SoFi

Your available credit and the total credit limit on a particular credit card are both tied to the potential amount that you can spend. Your credit limit is the total amount of credit that the card issuer is willing to lend you. On the other hand, your available credit is the potential amount you can spend right now.

Unlike your credit limit, your available credit takes into consideration your outstanding balance and any pending charges. So, for example, if your total credit limit is $10,000, and you have an outstanding balance of $2,000, then your available credit is $8,000.

What Is Available Credit?

Your available credit on a credit card is the total amount that you can spend on your credit card. It is usually calculated as the total credit limit minus any outstanding balance or pending charges. If you attempt a transaction that is larger than your available credit, the credit card company will typically decline the transaction.

What Is a Credit Limit?

The way most credit cards work is that the credit card company issues you a maximum amount that they are willing to lend you. This is called your credit limit. It is usually determined by your financial information, such as your credit score, income, and other items on your credit history.

Why Is Available Credit Important?

Your available credit is one of the most important things about your credit card. The amount of available credit you have is the total amount of money that you can spend on your credit card. If you try to make a purchase that’s more than your total available credit, your credit card company will usually decline your transaction.

Differences Between Credit Limit and Available Credit

The main difference between credit limit and available credit is one of a theoretical limit vs. a limit in practice.

Your credit limit is the theoretical limit that represents how much the credit card company is willing to lend you. If you’ve used a portion of your credit limit, then that amount is subtracted from your total credit limit and becomes your available credit. This is the maximum amount that you can spend right now on your credit card.

In other words, your credit limit will generally remain the same, whereas your available credit will vary based on your spending. When you haven’t spent any money using your credit card, meaning your balance is $0, your credit limit and available credit are the same.

What Happens If You Go Over Your Available Credit?

If you have a credit card balance or outstanding pending charges on your credit card, those amounts are subtracted from the total credit limit that you have on that card. This marks your current available credit, and it’s the maximum amount that you can charge on your credit card at the current point in time.

If you try to make a charge for more than your available credit, it’s likely that your credit card company will decline the charge. With some credit card companies or specific credit cards, it’s possible that the credit card company will allow a charge above your available credit, but they may charge interest and/or additional fees. Check with your credit card company for the specific rules and terms for your particular card.

What Happens If You Go Over Your Credit Limit?

If you continue to spend all of your available credit until you’ve reached your total credit limit, you may not be able to continue to use your credit card. You’ll first need to make payments to lower your total balance and raise your available credit.

In some cases, if you continue to keep your outstanding balance near your total credit limit, the credit card company may choose to close your credit card account. If this doesn’t happen, your card issuer may also increase your interest rate, lower your credit limit, or even raise the minimum payment requested.

Going over your credit limit can also have serious implications for your credit score. This is because credit utilization — how much of your available credit you’re currently using — is a major factor used to determine your score. It’s recommended to keep your credit utilization ratio below 30% to maintain a healthy score; if you’ve reached your credit limit, your utilization will be at 100%.

Recommended: When Are Credit Card Payments Due

How to Increase Your Available Credit

The best way to increase the available credit on your credit card is to spend less on your card and make additional payments toward your total outstanding balance. Every dollar that you pay toward your outstanding balance will increase your available credit.

Ideally, you’d get to a situation where you’d pay off your statement balance in full, each and every month. In that scenario, your available credit and your total credit limit would be equal.

How to Increase Your Credit Limit

You have a few options for increasing your credit limit. Some credit card companies will regularly review the accounts of their cardmembers, and proactively increase their credit limits.

You also have the option to contact your card issuer directly and ask them to increase your credit limit. Keep in mind that most issuers are more likely to increase your credit limit if you’re already using your credit card responsibly.

If you’re not having any luck increasing the credit limit on your existing credit card, another option is to open a new credit card. This could substantially increase your available credit if you’re approved — especially if the new card’s limit is at or above the average credit card limit.

Recommended: Tips for Using a Credit Card Responsibly

The Takeaway

Your total credit limit and available credit are two terms that refer to the amount of money that you can spend on your credit card. However, there is a difference between credit limit and available credit. Your credit limit usually refers to the maximum amount that your card’s issuer is willing to lend you. Meanwhile, your available credit is the maximum credit limit, minus any outstanding balance or pending charges on the card.

