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Credit cards typically expire two to five years after they are issued. The date on the card reflects the final month and year you can make purchases with your card.

Cards have expiration dates for reasons ranging from security to marketing, but issuers are usually very good about sending a new card before the old one is invalidated.

Here’s a closer look at what credit card expiration dates are, why they exist, and what the expiration date on your card means to you as a credit card user.

What Is a Credit Card Expiration Date?

An important aspect of how credit cards work, a credit card’s expiration date represents the last day you can use it for purchases. Consider these details:

•   Credit card expiration dates are typically printed as a two-digit month followed by a two-digit year. The last day of the month printed is the last day that you can use your credit card to make new purchases. If you try to make a purchase on the first day of the following month, the transaction will be declined.

•   For example, if your card has an expiration date of 06/25, then you can use that card until June 30, 2025. If you were to try to use that card to make a purchase somewhere that accepts credit card payments on July 1, 2025 — or any time thereafter — you could expect a situation wherein your credit card was declined, per credit card expiration date rules.

Fortunately, credit card issuers will typically mail you a new card with a new expiration date long before your card expires — you won’t have to worry about applying for a credit card.

Most card issuers will mail out a new card 30 to 60 days before your old card is due to expire, so you’ll never be without a valid card.

Why Do Credit Cards Expire?

There are several reasons that credit cards expire.

•   For one, the credit card expiration date serves as an additional security feature.

•   Credit cards also expire so that card issuers can keep track of their inventory and provide customers with new cards with updated features and technology.

•   Also, the magnetic stripes and computer chips in credit cards also wear out, so having an expiration date allows card issuers to ensure that cards don’t fail as often.

•   Beyond reasons of functionality, replacing credit cards also gives card issuers an opportunity to market new products (and credit card rewards) and update their brand image.

How to Find Your Credit Card Expiration Date

Your credit card’s expiration date will always appear on the card. In most cases, the expiration date will appear on the front of the card, on the right side, below the account number, which you’ll be familiar with if you know what a credit card is.

However, if the account number is printed on the back of the card, then that’s where you’ll most likely find the card’s expiration date.

Keep in mind that this number is separate from a CVV number on a credit card, which is usually a three- or four-digit number without a forward slash in it.

Recommended: How Many Credit Cards Should I Have?

What Happens After a Credit Card Expires

Once your card expires, it is no longer valid for new purchases. However, you should have already received a new card.

After you’ve activated your new card, there’s no reason to keep your old card, and you should destroy it; more on that in a moment. That’s because your old card still has your account number on it, which could help someone to make a fraudulent transaction with your account (though rest assured in this case there’s always the option to dispute a credit card charge).

What to Do When the New Card Arrives

Once you’ve received your new credit card with the updated expiration date, there’s no reason to continue to use your old card.

•   You can simply activate your new credit card, and replace your old one in your wallet or purse.

•   Your new credit card should have the same terms, including the credit card APR and credit limit.

•   Then, destroy your old card. You can destroy your plastic cards by cutting them up with scissors (it’s wise to cut the magnetic chip in half) or by using a shredding machine that’s designed for destroying plastic cards.

If you have a metal card, the card issuer will typically mail you a return envelope to send the card back for destruction.

However, if you haven’t received your new card and you notice your credit card expiration date is approaching, you should contact your card issuer before your old card expires. For example, if you’ve changed mailing addresses, your new card may have been sent to your previous residence. Or, your old card may have gotten lost in the mail. Either way, you’ll want your old card replaced before it expires so that you can continue making charges to it.

Don’t forget: Once you have your new card, you also may need to update any accounts for which you were using your old card for automatic billing every month or every year. This can include everything from streaming subscriptions to utilities. Doing so will ensure that your services remain uninterrupted when your old card does expire.

With your new card up and running, you’ll continue to make at least the credit card minimum payment as you’d been doing.

