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The annual percentage rate (APR) of your credit card has a big impact on how much it costs you to carry a credit card balance. In some cases — if you have a variable interest rate or you’re late making payments, for example — your APR can change, causing your credit card interest rate to increase or decrease.

Understanding when and how these changes might occur can help you choose the right credit card and potentially spend less on interest. Here’s a look at what can impact your credit card’s APR.

What Is Credit Card APR?

A credit card’s APR is the interest rate you’ll pay on the money you borrow, stated as an annual rate. Your credit card APR will tell you how much a credit card costs you in terms of interest on the balance you carry. However, it won’t tell you about other fees and other credit card charges you may incur.

Credit cards will typically have a separate APR for credit card purchase interest charges, balance transfers, and cash advances. The APR you receive when you open a credit card will depend on a benchmark interest rate as well as factors like your creditworthiness, as determined by your credit score.

Recommended: What Is a Charge Card?

What Can Cause Your Credit Card’s APR to Increase?

There are a number of reasons that credit card APR can increase. Your credit card company can increase your APR on new transactions as long as they give you 45 days’ notice. The company is generally not allowed to increase your APR during the first year after your account is opened.

Further, there are only certain cases in which your credit card issuer can raise rates on existing balances, including when:

•   An introductory rate expires

•   You have a variable rate card (most credit cards have a variable rate) and the benchmark interest rate rises

•   You’re 60 days late making your minimum payment

•   You have completed or don’t comply with the terms of an agreement with your card issuer, which has renegotiated the terms of your agreement for a period of time

No matter how the increase occurs, it’s important to realize that your credit card payments increase when your interest rate increases.

Prime Rate Rises

Your credit card will have either a fixed or variable credit card interest rate. If you have a credit card with a variable rate, that rate is largely based on a benchmark interest rate. The benchmark that many credit card companies use is what’s known as the prime rate. And when the prime rate rises, your APR will typically rise, too.

The prime rate could rise due to a change in the federal funds rate, which is the Federal Reserve’s recommendation for what banks should be charging when they make overnight loans to help each other meet federal reserve requirements.

Late Payments

Your credit card interest rate may also increase if you’re 60 or more days behind on paying your credit card minimum. This is what’s known as a penalty APR. Not only may this rate apply to your overdue balance, it may also raise interest payments on future purchases.

End of Introductory APR Offer

Some cards offer 0% APR on purchases or balance transfers for an introductory period. During that time, you won’t pay any interest on balances that you carry from month to month. However, once the introductory period is over, your APR will jump to the regular purchase interest rate, which will apply to any remaining balance on your account.

High Credit Card Balance

If you carry a growing credit card balance from month to month, or you’ve hit your credit limit and are unable to make payments, your card company may decide to raise your APR on new transactions.

Failure to Meet the Terms of a Workout Agreement

If you had trouble paying off your credit card debt in the past, you may have renegotiated with the credit card issuer the terms of your agreement, which is known as a workout agreement. When you successfully complete it, your card company may return your APR to what it was prior to the arrangement, which may have temporarily reduced your interest rate. On the other hand, if you fail to comply with the agreement, your card company may also decide to raise rates.

Recent Cash Advance

As mentioned above, credit card companies often typically set different APRs for purchases, balance transfers, and cash advances. If you’ve recently taken out a cash advance, you may have triggered the cash advance APR. This APR might be higher than the APR offered to you for regular credit card charges.

Recommended: What Is the Average Credit Card Limit?

What Can Cause Your APR to Decrease?

There aren’t as many triggers that will send your credit card APR lower, but here’s a couple to be aware of.

Prime Rate Falls

Changes in the prime rate typically have an impact on your APR. If the prime rate falls, your APR may also go down if you have a variable rate (as most credit cards do).