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

Why is my available credit less than my credit limit?

Your available credit will often be less than your credit limit based on any outstanding balance or pending charges that you have on your credit card. If you have a total credit limit of $7,500 on a particular card, and an outstanding balance of $1,000, then your available credit is $6,500. The available credit amount is the maximum amount that you can charge on your credit card at the current moment.

Why is my available credit higher than my credit limit?

It’s rare that your available credit will be higher than your total credit limit. Instead, it’s much more common for your available credit to be less than (or equal to) your total credit limit. One scenario where your available credit may be higher is if you have a credit on your account, such as from a refunded transaction.

How is my credit limit determined?

Credit card issuers typically determine your total credit limit based on the financial information that you provide when you apply for the card. This includes your employment information, salary, and overall creditworthiness. If your financial situation has materially changed since you first applied or if you have a history of responsibly using your card, you may be able to contact your issuer and have your credit limit increased.

What is a good amount of available credit?

Currently the average credit card limit was just over $30,000, though credit limits vary widely by card issuer, credit card, and individual. A good amount of available credit is one that allows you to make all of the transactions that you need to make each month, with a little bit of buffer room, and without your utilization going above 30% of your limit. You should aim to put yourself into a financial position where you can pay off each of your credit card statements in full, each and every month.

---

Photo credit: iStock/Georgii Boronin

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.

SOCC-Q224-1910959-V1

Read more

Both Buy Now, Pay Later (BNPL) and credit cards are ways to spread out the payment for a purchase over time, but they have a few key differences. Buy Now, Pay Later plans typically have a specific number of payments that are determined upfront. You’ll often pay a portion at the time of purchase, and then make regular payments over time, often with zero interest.

In contrast, when you pay with a credit card, you may not have to make any payment immediately. Instead, the credit card company will send you a monthly statement. You’ll likely need to make at least a minimum payment and will owe interest on any remaining balance. As long as you continue to make at least the minimum payments, there’s no limit to how long you can take to repay your purchase.

Read on for more on the differences between Buy Now, Pay Later vs. credit cards.

What Is BNPL (Buy Now, Pay Later)? And How It Works

BNPL (Buy Now, Pay Later) is a type of installment loan that allows customers to purchase something (either online or in-store) and pay for it over time. In recent years, there’s been a big jump in the growth of Buy Now, Pay Later programs.

Several retailers and even some credit card companies offer Buy Now, Pay Later. The details of these programs vary depending on the merchant, but there are some similarities. With a BNPL plan, generally you make an initial deposit of around 25% at the time of purchase. Then, you’ll make a series of installment payments until your balance is paid off, similarly to how you would with layaway.

Recommended: When Are Credit Card Payments Due

Pros and Cons of Buy Now, Pay Later

Next, consider the pros and cons of Buy Now, Pay Later:

Pros	Cons
No hard pull on your credit to apply	May influence you to make purchases outside your budget
Generally 0% interest or lower interest than using credit cards	You won’t earn any rewards like you might by using a credit card
Can get approved even with less-than-stellar credit	May hurt your credit if you miss payments or pay late

What Is a Credit Card? And How It Works

A credit card is a type of revolving credit that allows you to make charges against your line of credit.

When you apply for a credit card, the issuer will do a hard pull on your credit. If approved, you’ll be given a specific credit limit that is the maximum amount you can borrow.

As you borrow against that limit when using a credit card, your available credit is reduced. Similarly, it’s replenished when you make payments.

Each month, you’ll get a statement listing all of the charges you made that month, plus any outstanding balance. If you pay off the balance in full, you won’t be charged any interest due to how credit cards work. However, if you pay less than the full amount, you’ll owe interest on any remaining balance.