Recommended: Revolving Credit vs. Line of Credit: Key Differences

The Takeaway

Your credit card’s expiration date marks the last date it will still be valid for new purchases. You can find the expiration date on your credit card on either the front or the back of the card, and it will usually appear as a two-digit month followed by a two-digit year. You don’t usually have to worry about taking steps to get a new card when your old one is set to expire — the credit card issuer will usually mail you a card with a new expiration date beforehand. Understanding the expiration date can be an important part of using a credit card properly and easily.

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

Can I still use my credit card the month it expires?

Yes, your credit card will remain valid until the last day of the month it expires. It will no longer be valid on the first day of the following month.

Why do credit cards expire?

The credit card expiration date can serve as an additional security feature, as a way to replace worn magnetic stripes and computer chips in cards, and as an opportunity for card issuers to market new products and update their brand image.

Does your credit card automatically renew?

A credit card account isn’t attached to the credit card’s expiration date. The account usually renews every year regardless of whether the card itself expires. Card issuers also will automatically mail customers new cards within two months of their existing card’s expiration date.

Is it safe to give out your credit card number and expiry date?

For a merchant to accept credit card payments with your card not present, such as with a transaction online or over the phone, you’ll need to give your card’s number and expiration date, among other information. Otherwise, you should keep all of your credit card details private to avoid fraud and/or identity theft.

Do I have to pay off my credit card before it expires?

The expiration of your credit card is unrelated to your payments. You need to make at least the credit card minimum payment each month before your account’s due date. This date doesn’t correlate with your credit card’s expiration date.

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Photo credit: iStock/mrgao

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.

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If you’ve purchased a product or service using a credit card and never received it, or if the item arrived damaged, then you may be eligible for what’s known as a chargeback. A credit card chargeback is when a bank reverses an electronic payment to trigger a dispute resolution process.

In this guide, you’ll learn more about what a credit card chargeback is, how it works, and when you may be able to request one.

What Is a Credit Chargeback?

Credit card chargebacks usually occur between a merchant and a bank that issued the credit card used for the transaction. Chargebacks are used to reverse a payment after a billing error, unauthorized credit card use, or the failure to deliver a product or service. You can also request a chargeback when the goods or services that you paid for with your credit card you received aren’t delivered as advertised.

For example, if you ordered a red jacket, and you received a blue one, you could request a chargeback if the merchant refuses to exchange or refund your purchase.

Chargebacks can be initiated for almost any merchant that accepts credit card payments.

Credit Card Chargeback vs Refund

While both a chargeback and a refund can result in you getting your money back, they aren’t the same thing. Knowing the difference is an important part of understanding how credit cards work.

•   With a refund, it’s the merchant rather than the consumer that initiates the return of funds. Additionally, a consumer typically deals with the merchant to get a refund

•   When a chargeback occurs, it’s the bank issuing the credit card that you’ll work with.

How Does a Credit Charge Back Work?

If you have an issue with a product or service you received or you notice a charge on your credit card statement that you don’t believe was authorized, you can initiate a credit card chargeback. These are some details about how this typically works:

•   You can usually only make a chargeback within 120 days of the date of purchase.

•   Once you’ve contacted the credit card issuer to dispute the charge, the bank will take over the process and contact the merchant. The merchant will have the opportunity to either accept or refute the chargeback, and you may be asked to provide evidence supporting your request.

•   At the end of the investigation, the chargeback will either be accepted, in which case you’d get your funds back, or it will be rejected.

•   If you disagree with the decision, you can always continue to dispute the charge through a process called arbitration.

When to Use a Chargeback

The Federal Trade Commission (FTC) provides protections to consumers who use credit cards, including the right to accurate billing, protection from unauthorized charges, and the right to dispute credit card charges for goods or services that are different than described. As such, chargebacks are issued for a variety of reasons.

Before proceeding, however, keep in mind that if there was an issue with your service or goods, you may consider giving the merchant the opportunity to make it right before requesting a chargeback.

Fraud or Unauthorized Use

A common reason to request a credit card chargeback is due to fraud or unauthorized use. If you don’t recognize a transaction on your credit card statement or believe someone used your card without your authorization, you may consider requesting a credit card chargeback.