Negotiating for a Lower Rate

If you’d rather not sit around waiting for the prime rate to go down (or if it’s on an upward trajectory), one of the best ways to lower your credit card APR is simply by asking. Negotiating for lower rates and fees is one of the important credit card rules to know. (You can also negotiate on other things, such as credit card spending limits.)

You can improve your odds in this negotiation by arming yourself with some key information. First, get familiar with your credit score and make sure that it’s as high as possible. You may be able to help build your score by paying down debts and making sure to correct any errors on your credit report.

Also make sure to highlight your history with the company. Credit cards want to hold on to long-standing customers with a good history of paying their bills on time.

If your credit card company rejects your first attempt at negotiation, don’t be afraid to ask again or to speak to a manager who may have more power to make decisions about your account.

The Takeaway

Your credit card APR can have a major impact on how much it will cost you to carry credit card debt. As you choose a credit card, it’s important to shop around for the card that offers a low interest rate.

Still, your APR may rise at some point — especially if the prime rate increases or a low introductory offer expires. However, that doesn’t mean you’re stuck with the new rate. You can always try to negotiate with your card company to see if they can lower your rate.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

FAQ

How can I lower my APR on my credit card?

You can try to lower the APR on your credit card by negotiating with your lender. To help increase your odds of success, make sure you have a history of paying your bills on time and a strong credit score. Remind the lender of that positive history when you speak with them.

How does the prime rate affect my credit card APR?

If you have a variable APR, as many credit cards do, when the prime rate rises, so too, typically, will your APR. When the prime rate falls, your APR usually falls as well.

Can the APR on a credit card change?

Yes, the APR on a credit card can change for a variety of reasons. These can include a shift in the prime rate, the expiration of a low introductory offer, or being 60 days late on paying your credit card minimum.

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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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It’s that time of year again: Typically, by midnight on April 15, taxpayers must e-file or mail their federal and, if applicable, state tax returns for the previous calendar tax year to avoid penalty. Well before the deadline, though, it’s wise to do your prep work, hunting down the necessary documents, finding a tax pro or software to help you through the process, and learning about any new tax deductions or credits you might be eligible for.

It can definitely be a challenge to get organized, but by following certain steps, you can be ready to file properly and on time. Here, we’ll help you along with important tips, including:

•   When is tax filing season?

•   How do you prepare for tax season?

•   Should you hire a tax pro?

•   Which tax documents do you need?

•   By when do you need to file taxes?

When Is Tax Filing Season?

Tax season typically begins at the end of January. If you are filing your 2025 tax return, the IRS will start accepting and processing your tax returns at the end of January 2026.

You should receive a Form W-2 by January 31st or, with any mail delay, soon thereafter. The same deadline applies to 1099-NEC forms for independent contractors. Each financial institution that paid you at least $10 of interest during the year must send you a copy of the 1099-INT by January 31st as well.

The due date for individuals to file their taxes is usually April 15th of a given year or, if that falls on a weekend, the next following weekday.

It’s generally not a good idea to wait until the last minute to prepare for tax filing. If you work for one employer, your taxes may not be complicated, but if you have side gigs or you’re self-employed, your tax returns can take a while to fill out.

13 Tax Prep Tips for 2025

Before filing, here’s how to prepare for the upcoming tax season.

1. Decide on Hiring a Pro or DIY

You can either prepare and file your taxes on your own or hire a professional. If you choose the latter, you can go to a tax preparation service like H&R Block or contact a local accountant or other tax pro. Some people feel more secure with a professional who can guide them through the process, know the latest deductions, and perhaps help them avoid IRS audit triggers.

The costs for a professional vary, and the more complicated a return is, generally the higher the costs will be.

The IRS has a tool where taxpayers can find a tax preparer near them with credentials or select qualifications. Doing so will mean paying a fee. How much? Tax preparation could run anywhere from $300 to $600 (or more), depending on where you live, how complicated your tax situation is, and how your tax professional charges for services.