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

Pros and Cons of Credit Cards

Credit cards can serve as a useful financial tool when you use them responsibly and adhere to credit card rules. However, they also have the potential to cause harm. Here are some pros and cons of using credit cards:

Pros	Cons
Many more retailers accept credit cards than offer BNPL plans	May encourage you to spend outside of your budget
Credit cards may offer cash back or rewards for using them	Many cards come with high interest rates
Can help build your credit when used responsibly	Can hurt your credit if you keep a balance or miss payments

Difference Between Buy Now, Pay Later and Credit Cards

While Buy Now, Pay Later plans and credit cards have some similarities, they have a few key differences. Here’s a look at BNPL vs. credit card distinctions:

	Buy Now, Pay Later	Credit Cards
Opening the account	Apply with participating retailers at the time of purchase; no hard pull on your credit required	Apply directly through the credit card issuer; hard pull on your credit
How they affect credit scores	Usually no effect on your credit score	Can help build your credit when used responsibly, or hurt your credit when misused
Interest	Often no interest when paid on-time in full	Interest charged on any outstanding balance each month
Fees	Often no fees when paid on-time in full	Fees vary by credit card and issuer, including a fee for late payments
Rewards	No rewards earned	Many credit cards offer cash back or rewards for purchases

What Is a Buy Now, Pay Later Credit Card?

Traditionally many Buy Now, Pay Later plans were offered by companies that were not traditional credit card companies. However, several issuers are now starting to offer credit cards with Buy Now, Pay Later features available.

With these Buy Now, Pay Later credit cards, you can combine some of the benefits of both options. You can use your credit card like you normally would (including earning rewards) and then identify larger purchases that you’d like to pay for over time with the Buy Now, Pay later card feature.

Among the companies offering such products are American Express, Chase, and Citi.

Choosing a Buy Now, Pay Later Credit Card

Credit card issuers that offer Buy Now, Pay Later credit cards each run their programs slightly differently. You’ll want to look at the terms and conditions of each credit card you’re considering to see which works best for you. If the Buy Now, Pay Later options are similar, you can compare the credit cards themselves to find the best option.

Benefits of Buy Now, Pay Later Credit Cards

These are some of the upsides of BNPL credit cards to consider:

•   Earn credit card rewards on your purchases.

•   You can finance the purchase for a variable length of time.

•   Responsible and on-time payments can help your credit score.

Risks of Buy Now, Pay Later Credit Cards

That being said, there are potential downsides to know about too, including:

•   Buy Now, Pay Later cards may encourage you to spend more than you have.

•   Unlike traditional Buy Now, Pay Later plans without credit or debit cards, you may be charged a fee to pay for your purchase over time.

•   There is likely a minimum purchase amount you must meet to be able to use the BNPL feature of your credit card.

Recommended: How to Avoid Interest On a Credit Card

The Takeaway

Buy Now Pay Later and credit cards are two ways to pay for your purchases over time. With BNPL, you’ll usually pay an initial deposit at the time of purchase, and then you’ll make several fixed payments over the course of a few months. With credit cards, you have a set credit limit; each month, you’ll get a statement with your total monthly charges and any outstanding balance. If you don’t pay your statement balance in full, you’ll owe interest on any unpaid amount. Each option has its pros and cons. Another possibility is to get a Buy Now, Pay Later credit card, which combines features from both types of plan.

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

Is Buy Now, Pay Later better than a credit card?

Buy Now, Pay Later and credit cards can both be the right answer depending on your specific situation, so it’s hard to say that one is better than the other for every scenario. Buy Now, Pay Later can be a good option if you want to finance a purchase over a fixed period of time with low interest and fees.

Will BNPL affect my credit score?

Generally speaking, BNPL plans do not impact your credit score as long as you make your payments on time. However, if you do not fulfill your BNPL contract, your outstanding debt may be reported to the credit bureaus, which could have a negative impact on your credit score.

Will BNPL replace the use of credit cards?

While BNPL and credit cards are both financial instruments that allow you to pay for purchases over time, they have some important differences. Since they have different pros and cons, it is unlikely that one will completely replace the other. Instead, it is more likely that both will continue to be used in different situations.

---

Photo credit: iStock/RgStudio

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.

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-Q224-1909432-V1

Read more

If you’re asked to insert or tap rather than swipe your credit card when you go to pay, you’re using a chip credit card. A credit card chip is a small gold or silver microprocessor that’s embedded in the card and intended to offer greater security for your transactions.

Credit card chips are growing dominant in the plastic payment market. These chips — sometimes known as Europay, MasterCard, and Visa (EMV) chips — comprised about 93% of global credit card transactions in the most recent year studied, though US usage was slightly lower at 87.2%. Overall, there are almost 13 billion cards with these chips in circulation. Read on to learn more about how the credit card chip works.