Moving forward, a good way to prevent credit card fraud can be to keep your credit card expiration date and CVV number on a credit card safe.

Incorrect Amount

If an amount on your credit card bill is incorrect, you can file for a chargeback. For example, if the merchant adds an extra zero to your bill and you can’t reach the company to have it corrected, then this would be a good time to request a chargeback — especially if the overcharge has pushed you close to your credit limit.

Recurring Billing Was Not Stopped

If you cancel a subscription service but continue to be billed afterwards, a chargeback can make sense. It can help if you have proof in hand that you had canceled the subscription already.

Goods and Services Not Delivered

Paying for a good or service that you never received is another reason to file a chargeback. If you order something that never arrives and are unable to get the company to send it or give you a refund, then filing a chargeback may be your best course of action. After all, you don’t want to potentially pay interest on something you never received, even if you do have a good APR for a credit card.

Goods or Services Were Not as Described

If you receive a good or service that was substantially different from what was described or agreed to, you can file a chargeback for the cost of that good or service. For example, if you paid to have work done on your house, but it was done incorrectly and the service provider refused to fix it, then you could request a chargeback.

However, remember that the merchant will get the opportunity to prove that the services were provided as described.

Return Credit Not Processed

If you returned an item or canceled a service within a merchant’s return policy but never received credit for the return, such as a refund, you can file a chargeback with your credit card. This can help you recoup the funds you were owed (plus any credit card interest that may have accrued in the meantime).

Recommended: How Many Credit Cards Should You Have?

How to Submit a Chargeback

Here are the typical steps for submitting a credit card chargeback:

1. Contact Your Bank or Card Issuer

To submit a chargeback, you first initiate the process with your bank or card issuer, often through its website. Some card issuer websites allow you to initiate or process most disputes entirely online. Otherwise, you can call your card issuer to file the chargeback or request a chargeback by mail.

2. Receive Confirmation of Your Request

After you’ve submitted the chargeback request, your bank will provide written confirmation of your chargeback request. They will then either post a temporary credit to your account to cover the disputed amount or pause required payments and APR on a credit card on the disputed amount while the issue is being investigated.

3. Wait While Your Request Is Submitted to the Merchant

Next, the bank will submit your chargeback request to the merchant. The merchant has a certain amount of time to respond to the bank’s inquiry.

During the investigation, make sure that you continue to pay your credit card bill for the remaining charges. At the least, make sure that you’re making the credit card minimum payment. Otherwise, you’ll end up paying interest on the non-disputed charges.

4. Receive a Decision

If the chargeback is accepted by the merchant, your billing dispute will be closed and your bank will provide an account credit to cover the disputed charge.

However, if the merchant rejects the chargeback request, your bank will evaluate the information and make a decision, which they will notify you about in writing. If you disagree with the bank’s decision, you can dispute your bank’s decision through the bank’s dispute resolution process.

Recommended: What Does Preapproved Mean for a Credit Card?

The Takeaway

Credit card chargebacks allow you to dispute a charge on your credit card. You can initiate a chargeback from a variety of reasons, such as fraud or unauthorized use, being billed for an incorrect amount, or encountering a situation where goods or services either aren’t delivered or aren’t provided as described. To start the process, you’ll contact your credit card issuer, and they will then reach out to the merchant.

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 happens when you submit a chargeback?

When you submit a chargeback, you initiate the process with your bank. The bank contacts the merchant for the request, and the merchant decides whether to accept or reject the chargeback request.

Does a chargeback hurt your credit?

A chargeback doesn’t hurt your credit in itself, but any unpaid credit card bill during the dispute process could temporarily impact your credit score. If the disputed charge or charges are large and comprise a significant portion of your credit limit, this could also negatively affect your credit score temporarily, since your credit utilization ratio will be high.

Are chargebacks always successful?

Chargeback requests are not always successful. The merchant can respond that the charge is valid and provide documentation to support the claim. In this case, the credit card issuer may deny your request for a credit card chargeback.

How much is the chargeback fee?

A chargeback fee only applies to the merchant, not to the customer. The average chargeback fee is less than 1% (0.60%, to be exact), but businesses with more chargebacks will face higher fees.