Or, you could use software which is likely to cost less but require a greater investment of your time. For instance, TurboTax prices range from $89 and up, depending on whether you need additional features, like online assistance.

Recommended: How to File Taxes for Beginners

2. Consider Other Tax-Filing Options

You might also want to try this alternative: IRS Free File lets you prepare and file your federal income tax online for free. There are two options, based on income.

•   You can file on an IRS partner site if your adjusted gross income was approximately $89,000 or less. This is a guided preparation, and the online service does all the math.

•   Those whose income is higher and who know how to prepare their own taxes can choose the fillable forms option. The forms-based product can do basic calculations but will not provide step-by-step guidance. Also there is no state tax filing with this option.

Recommended: How to Pay Less in Taxes: 9 Simple Steps

3. Collect Tax Documents

Gathering the right papers is an important part of preparing for tax season. By the end of January, you should have received tax documents from employers, brokerage firms, and others you did business with. They include a W-2 for a salaried worker and Form 1099-NEC if you were self-employed (gig worker or freelancer) or did independent contractor work amounting to over $600 last year.

Employers will send the documents in the mail or electronically.

Investors might receive these forms:

•   1099-B, which reports capital gains and losses

•   1099-DIV, which reports dividend income and capital gains distributions

•   1099-INT, which reports interest income

•   1099-R, which reports retirement account distributions

Other 1099 forms include:

•   1099-MISC, which reports miscellaneous income (such as prize money or payments received for renting space or equipment)

•   1099-Q, which reports distributions from education savings accounts and 529 accounts

If you won anything while gambling, you’ll need to fill out Form W-2G. If you paid at least $600 in mortgage interest during the year, you’ll receive Form 1098, which you’ll need to claim a mortgage interest tax deduction.

A list of income-related forms can be found on the IRS website.

Last year’s federal return, and, if applicable, state return could be good reminders of what was filed last year and the documents used. That can help you pinpoint any missing tax documents.

4. Look Into Deductions and Credits

Wondering whether to take the standard deduction or itemize deductions? The higher figure is the winner.

The vast majority of Americans claim the standard deduction, the number subtracted from your income before you calculate the amount of tax you owe.

For tax year 2025, the standard deductions are:

•   $15,750 for single filers and those married filing separately

•   $31,500 for those married filing jointly

•   $23,625 for heads of household

Individuals aged 65 or older or who are blind can claim an additional standard deduction of $1,550 (for married filers) or $1,950 (for single or head of household filers).

For tax year 2026, the standard deductions are:

•   $16,100 for single filers and those married filing separately

•   $32,200 for those married filing jointly

•   $24,150 for heads of household

Individuals aged 65 or older or who are blind can claim an additional standard deduction of $1,600 (for married filers) or $2,000 for single or head of household filers).

Individuals interested in itemizing tax deductions can look into whether they’re eligible for a long list of deductions like a home office (and, if eligible, whether to use the simplified option for computing the deduction), education deductions, healthcare deductions, and investment-related deductions.

•   You own a home and the total of your mortgage interest, points, mortgage insurance premiums, and real estate taxes are greater than the standard deduction.

•   Your state and local taxes (including real estate, property, income, and sales taxes) plus your mortgage interest exceed the standard deduction.

•   You spent more than 7.5% of your adjusted gross income for out-of-pocket medical expenses.

Then there are tax credits, a dollar-for-dollar reduction of the income tax you owe. So if you owe, say, $1,500 in federal taxes but are eligible for $1,500 in tax credits, your tax liability is zero.

There are family and dependent credits, healthcare credits, education credits, homeowner credits, and income and savings credits. Taxpayers can see the entire tax credits and deductions list on the IRS website.

Recommended: What Tax Bracket Am I In?

5. Be Sure to Include Dependents’ IDs

Details count (a lot) when filing your return, and one important point to include is the Social Security numbers for any children and other dependents. If you omit this, you may lose any dependent credits, like the Child Tax Credit, that you qualify for.