What Is a Credit Card Chip?

Credit card chips are small microchips embedded in the card that collect, store, and transmit credit card data between merchants, their customers, and participating financial institutions. Each time you use a credit card, these chips generate a unique code that can only be used for that transaction.

Chip credit cards date back to the mid-1990’s, when the three titans of card payment technology — Europay, MasterCard, and Visa — collectively rolled out the first chip-based credit card to the masses. Also known as EMV chips, credit card chips were introduced as a way to enhance payment security over the existing magnetic-strip credit cards.

Today, chip credit cards continue to grow in popularity. Contactless credit cards are another advancement underway.

Magnetic Strip vs Chip Credit Cards

Magnetic-strip cards hold data on the magnetic strip that appears on the back of payment cards. Because these strips hold all of a cardholder’s information needed to make a purchase, this type of card is an easy target for thieves.

With industry-wide concerns over data fraud linked to magnetic stripe cards, credit card companies turned to advanced computer microchips as a solution to credit card data security problems, using EMV technology.

Chip-based payment cards have a big advantage over magnetic-strip cards, as each card payment transaction generates a unique data code. Because the chip’s code is a “one and done” feature that disappears after the transaction is completed, even if data fraud criminals uncover the code, they can’t use it for future transactions.

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

How Does a Chip Credit Card Work?

Chip credit cards don’t work on a standalone basis. Merchants who want to conduct card payment transactions need payment processing tools, like card terminals and mobile scanners, that are compliant with EMV chip industry standards.

•   When a consumer inserts a chip credit card into a payment terminal (unlike with a contactless payment), and follows the on-screen prompts to complete the transaction, the chip and the terminal exchange the needed data in an encrypted code.

•   That code is then used to transmit the transaction details to the acquiring bank, which quickly reviews the transaction.

•   After the cardholder’s financial data is authenticated and it’s determined the consumer has the funds to cover the purchase, the payment software may run fraud filters to further authenticate the user and the transaction.

•   Then, the transaction is approved by the acquiring bank (or declined if the consumer doesn’t have the funds to cover the purchase or if fraudulent activity is suspected). The appropriate transaction confirmation codes are relayed back to the EMV payment device in real time, thus concluding the transaction.

•   Assuming the transaction is approved, the embedded card chip transmits the approval to the cardholder’s bank, which releases funds to pay for the transaction and sends it to the acquiring bank.

•   The transaction is then settled by the merchant’s payment provider and deposited into the merchant’s bank account.

Types of EMV Cards: Chip-and-Signature vs Chip-and-PIN

If you are using an EMV chip card these days, you probably know that many retailers don’t require a signature or PIN. You just tap, wave, or insert the card, and you’re all done. Many of the major card companies did away with the signature requirement.

However, you may still have another step when you use your credit card, depending on which of the two main types of chip-based cards you have:

1.    Chip-and-signature cards: The most widely used form of EMV card in the U.S. is the chip-and-signature card. With these, the cardholder simply inserts the card into the point-of-sale terminal and then provides their signature to verify the transaction.

2.    Chip-and-PIN cards: With a chip-and-PIN card, the cardholder is asked to enter a four-digit PIN, or personal identification number, at the point of sale. That process authenticates the user and allows for the card transaction process to be completed.

While each type of chip-based payment card model serves the same function — the safe and efficient completion of a transaction — chip-and-pin cards may be the safer alternative.

That’s because with a chip-and-signature card, the cashier or front of the store service provider may not ask to see the back of the card to manually authenticate the signature. That gives fraudsters a leg up, since their signatures may not be checked. With a chip-and-pin card, on the other hand, the thief would need to know the credit card PIN to complete a transaction.

Protecting Yourself From Credit Card Fraud

While chip-based credit and debit cards have been a game-changer in improving payment security, card thieves still have ways to either steal your card or lift sensitive personal data from a payment card.

Here are some ways you can protect yourself against credit card fraud:

•   Review your card statements. One of the important credit card rules to follow is checking your card statements regularly for potential security issues. If something looks suspicious, immediately contact your credit card issuer. In the case of unauthorized charges, report the fraudulent activity and follow the steps recommended by the card company, which could include freezing the card temporarily or getting a new card.