Is it worth fighting a chargeback?

Whether it’s worth fighting a chargeback depends on a variety of factors and will vary from person to person. Consider the amount in question, the time it may take, and the reason for the chargeback request. It’s also a good idea to contact the merchant first to give them a chance to correct the problem before requesting a chargeback.

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Photo credit: iStock/PamelaJoeMcFarlane

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

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

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

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

What Is Credit Card Debt Forgiveness?

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

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

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

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

Recommended: Charge Card Advantages and Disadvantages

How Does Debt Forgiveness Work for Credit Cards?

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

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

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

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

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

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

When Does Credit Card Debt Forgiveness Work Best?

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

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

How Credit Card Debt Forgiveness May Affect Your Credit

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

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

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

Pros and Cons of Credit Card Debt Forgiveness

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

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

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

Alternatives to Credit Card Debt Forgiveness

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

Debt Management

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

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

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

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

Debt Settlement

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

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

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

Debt Consolidation

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

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

Before you apply for a debt consolidation loan, compare your options to identify the loans with the most competitive terms and interest rates.

Declaring a Chapter 7 or Chapter 13 Bankruptcy

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

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

The Takeaway

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

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

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

FAQ

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

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

Does debt forgiveness hurt your credit score?

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

How do you get your credit card balance forgiven?

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

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

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

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

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

Photo credit: iStock/damircudic
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If you’re young and looking to access and build credit, opening a credit card can be a great step. However, you need to be at least 18 years old to open your own account. If you’re under the age of 18, you can’t open your own credit card, but you can be an authorized user on someone else’s account.

Even if you’re old enough to get a credit card, when you’re under the age of 21, you may face additional requirements when applying. Read on for tips on getting a credit card when you’re young and options you might consider to be able to start building your credit.

At What Age Can You Get a Credit Card?

To open your own credit card, you must be at least 18 years old.

However, if you’re between the ages of 18 and 20, you may encounter stricter verification requirements, including showing proof of ability to repay, such as through income, or getting a cosigner. This is due to regulations from the Credit CARD Act of 2009, which is intended to protect young consumers from taking on more debt than they can handle.

After age 21, these regulations won’t apply to you, but card issuers may still review your income as part of your application. It’s also important to pay attention to the terms and conditions of the credit card, such as the APR on a credit card, as you consider your credit card options and apply.

If you’re younger and have a limited credit history, you may only get approved for a card with a higher APR. Do your research before applying to have an idea of what is a good APR on a credit card.

Tips for Getting a Credit Card When You’re Young

Once you understand what a credit card is and how credit cards work, you may see the appeal of a credit card and want to open one. If you’re under the age of 18, the best things you can do to work toward being able to get your own credit card are to start building credit and to learn the basics of financial management.

Start Building Credit

Building credit when you’re young may be hard, especially if you’re under 18 and not yet eligible for your own credit card. One way to do so, however, is by becoming an authorized user on a credit card account.

A responsible parent or guardian can add you as an authorized user for their account, even if you’re still under the age of 18. Being added to the primary cardholder’s credit history can help build your credit.

Learn the Basics of Financial Management

It’s also important for young people to learn the basics of financial management. Learning about things like budgeting, credit card interest, and credit scores before you even own a credit card can help put you on the path to financial success. That way, when you do eventually get your own credit card, you’ll know how to stay on top of credit card minimum payments and avoid debt.

This can also be a good time to familiarize yourself with common financial scams, such as credit card skimmers, so you’ll know what to be aware of when you do get your own card.

How to Get a Credit Card If You Are 18 to 20 Years Old

Many young people between the ages of 18 and 20 are attending college or trade school or working. They may not have a lot of income yet, and their credit history may be limited. Still, first-time cardholders do have options for getting a credit card, which can be an important step toward building their credit history and score.

Secured Credit Cards

One option is secured cards, which are a type of credit card that require the cardholder to make a refundable security deposit. The security deposit typically becomes the amount of the card’s credit limit.