Also know that if you are divorced, only one parent can claim children as dependents.

6. Update Beneficiary Designations

On the subject of children, tax time is a good time to review and update beneficiary designations. While it won’t change your tax-filing calculations, it will potentially reduce the tax burden your beneficiaries may pay on what they inherit after you die.

7. Add to Your Retirement Contributions

As you get ready for tax filing, it’s wise to check your progress towards your retirement fund (hopefully you have one). Money that you put into a 401(k), 403(b), or other tax-deferred account reduces your taxable income. In other words, it helps minimize your tax bill. The contributions you make generally aren’t taxed until you decide to withdraw funds.

If you feel you can afford to contribute more, know that for 2025, the 401(k) contribution limit for employees is $23,500, with an additional $7,500 for catch-up contributions for taxpayers who are age 50 or older. For 2026, the 401(k) contribution limit is $24,500, with an additional $8,000 for those age 50 or older. In both 2025 and 2026, those aged 60 to 63 may contribute up to an additional $11,250 instead of $7,500 and $8,000 respectively, thanks to SECURE 2.0.

However, it’s important to be aware that under a new law regarding catch-up contributions that went into effect on January 1, 2026, individuals aged 50 and older who earned more than $150,000 in FICA wages in 2025 are required to put their 401(k) catch-up contributions into a Roth account. Because of the way Roth accounts work, these individuals will pay taxes on their catch-up contributions upfront, but can make qualified withdrawals tax-free in retirement.

8. Take Any Required Minimum Distributions

Another tax-filing tip: If you’ve reached retirement age, make sure you take any distributions that are necessary. You generally must begin taking annual withdrawals from your traditional IRA, SEP IRA, SIMPLE IRA, and retirement plan accounts starting with the year you turn 73. When you reach the minimum age, you can delay your first mandatory withdrawal until April 1 of the following year. From then on, however, you must take your annual required minimum distribution (RMD) by December 31. If you miss the RMD deadline, you may get hit with a penalty of 25% of the RMD total.

9. Make a Final Estimated Tax Payment

Taxpayers who do not have taxes withheld from their paychecks can pay estimated taxes every quarter to avoid owing a big chunk of change come Tax Day.

Quarterly estimated taxes are typically due on April 15th, June 15th, and September 15th, with the fourth due on January 15th of the following year.

10. Apply for a Payment Plan If Needed

What happens if you discover, at tax filing time, that you can’t pay the full amount you owe? One option is to pay as much as you can and then set up a payment plan with the IRS for the rest. This is a method that gives you a longer time frame in which to pay what you owe. Depending on whether you have a short-term or long-term IRS payment plan , there may be setup fees.

11. File Electronically

Here’s an important tip: Prioritize filing electronically, especially if you anticipate receiving a refund. Electronic returns can typically be processed more quickly than paper ones, which means you’ll get your infusion of cash that much sooner.

Another benefit of filing this way is that your return is much less likely to have errors. Electronic returns tend to have just 0.5% with errors. But for “hard copy” paper returns, that number ratchets up to about 21% with mistakes.

12. Decide Whether to File for an Extension

What if you don’t quite have your act together and your tax filing materials ready to roll on time? It happens. If you need more time to prepare your federal tax return, you can electronically request an extension by filing Form 4868 by the April tax filing due date. This gives you until October 15 to file a completed return. Just keep in mind: Even if you file an extension, you are required to pay any taxes you may owe by the April deadline.

13. Avoid Tax Season Scams

Filing a tax return can be enough to keep you busy without worrying about getting scammed. But unfortunately, there are fraudsters out there, trying to take advantage of the season. For instance, you might get an email, phone call, or even a text message that says it’s from the IRS. They may say there’s an issue with a return of yours and that they need to speak with you ASAP. Don’t fall for it: The only way the IRS will ever communicate with you is via U.S. mail, unless you are involved in some kind of litigation with them.