•   Keep physical possession of the card at all times. A cardholder’s best defense against physical card theft is to always know where their card is and only carry it when needed. It’s also a good idea to avoid storing your card account number on a digital device — particularly sensitive information like the credit card CVV number — that could be stolen by a savvy cyber thief.

•   Shred any documents that contain sensitive information. To further protect your account information, shred physical payment card files that include your credit card or account number once you’ve paid your monthly bill. Better yet, sign up for paperless billing, so there’s no paper trail at all.

•   Watch out for email scams. Steer clear of “phishing” scams, i.e., fraudulent emails or texts pretending to be from trusted retailers and financial institutions. If you receive an email requesting sensitive information, reach out to the company directly using the contact information listed on their website or on the back of your card.

Recommended: What Is the Average Credit Card Limit

The Takeaway

The introduction of credit card chips has greatly increased the security of credit card transactions. Credit card chips generate a unique code for each transaction, and that code cannot be used for future transactions. This makes it harder for thieves to intercept your personal data — though that doesn’t mean credit card fraud isn’t still possible.

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

What is the chip on credit cards?

A credit card chip is a microchip embedded into a credit or debit card that securely stores transaction data. This helps to facilitate safe and efficient payment card transactions.

Are chip-and-signature cards as safe as chip-and-PIN cards?

Not necessarily. That’s because the merchant may not require a signature or verify it against the one on the back of the card. This means it may be easier for thieves to get away with signing on behalf of the actual cardholder. It’s likely more difficult for a thief to get hold of a cardholder’s PIN.

Do all retailers accept EMV cards?

A high percentage of global retailers accept chip-based credit and debit cards. Industry figures show that EMV chip cards comprised over 90% of the global credit card transactions in the most recent year reviewed.

Is tapping or contactless credit cards safer?

Both are secure ways to make transactions. That’s because both contactless and chip credit card transactions generate a new transaction code for each purchase.

---

Photo credit: iStock/Georgii Boronin

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.

SOCC-Q224-1905628-V1

Read more

Credit cards can come with a four-digit personal identification number (PIN). The PIN acts like a password, helping to prevent unauthorized use of your credit card. However, in the U.S., PINs are more often required when using debit cards than when using credit cards.

Hence, if you live in the United States and don’t often travel abroad, you may not find yourself using a credit card PIN most of the time. Still, it can be helpful to understand their purpose and how to obtain one just in case.

What Is a Credit Card PIN?

A credit card PIN is a four-digit personal identification number used to help verify the integrity of certain transactions that might occur while using a credit card. You might receive a PIN with your new credit card; however, it will probably be mailed separately for security reasons. This way, if someone were to steal your card, they won’t gain access to your PIN along with it.

Credit card PINs offer an added layer of security alongside other measures, such as your signature, the credit card’s EMV (that stands for Europay, Mastercard, Visa) chip, or the credit card CVV number. In the United States, chip and signature are the preferred security measures for most types of transactions, but there could still be times when you need a PIN.

How Do Chip and PIN Cards Work?

Chip and PIN generally refers to credit cards that have a microchip that can be inserted into a card reader. As their name suggests, these cards may also require the cardholder to authorize the transaction by entering their PIN.

The use of a microchip and a PIN allows for increased security when compared to credit cards of the past, which only used a magnetic stripe to complete transactions. Also called stripe and signature cards, these older credit cards are considered less secure than chip and PIN credit cards. This is because the magnetic stripe has your card information coded directly into it.

An increase in credit card data breaches called for a more secure solution. That led to the adoption of EMV cards, named for the three organizations that developed the technology, as noted above — Europay, Mastercard, and Visa. EMV cards would become the chip and PIN cards we know today, later joined by contactless payments.

The main benefit of EMV, or chip and PIN, cards is that they generate a one-time code when inserted into the card reader. Instead of sharing your card number with the merchant, the code is used to process the payment. This process is more secure than using a magnetic stripe because it makes it much more difficult for thieves to attempt to steal your credit card information.

Recommended: What Is a Contactless Credit Card

Credit Card vs Debit Card PIN

There’s little difference between a credit card PIN and a debit card PIN. Both are four-number codes that you use to verify transactions in some situations.