Secured cards are often marketed toward people who want or need to build their credit, so they can be a great choice for young people who are age 20 and under. Once you make the initial minimum security deposit (which usually serves as your credit limit), you can use your secured credit card in the same way that you would use any other credit card. Like any other credit card, your credit card will have a credit card expiration date and a CVV number.

A few points to note:

•   Since your credit limit is often equal to the amount of your security deposit, secured credit cards often don’t have very high credit limits compared to the average credit card limit. However, having a lower credit limit can help prevent young people from overspending.

•   With a secured card, your money is tied up temporarily in the security deposit. While you get your security deposit back when you close or upgrade the account, that’s money you otherwise can’t use in the meantime.

Become an Authorized User

Young cardholders could also become an authorized user, which is someone who’s added to a credit card account with authorization to use that account. The authorized user typically has their own card and can use it to make payments as usual. However, only the primary account holder is held responsible for payments.

The authorized user benefits from this arrangement because the primary cardholder’s account history and activity are reported on the authorized user’s credit report, which can help build their credit history.

Apply for a Student Credit Card

Student credit cards are designed and marketed for students roughly between the ages of 18 and 22 years old. Students generally have different needs than other credit card customers, so it may make sense for them to get a credit card designed specifically for them.

As an added bonus, some students may qualify for credit cards with rewards, such as cashback on categories that students may spend more on, like restaurants and grocery stores.

Consider Credit Builder Credit Cards

There are also some credit cards that are available to applicants with poor credit who are looking to build their credit. Responsible use of a credit card can be a great way to build or improve credit, as your payment history will be reported to all three major consumer credit bureaus. Just keep in mind that these cards can have higher than average credit card interest rates and more fees due to their availability to those with lower credit scores.

Get a Cosigner

Another option for young applicants is to get a cosigner for a credit card. Indeed, applicants within the 18 to 20 age range must get a cosigner if they can’t provide proof of employment or income when applying. Also, people in this age may not have much of a credit history, if any, which can be a downside.

A cosigner can be a parent, guardian, or other family member who assumes legal and financial responsibility for the applicant if they are unable to pay off the balance of the card. Ideally, the cosigner should have a decent credit history to improve the chances of the credit card application getting approved. If the cardholder fails to repay a card or falls in debt, it will negatively affect the credit score of both the cardholder and the cosigner, so this is an important responsibility.

Check with your bank or credit card issuer before using a cosigner, since not all banks allow cosigners on credit cards.

The Takeaway

Once you reach the age of 18, you will be able to get a credit card of your own. You can make sure you’re ready for this responsibility by building your credit history, getting down the financial basics, and knowing how to apply for a credit card when the time comes. You’ll have options as a young credit card applicant, from secured credit cards to student credit cards to credit builder cards and more. Learning how to use a credit card responsibly is an important part of your financial life.

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

Can I get a joint card?

Some card issuers allow cosigners on credit card. If you’re not able to qualify for a credit card on your own, you could also explore becoming an authorized user on someone else’s credit card account.

Does a student credit card affect credit score?

Yes, a student credit card affects your credit score. A student credit card is a regular credit card that’s just designed with students’ unique needs in mind, so it will affect your credit like any other credit card would.

What is the limit on a student credit card?

Credit limits on student credit cards vary by issuer and card. However, credit limits on student cards are often lower than the average credit card limit due to the fact that students generally have more limited credit histories and lower incomes.

Do you need credit for a secured credit card?

Most secured credit cards have less restrictive requirements for an applicant’s credit. In fact, many secured credit cards consider applicants with very poor or limited credit.

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

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

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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The specter of a stock market crash weighs on the mind of many investors. After all, stock market crashes have played a substantial role in the United States during the 20th and 21st centuries. But knowing what is a stock market crash as well as the history and effects of stock market crashes can help investors weather the storm when the next one occurs.

What Happens When the Stock Market Crashes?

A stock market crash occurs when broad-based stock indices like the S&P 500, Dow Jones Industrial Average, or the Nasdaq Composite experience double-digit declines over a single or several days. This means that the stocks of a wide range of companies sell off rapidly, generally because of investor panic and macroeconomic factors rather than company-specific fundamentals.