The Benefits of Getting Prepared Early

Now that you’ve learned more about tax filing, here are some reasons to get started sooner rather than later on your return.

•   Avoid deadline anxiety. For some people, procrastination can lead to a lot of stress as the filing date approaches. They risk having to pull the proverbial all-nighter to get their return done on time or wind up blowing the deadline. By starting sooner, you can chip away at the process of pulling materials together and completing forms and breathe a little easier.

•   Dodge processing delays. If you file earlier, you are likely to slip in before the deluge of returns hits the IRS’s offices. You might even get your refund (if you’re due one) sooner.

•   Take the time to plan. Perhaps you know you’re going to owe money. Or, maybe you’re not sure if that’s the case. In either scenario, starting the tax-filing process earlier will give you time to see what you may owe and then figure out how to pay any funds that are due.

Recommended: Tax Preparation Checklist 2025: Documents You Need to Gather

The Takeaway

“Tax prep” isn’t a phrase signaling that big fun is on the way, but putting off the inevitable probably isn’t the best choice. To save yourself stress, you’ll want to prepare for tax season as early as possible by gathering documents and information, choosing a preparer or getting ready to DIY, and learning about tax credits and deductions.

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

FAQ

When can I start filing my taxes?

Tax filing season typically begins at the end of January. For example, the Internal Revenue Service (IRS) will begin accepting 2025 tax returns on or about January 26, 2026.

Should I use a tax preparer?

It’s a personal choice whether to hire a tax preparer or file your taxes yourself. A tax preparer will likely reduce the time you have to spend doing your taxes and can apply their professional knowledge to help you know what credits and deductions you qualify for. However, you will have to pay a fee for this service, which could run anywhere from $300 to $600 (or more), depending on where you live and how complicated your tax situation is.

What documents do I need to prepare for tax season?

You’ll need to gather a variety of documents for tax season, including income received (W-2s and/or 1099s to show earnings, and 1099s that reflect interest and dividends earned), records of deductions (relating to home ownership, charitable donations, medical expenses, educational costs, and the like). And, of course, you’ll need personal information like your Social Security number and that of any dependents.

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Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

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When you piggyback on someone else’s credit card, you become an authorized user on their credit card account. Usually, this is done if you are working to establish credit for the first time or strengthen your credit.

While piggybacking credit can serve as an important tool as you establish firm financial footing, there are also situations in which it can be risky. Because of this, it’s important to understand how piggyback credit works before using this strategy.

What Is Credit Card Piggybacking?

When piggybacking credit, you become an authorized user, or a secondary account holder, on a credit card account. As a secondary cardholder, you may receive your own card. You’ll be allowed to make purchases on the account, but you aren’t necessarily responsible for payment. This differs from joint accounts, where both parties are responsible for payment.

The primary account holder will be able to view all of the purchases and will ultimately be responsible for making all payments. You’ll likely enter into some sort of agreement with the primary account holder to pay them back for any purchases that you make.

How Does Credit Card Piggybacking Work?

If you don’t have a credit history or you’re looking to build your credit, credit card piggybacking can typically help. That’s because when you become an authorized user on someone else’s card, their credit history for that account has an impact on yours.

When you become an authorized user, that account pops up in your credit report. If the primary account holder has a long history of paying their bills on time or they keep their balance low, this might have a positive effect on your credit. If the account has been open for a long time, say 15 years, it will read on your credit report as a 15-year account. Since length of credit history has an effect on your credit score, this can prove helpful in building your score.

Be aware, however, that the impact on your credit score doesn’t always move in the positive direction. If the primary account holder misses payments, for example, the account could have a negative effect on your credit.

Recommended: When Are Credit Card Payments Due?

Does Piggybacking Credit Actually Work?

Piggybacking on a credit card does usually work, but not all of the time. For one thing, not all credit card companies will report a secondary account holder to the credit reporting bureaus Equifax®, Experian®, and TransUnion®.