At least in the U.S., the most notable difference between credit vs. debit card PINs is that debit card transactions require a PIN more often than credit card transactions do. In other countries, the use of PINs for credit card transactions could be more common.

Recommended: When Are Credit Card Payments Due

Why You Might Need a Credit Card PIN

The two scenarios in which you’re most likely to need a credit card PIN are when requesting a cash advance and when traveling outside the U.S.

Cash Advances

A cash advance works like a loan from your credit card issuer. There are a few ways to request a cash advance, but one way to do so is by using your credit card at an ATM. You may be required to enter your PIN when requesting a cash advance, and credit cards sometimes have daily cash advance limits. Also, cash advances can be an expensive option; make sure you understand the interest that will be charged.

Credit Card Purchases Abroad

European credit cards have long used chip and PIN technology, which can help keep your money safe when traveling abroad. That means you could be required to enter your PIN, even for purchases. For instance, automated kiosks in Europe may only work with foreign credit cards if you provide a PIN.

Guide to Requesting a Credit Card PIN

Whether or not you think you’ll need a credit card PIN, you can request one from your card issuer just in case you do end up needing it in the future. Keep in mind that your card issuer may have sent you a PIN when they shipped your new card. However, as mentioned earlier, the PIN likely was not sent in the same envelope as your credit card for the sake of security.

If you aren’t able to locate a PIN that was sent with your card, you can request a new one in the following ways:

•   On your bank’s website. Some banks allow you to request a new PIN while logged in to your account. To do so, you can search your bank’s website for information on requesting a PIN for a credit card.

•   By phone. Some banks require you to call to request a PIN on a credit card. If that’s the case, or if you simply prefer to call, your card issuer should provide a support number. They likely won’t issue you a new PIN over the phone but will instead mail it to the address on file.

•   At a bank branch. If your bank has branches nearby, then you should be able to request a PIN by visiting a branch and asking them to reset it for you.

•   At an ATM. If you know your existing PIN and simply want to change it, you might be able to change your credit card PIN by visiting an ATM.

If you request a new PIN either online or by phone, it should be mailed to your address on file. Thus, you should make sure your address is up to date before requesting a PIN.

Another important credit card rule to keep in mind is not to use personally identifiable information in your PIN, such as your birthday or your address. While those might be easier to remember, they can also be easier for a thief to guess.

Do All Credit Card Issuers Offer Cards With PINs?

The answer to this question may depend upon your location. In the U.S., for example, most credit cards have at least chip and signature verification, though an increasing number have chip and PIN. While chip and PIN adoption has increased in the U.S., the technology is already fully implemented in much of the rest of the world.

Most major banks in the U.S. offer PINs with their credit cards, even if PIN verifications aren’t always required.

Finding Your Credit Card PIN Number

When you were approved for your new credit card, you might have received a separate mailer with your credit card PIN along with relevant information about using it. If you never received your PIN or you lost it, you probably won’t be able to find your credit card PIN by logging into your account. Usually, you’ll either need someone to reset it for you at a bank branch or ask to have a new PIN mailed to your address on file.

Are Credit Card PINs Safe?

Chip and PIN credit cards tend to be much safer than their magnetic stripe counterparts of the past. This is because chip and PIN credit cards do not share your credit card number; instead, they generate a unique, one-time code to verify the transaction. Hence, schemes that worked in the past, such as credit card sniffing, are much less likely to succeed with chip and PIN credit cards. This helps you keep your data safe, along with your money.

The Takeaway

With the adoption of EMV, credit cards may have a PIN, but purchases don’t often require them in the United States. However, your card issuer may have sent you a PIN when you were approved for a new card. Chip and PIN technology makes credit cards more secure so you can feel more confident about your purchases.

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

What if my credit card company does not allow chip-and-PIN purchases?

Most credit card companies should allow chip and PIN purchases, or at the very least, chip and signature. All U.S. merchants were asked to begin accepting EMV chips by October 2015. While there’s no federal law requiring EMV compliance at the moment, it is considered industry-standard. As a result, most credit card issuers have already adopted EMV standards.

Can I use the same PIN for all credit card transactions?

Some card issuers might allow this, but others may not — it depends on the banking institution. For example, your card may not allow you to use the same PIN for cash advances that you use for purchases. If that is the case, you will need to remember two different PINs.