While no specific percentage decline defines a stock market crash, investors generally know one is occurring while it’s happening.

💡 Quick Tip: Before opening any investment account, consider what level of risk you are comfortable with. If you’re not sure, start with more conservative investments, and then adjust your portfolio as you learn more.

What Causes the Market to Crash?

Stock market crashes are usually unexpected and occur without warning. Often, crashes are caused by investor dynamics; when stocks start to sell off, investors’ fear takes over and causes them to panic sell shares en masse.

Though stock market crashes are usually unexpected, there are often signs that one could be on the horizon because a stock market bubble is inflating. A bubble occurs when stock prices rise quickly during a bull market, outpacing the value of the underlying companies. The bubble forms as investors buy certain stocks, driving prices up. Other investors may see the stocks doing well and jump on board, further raising prices and initiating a self-sustaining growth cycle.

The stock price growth continues until some unexpected event makes investors wary of stocks. This unexpected event causes investors to unload shares as quickly as possible, with the herd mentality of panic selling resulting in a stock market crash.

Catastrophic events such as economic crises, natural disasters, pandemics, and wars can also trigger stock market crashes. During these events, investors sell off risky assets like stocks for relatively safe investments like bonds.

Stock markets can also experience flash crashes, where the stock market plummets and rebounds within minutes. Computer trading algorithms can make these crashes worse by automatically reacting and selling stocks to head off losses. For example, on May 6, 2010, the Dow Jones Industrial Average fell 1,000 points in 10 minutes but recovered 70% of its losses by the end of the day.

Recommended: What Is the Average Stock Market Return?

Examples of Past Stock Market Crashes

There have been several crashes in the stock market history, the most recent being the crash associated with the coronavirus pandemic in early 2020. The following are some of the most well-known crashes during the past 100 years.

Stock Market Crash of 1929

The most devastating stock market crash in the history of the United States occurred in October 1929. The crash occurred following a period of relative prosperity during the Roaring Twenties, when new investors poured money into the stock market.

The crash began on Thursday, October 24, when the Dow Jones Industrial Average declined about 11%, followed by a 13% decline on Monday, October 28, and a 12% drop on Tuesday, October 29. These losses started a downward trend that would continue until 1932, ushering in the Great Depression.

Black Monday Crash of 1987

On Monday, October 19, 1987, the Dow Jones Industrial Average plummeted nearly 23% in a single day. Known as Black Monday, this selloff occurred for various reasons, including the rise of computerized trading that made it easier for panicked investors to offload stocks quickly, and stock markets around the world crashed.

Dotcom Crash of 2000

The Dotcom crash between 2000 and 2002 occurred as investors started to pull money away from internet-based companies. The Nasdaq Composite index declined about 77% from March 2000 to October 2002.

In the mid to late 1990s, the internet was widely available to consumers worldwide. Investors turned their eyes to internet-based companies, leading to rampant speculation as they snapped up stocks of newly public internet companies. Eventually, startups that enthusiastic investors had fueled began to run out of money as they failed to turn a profit. The bubble eventually burst.

Recommended: Lessons From the Dotcom Bubble

Financial Crisis of 2008

The stock market crash of 2008 was fueled by rising housing prices, which came on the heels of the dot-com crash recovery. At the time, banks were issuing more and more subprime mortgages, which financial institutions would bundle and sell as mortgage-backed securities.

As the Federal Reserve increased interest rates, homeowners, who often had been given mortgages they couldn’t afford, began to default on their loans. The defaults had a ripple effect throughout the economy. The value of mortgage-backed securities plummeted, causing major financial institutions to fail or approach the brink of failure. This financial crisis spilled over into the stock market, and the S&P 500 fell nearly 60% from a peak in October 2007 to a low in March 2009.

Coronavirus Crash of 2020

As the coronavirus pandemic swept the United States in February 2020, the government responded with stay-at-home orders that shut down businesses and curtailed travel. The U.S. economy entered a recession, and the stock market plunged. The S&P 500 fell 30% into bear market territory in just one month, including a one day decline of 12% on March 16, 2020.