What’s more, when you become an authorized user, you’re not necessarily learning to use credit cards responsibly — especially if you’re not making purchases and having to pay them off on time.

Is Piggybacking Illegal?

Piggybacking is not illegal. In fact, under the Equal Credit Opportunity Act, Congress determined that authorized users cannot be denied on existing credit accounts.

That said, there are situations in which becoming an authorized user is a deceptive practice and may entice individuals into some fraudulent situations. (See more on this below.)

What Is Person-to-Person Piggybacking?

Person-to-person piggybacking involves becoming an authorized user on the account of a significant other, family member, or friend. For example, young adults often become an authorized user on their parent’s credit card as they seek to build credit for themselves.

Eventually, that young adult will have built enough credit to get a credit card of their own and will be financially stable enough to be able to pay it off on time. At this point, they can decide to drop from their parents’ account.

What Is For-Profit Piggybacking?

Businesses known as tradeline services offer piggybacking for a fee. A tradeline is another word for a revolving credit account that shows up on credit reports.

The tradeline service matches individuals who are looking to build their credit with a stranger who has good credit. The tradeline service adds them to that person’s account for a fee. The cardholder receives a portion of the money, and you won’t receive a physical card or access to the account.

The practice of purchasing a tradeline can be seen as a method of deceiving lenders and credit reporting agencies into thinking you have better credit than you do. If perceived as fraud, this could have some legal ramifications.

Engaging a tradeline service can also be pricey. Depending on what type of credit you’re looking for, it may cost you anywhere from a few hundred to a few thousand dollars.

It’s also important to understand that you’re only authorized on the cardholder’s account for a short period of time. While your credit may be built in the short-term, when you’re dropped from the account, your credit score may fall as well.

Risks of Credit Card Piggybacking

In addition to the considerations above, there are other risks to be aware of when piggybacking, especially when doing so through a third party such as a tradeline service.

•   You have to give out your personal information. This includes giving your name, address, and Social Security number to the tradeline service. Providing them with your data may put you at risk for fraud and identity theft.

•   It’s not looked on favorably by lenders. Lenders use your credit score to learn how well you’re able to manage your debts. If they learn that you’ve used a tradeline service, they may lose trust in you and be less likely to extend credit to you.

•   There’s the potential for fraud. Beware any company that tells you that you can hide bad credit or a bankruptcy using a credit privacy number. The number they provide might actually be someone else’s Social Security number, which would put you at the heart of an identity theft scam.

•   It could hurt your credit. You might also be duped into buying an account that’s gone into default, which could hurt your credit.

•   There’s the potential for address merging, which is fraudulent. Sketchy companies may also try to use a process called address merging. This involves claiming that the authorized user lives at the same address as the account holder. This is fraudulent and indicates that you are not working with a reliable company.

•   You don’t get the chance to build healthy financial habits. The best way to build your credit score is to avoid taking on more debt than you can afford and to make payments on time. If you don’t have experience with doing that, you may not learn healthy financial behaviors.

Is Credit Card Piggybacking Right for You?

Credit card piggybacking may be right for you if you’re building credit for the first time and need a way to get your foot in the door.

If you do decide to try piggybacking credit, piggyback on the credit of someone close to you, if possible, such as a parent or close friend.

Alternatives to Credit Card Piggybacking

Piggybacking isn’t the only way to build your credit.

You could instead turn to one of the other different types of credit cards. Secured credit cards, for instance, require you to make a security deposit to receive a line of credit, which makes these cards easier for people with no credit history to qualify for. The credit limit on the card is typically equal to the security deposit amount.

For college students, there are student credit cards. These are entry level credit cards with lower credit limits that are generally easier to qualify for. They are designed to help students build a credit history.

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

Tips for Managing Your Credit History

There are a few strategies that can be helpful in building and strengthening a credit history.