How do you get a PIN for your credit card?

Card issuers will often send you a PIN when you apply for a new credit card. However, if you lost your PIN or don’t recall receiving one, you can try requesting one from your bank. You may be able to request a PIN via online banking; if that isn’t possible, other options include asking for one on the phone or visiting a bank branch.

Can you use a credit card without a PIN?

Whether you can use a credit card without a PIN depends on the kind of transaction you’re making. For example, if you are in the U.S. and requesting a cash advance with your credit card at an ATM, it is unlikely that you will be able to do that without a PIN. Purchases, on the other hand, often don’t require a PIN in the United States.

---

Photo credit: iStock/Ludmila_m

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.

SOCC-Q224-1909410-V1

Read more

Contactless credit cards are a method of payment that allows you to simply tap or hold your card on the card reader, as opposed to inserting or swiping it. This kind of card has grown in popularity over the past few years.

Here’s a look at the tech that enables contactless credit card payments, as well as the pros and cons of using this sort of card.

What Is a Contactless Credit Card?

Physically, a contactless credit card looks like a regular credit card, with the bank name and the account number on the front of the card and the ubiquitous magnetic stripe on the back of the card. However, contactless credit cards allow cardholders to “tap and pay” instead of inserting or swiping their card in a merchant payment machine.

This enables a consumer to make a purchase at a retail location without ever having to physically touch a payment device. This was one of the reasons contactless payments soared during the pandemic.

What Does Contactless Payment Mean?

The term contactless payment more broadly refers to a form of payment that involves no touch. You can make a contactless payment using a credit card as well as a debit card, gift card, mobile wallet, or wearable device.

Regardless of the form, contactless payments rely on the same technology to make a payment without needing to swipe, enter a debit or credit card PIN, or sign for a transaction.

How to Know If Your Credit Card Is Contactless

Major credit card providers like MasterCard and Visa offer contactless cards. You can determine if your credit card is contactless-capable by looking for a contactless card symbol on the back of your card. This symbol looks like a wifi symbol flipped on its side, with four curved lines that increase in length from left to right.

Even if your card has this symbol on it, you’ll also want to check that the merchant has contactless readers. You can figure this out by looking for that same symbol on the card reader or asking the merchant directly.

How Contactless Credit Cards Work

Like other credit cards, contactless credit cards have small chips embedded in them. But instead of requiring you to insert the card, this chip emits electromagnetic waves that transfer your payment information when you place the card close to a payment terminal that accepts contactless payments.

You don’t actually even need to tap your contactless credit card to pay — all you have to do is place your card within a few inches of the payment terminal. This will initiate payment.

You might then have to wait a few seconds while the transaction processes. The terminal may give a signal when the transaction is complete, such as by beeping or flashing a green light.

Technology That Enables Contactless Credit Card Payments

Instead of inserting a credit or debit card into a merchant payment terminal, contactless credit cards rely on radio frequency identification technology (RFID) and near-field communication to complete a retail transaction.

The “no touch” concept is driven by a contactless card’s short-range electromagnetic waves, which hold the cardholder’s personal data, including their credit card account number. This information is then transmitted to the merchant’s payment device. Once the device grabs the airborne card information, the transaction can be completed and the purchase confirmed.

Pros and Cons of Contactless Credit Cards

Like most consumer finance tools, contactless credit cards have their upsides and downsides. Here’s a snapshot of the pros and cons to note:

Pros	Cons
Convenient to use	Not always available overseas
Secure	Low transaction limits
Increasingly offered	Not always reliable
Better for merchants

Pros

These are the main upsides of contactless credit cards:

•   Convenient to use: Contactless credit cards are extremely convenient to use once you get the hang of how credit cards work when they have this feature. All a user has to do is wave their contactless credit card in front of the card reader, and the deal is done in a matter of seconds. Plus, you can avoid touching any surfaces in the process.

•   Secure: With data thieves regularly on the prowl, “tap and pay” and “wave and pay” technologies are highly protective of a consumer’s personal data. All of the data is stored on a password-protected, fully-encrypted computer chip embedded inside the card, making it difficult for a financial fraudster to steal a user’s personal information.

•   Increasingly offered: The availability of contactless payments has increased in recent years, and many brand-name companies now offer the option. Companies may even offer discounts and loyalty point details that are immediately added to a consumer’s account at the point of sale.