What Are the Effects of a Crash?

Stock market crashes can lead to bear markets, when the market falls by 20% or more from a previous peak. If the crash leads to an extended period of economic decline, the economy may enter a recession.

A market crash could lead to a recession because companies rely heavily on stocks as a way to grow. Falling stock prices curtail a company’s ability to grow, which can have all sorts of ramifications. Companies that aren’t able to earn as much as they need may lay off workers. Workers without jobs aren’t able to spend as much. As consumers start spending less, corporate profits begin to shrink. This pattern can lead to a cycle of overall economic contraction.

A recession is usually declared when U.S. gross domestic product, or GDP, shrinks for two consecutive quarters. There may be other criteria for declaring a recession, such as a decline in economic activity reflected in real incomes, employment, production, and sales.

💡 Quick Tip: How to manage potential risk factors in a self-directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.

Preventing Stock Market Crashes

Major stock exchanges like the New York Stock Exchange (NYSE) have instituted circuit breaker measures to protect against crashes. These measures halt trading after markets drop a certain percentage to curb panic selling and prevent the markets from going into a freefall.

The NYSE’s circuit breakers kick in when three different thresholds are met. A drop of 7% or 13% in the S&P 500 shuts down trading for 15 minutes when the drop occurs between 9 am and 3:25 pm. A market decline of 20% during the day will shut down trading for the rest of the day.

Suppose a crash does occur, and it threatens to weaken the economy. In that case, the federal government may step in to ease the situation through monetary and fiscal policy stimulus measures. Monetary policy stimulus is a set of tools the Federal Reserve can use to stimulate economic growth, such as lowering interest rates. Fiscal stimulus is generally infusions of cash through direct spending or tax policy.

Investment Tips During a Market Crash

A stock market crash can be alarming, especially when it comes to an investor’s portfolio. Here are some investment tips to consider for navigating a market downturn.

Don’t Panic and Focus on the Long-Term

It will help if you remain calm when the stock market is plummeting. That’s often easier said than done, especially when your portfolio’s value declines by more than 10% in a short period. It’s tempting to join the panic selling, to make sure stock losses are minimized.

But remember, investing is a long game. In general, making decisions based on something happening now when your investing time horizon might be 30 years, may not be the best choice. If you don’t need access to your money right away, it may be better to hold on to your investments and give them time to recover.

Diversify Your Portfolio

Stocks and the stock market get most of the media’s attention, especially when the stock market is crashing, but there are other potential ways to help you realize your financial goals. Other assets like bonds, commodities, or emerging market stocks may be attractive investment opportunities to consider during a crash.

Consider Buying The Dip

While it depends on an individual’s specific situation and risk tolerance, a stock market crash might present opportunities to purchase stocks at a lower, more attractive share price that some investors may want to consider.

The Takeaway

The stock market tends to recover following a stock market crash; it took the S&P 500 six months to recover the losses experienced during the coronavirus crash. So any rash moves investors make during a stock market crash may prevent them from seeing gains in the long term.

A stock market crash can be scary, causing you to panic and fret over your savings and investments. But often, with investing, the best advice is not to make rash decisions. Even during a stock market crash, there may still be some opportunities and strategies to help build wealth over time.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Invest with as little as $5 with a SoFi Active Investing account.

FAQ

When was the last market crash?

The last stock market crash was in 2020, at the onset of the coronavirus pandemic, when business shut down and the stock market plunged. The S&P 500 fell 30% in just one month. Within six months, however, the S&P 500 had recovered its losses.

What goes up when the stock market crashes?

Bonds generally tend to go up when the stock market crashes, although not always. Government bonds such as U.S. Treasuries typically do best during a market crash, though again, there are no guarantees.

Do stocks recover after a crash?

Historically, the stock market has recovered after a crash, although it’s impossible to say how long a recovery might take. Some stock market recoveries have taken a year or less, some have taken much longer.

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

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

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Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

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