfer card will often come with a 0% APR introductory period, but once that ends, the interest rate shoots up.

It’s important to pay attention to the fine print if this is an option you’re considering.

The Takeaway

Choosing the most rewarding and suitable new credit card can become a research project. It’s best to think about your spending habits, needs, credit history, APR, any annual fee, and perks.

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.



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

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Prepaid vs Secured Credit Cards: Similarities and Differences

If your credit isn’t stellar, you may find it challenging to get approved for a traditional unsecured credit card. One option can be a prepaid or secured credit card, which can be more easily available than an unsecured credit card. However, these cards come with a few key differences. Understanding how a prepaid card and a secured card vary can help you choose the right one for your specific situation.

When you apply for a secured credit card, you will put down a refundable security deposit. This serves as your initial credit limit, and you can borrow against that initial deposit. Your borrowing history on a secured credit card is typically reported to the major credit bureaus and will impact your credit score.

On the other hand, a prepaid card serves more like a debit card without being attached to your bank account. You load it with a given amount of money and can use it to pay for purchases without affecting your credit.

Learn more about the similarities and differences, including:

•   What is a prepaid credit card and how does it work?

•   What is a secured credit card and how does it work?

•   How are secured vs. prepaid credit cards the same?

•   How are prepaid vs. secured credit cards different?

•   How do prepaid credit cards vs. secured credit cards impact your credit?

What Is a Prepaid Credit Card?

A simple way to think about what prepaid credit cards are is that they are just debit cards that aren’t tied to your bank account. Worth noting: These aren’t truly credit cards because you aren’t being extended credit; no one is lending you funds. For this reason, you may hear them referred to as just “prepaid cards” (which is what you’ll see as you keep reading).

You purchase a prepaid card (often with an activation fee) and can then use the card to make purchases. Because prepaid cards are not considered a loan, their use is not reported to the major credit bureaus. This means that they do not have a positive or negative impact on your credit score or credit history.

How Prepaid Cards Work

When you buy a prepaid card, it comes loaded with a specific amount of money on it. Generally prepaid cards are issued by some of the major credit card processing networks (e.g. Visa or Mastercard). Once you have purchased the prepaid card, you can then use it anywhere that network is accepted. Some prepaid cards only have a certain amount loaded onto them that is fixed at purchase, and others allow you to reload the card at your convenience.

Pros and Cons of Prepaid Cards

One positive thing about using a prepaid card is that it can make purchases much more convenient. It can also be more secure than carrying cash for all of your purchases.

However, a potential downside to using them is that, if you are wondering, “Do prepaid cards help build credit,” the answer is a hard no. So if you are looking for an option that can help improve your credit score, you’ll need to look elsewhere.

What Is a Secured Credit Card

If you’re looking for an alternative to a traditional unsecured credit card, you will also probably want to understand what secured credit cards are. A secured credit card is a type of credit card that requires you to apply (which likely involves a credit check). If approved, you put down an upfront security deposit to the lender. This upfront deposit will serve as your initial credit limit, and it determines the amount of money you can spend on your card.

How Secured Credit Cards Work

With an unsecured credit card, you will put down an initial deposit. Some secured credit cards have a specific amount that you must put down, and other secured cards may allow you to put down more of a deposit. As you spend money on your secured credit card, your available credit decreases. However, you can likely increase your credit line by making payments or additional deposits.

Pros and Cons of Secured Credit Cards

One of the biggest pros of a secured credit card can be that your usage is reported to the major credit bureaus. In other words, if you use it responsibly, the card can help build your credit.

Many banks that issue secured credit cards also provide a pathway to automatically increase your credit line and help you transition from a secured to a unsecured credit card. One thing to watch out for is that some secured credit cards come with high interest rates and/or fees, so it can be worthwhile to pay your balance in full each month, whenever possible.

Recommended: Secured vs. Unsecured Credit Card: What’s the Difference?

Secured vs Prepaid Cards

Here is a quick look at how prepaid cards compare to secured credit cards in a few key areas:

Secured Credit Cards Prepaid Cards
Secure and convenient payment method Yes Yes
Reports to major credit bureaus Yes No
Affects your credit score Yes No
May be easier to be approved as compared to a traditional credit card Yes No approval necessary

Is One Better for Establishing Credit?

If you’re looking to establish your credit, a secured credit card is definitely your better option. Prepaid cards are not considered loans so they are not reported to the major credit bureaus. This means that using a prepaid card will not have any impact on building your credit. Using a secured credit card responsibly can help you build credit, but it can take a while to build credit with a secured credit card.

Is a Secured or PrepaidCard Right for You?

Deciding whether a secured or prepaid card is right for you depends on what your overall goals are. If you’re just looking for a convenient and secure way to make purchases without impacting your credit, a prepaid card can be a great choice.

But if you’re looking to build or establish your credit, you might consider a secured credit card. Of the two, a secured card is the only one where your usage and payment history is reported to the major credit bureaus.

Recommended: Tips for Using a Credit Card Responsibly

The Takeaway

Prepaid cards and secured credit cards are both options that allow people with limited or poor credit histories to make secure and convenient payments. Both options allow you to easily pay for purchases wherever their issuer (e.g. Mastercard or Visa) is accepted. But usage of prepaid cards is not reported to the major credit bureaus, so it won’t have an impact on your credit score. If you’re looking to build your credit, you will be better off with a secured card.

Once you have established a solid credit history, you might consider a credit card that lets you earn cashback rewards with every eligible purchase. If you’re in the market for a new credit card, you might apply for a credit card like the SoFi Credit Card. With the SoFi Credit Card, you can earn cash-back rewards, which you can then use for travel or to invest, save, or pay down eligible SoFi debt.

The SoFi Credit Card: So simple, so rich in perks.

FAQ

Are prepaid cards more secure?

Prepaid cards are typically issued by one of the major card issuers, like Mastercard or Visa. Each of these issuers is known for payment security. One thing to watch out for with a prepaid card is that it works just like cash — if you lose your card, you’re likely to lose all of the money that is stored on your card.

What is one disadvantage of a prepaid card?

One disadvantage of a prepaid card is that your usage is not reported to the major credit bureaus. This means that using a prepaid card will not appear on your credit report and will not have any impact on your credit score. If you’re looking to build your credit, however, you’re better off getting either a traditional credit card or a secured credit card.

What are the downsides of getting a secured credit card?

A secured credit card can be a good option if you’re looking to build your credit and are having trouble getting approved for a traditional unsecured credit card. One downside of a secured credit card to keep in mind is that you will have to put down a security deposit upon being approved. Many secured credit cards also come with higher-than-average interest rates and fees, so make sure you watch out for that as well.


Photo credit: iStock/Elena Uve

SoFi cardholders earn 2% unlimited cash back rewards when redeemed to save, invest, a statement credit, or pay down eligible SoFi debt.

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

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

1See Rewards Details at SoFi.com/card/rewards.

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

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

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