•   Better for merchants: Companies that offer contactless credit/debit card payments also benefit from “no touch” card technology. Aside from superior operational capability and faster transactions, merchants get a better customer experience and formidable fraud protection from contactless payment technology, with no extra cost. That’s because merchants pay the same transaction processing fee with contactless payments as they do with regular credit card transactions.

Cons

Of course, there are downsides to contactless credit cards as well:

•   Not always available overseas: Contactless payments may not work abroad, given the recent expansion of a new card payment technology. Additionally, consumers may be charged foreign transaction fees when they do use contactless payments overseas, depending on the specific country’s credit card payment laws.

•   Low transaction limits: Contactless card users may find they can’t cover large transactions, like a laptop computer or king-size bed. That’s because merchants may issue those limits until they’re convinced contactless payments (like any new technology) are completely safe, secure and free of any fraud threats. In the meantime, contactless card-using consumers can always use the same credit card to make a big purchase by using “chip and sign” or “chip and swipe” card technologies.

•   Not always reliable: Contactless credit card transactions aren’t always reliable, as sometimes the payment won’t go through even though a reader indicates that it accepts contactless payments. This could cause someone to have to resort to swiping their card instead to complete the transaction.

Recommended: What Is a Charge Card?

Guide to Using a Contactless Credit Card

When using a contactless credit card, the transaction is enabled and completed in three key steps: look, tap, and go.

1.    Look. The consumer checks for a contactless symbol on a merchant’s payment device (this will look like a wifi signal tipped on its side).

2.    Tap. After being prompted by the payment device, the consumer will wave the credit card an inch or so over the payment device, or actually touch (tap) the credit card on the payment terminal. This is why the process is sometimes referred to as credit card tap to pay.

3.    Go. Once the wave or tap is executed, the payment device picks up the transaction, confirms the credit card payment, and completes the transaction.

Be mindful that if you carry multiple contactless credit cards, you may want to keep those cards away from a terminal that accepts contactless payments. This will help ensure the correct credit card is being charged. Instead of holding your wallet or purse over the payment terminal, take out the specific card you’d like to use instead.

Recommended: When Are Credit Card Payments Due?

Are Contactless Credit Cards Safe?

Contactless payment cards basically offer the same anti-fraud protections as any card that relies on a credit card chip.

This is because the chip in contactless credit cards creates a one-time code for each merchant transaction. Once the payment is confirmed and the transaction is approved, the code disappears for good. That makes it virtually impossible for a financial fraudster to steal a consumer’s personal data, as they can’t crack the complicated algorithmic codes financial institutions use with chip-based payment cards.

Additionally, a contactless card is equipped with electromagnetic (RFID) shielding, which helps keep card information from being “skimmed” by data thieves. In turn, this removes another data security threat from the credit card transaction experience.

The Takeaway

Contactless credit cards are emerging as an effective payment technology that’s gathering steam among consumers and retailers alike. Thanks to the tech that enables contactless credit card payment, these credit cards allow you to simply wave or tap the credit card within range of a payment terminal that accepts contactless payments. You can figure out if a payment terminal — and your credit card — offer contactless payment as an option by looking for the contactless payment symbol.

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

Are there extra charges for using contactless credit cards?

No, there are no extra charges for using contactless credit cards. This is true for the consumer who’s tapping their card as well as for the merchant accepting contactless payments.

What are the risks with contactless credit cards?

While contactless credit cards generally offer enhanced security, there is the risk of a thief skimming cards in your wallet by using a smartphone to read it. However, the thief must be within very close range to do so. Perhaps the easiest way for a thief to get ahold of your information is by stealing your physical credit card, which is a risk with any type of credit card.

Where can I use my contactless credit card?

You can use your credit card at any retailer that has a terminal accepting contactless payments. You can determine if a card reader will take your contactless credit card by looking for the contactless payment symbol.

What happens if I lose my contactless credit card and someone else uses it?

If your card is stolen or lost, contact your credit card issuer immediately. Check your recent credit card transactions for any fraudulent activity, and make sure to report that information to your credit card issuer.

---

Photo credit: iStock/milan2099

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.

SOCC-Q224-1917311-V1

Read more