•   Paying bills on time. Consistently paying bills on time makes you appear more creditworthy to lenders. Payment history is a major factor that impacts your credit score.

•   Having a diverse mix of credit, such as credit cards, student loans, auto loans, or a mortgage, shows that you can handle different types of accounts, and may help build your credit.

•   Keeping your credit utilization below 30%. Credit utilization measures how much of your credit limit you are currently using. You can calculate it by dividing your credit card balance by your loan limit.

•   Limiting hard credit inquiries. When you apply for credit, you trigger what is known as a hard credit inquiry. These can temporarily lower your credit score.

•   Monitoring your credit report. You can now request a free credit report each week from AnnualCreditReport.com, which is directed by federal law to provide free credit reports from the three credit reporting bureaus. Look for mistakes on the report and alert the reporting bureaus immediately if you spot anything that’s amiss.

Learning to read your credit report can also clue you into areas of your credit that need your attention and may be dragging down your score.

The Takeaway

Piggybacking credit — becoming an authorized user on another person’s credit account — can be a tool for building credit. However, you only get a benefit with credit card piggybacking if the other person’s account is in good standing. If they miss a payment, it could have a negative impact. And if you use a third-party tradeline service, you could be putting your personal information at risk.

Before moving ahead with piggybacking credit and becoming an authorized user on someone else’s account, consider all the pros and cons.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

FAQ

Is piggybacking credit illegal?

Piggybacking credit is not illegal. In fact, under the Equal Credit Opportunity Act, authorized users cannot be denied on existing credit accounts.

How much can piggybacking positively impact your credit score?

Piggybacking as an authorized user on the account of someone with good credit who has a history of paying their bills on time might positively affect your credit since this information will show up on your credit report. However, if the other person fails to pay their bills, your credit could be negatively impacted.

Does piggybacking credit still work in 2026?

Piggybacking credit does still work in 2026 when it’s done by becoming an authorized user on the account of someone you know and trust who has a good credit history. Tradeline services that charge to add you to a stranger’s account are more questionable and may, in some cases, be viewed as deceptive by lenders.

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This article is not intended to be legal advice. Please consult an attorney for advice.

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

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SOCC-Q126-056

If you’re repaying a variety of debts to different lenders, keeping track of them all and making payments on time each month can be time-consuming. And it isn’t just tough to keep track of — it’s also difficult to know which debts to prioritize to fast-track your debt repayment. After all, each of your cards or loans likely has a different interest rate, minimum payment, payment due date, and terms.

Consolidating, or combining, your debts into a single new loan or credit line could give your brain and your budget some breathing room. We’ll take a look at what it means to consolidate debt and how it works.

What Is Debt Consolidation?

Debt consolidation involves taking out one loan or line of credit — ideally with a lower interest rate — and using it to pay down other debts, whether that means car loans, credit cards, or another type of debt. After combining those existing loans into one, you have just one monthly payment and one interest rate.

💡 Quick Tip: Credit card interest rates average 20%-25%, compared to 12% for a personal loan. And with loan repayment terms of two to seven years, a loan could let you pay down your debt faster. With a SoFi personal loan to consolidate credit card debt, who needs credit card rate caps?

Common Ways to Consolidate Debt

Your options to consolidate debt depend on your overall financial situation and which types of debts you want to consolidate. Here are some common approaches.

Balance Transfer

If you’re able to qualify for a credit card that has a lower annual percentage rate (APR) than your current cards, a balance transfer credit card can be a smart financial strategy to consolidate debt as long as you use it responsibly.

Some credit cards have zero- or low-interest promotional rates specifically for balance transfers. Promotional rates typically apply for a limited time only, but if you pay off the transferred balance in full before that period ends, you’ll reap the benefit of paying less — or even zero — interest.

However, there are caveats to keep in mind. Credit card issuers generally charge a balance transfer fee, often 2% to 5% of the amount transferred. And if you use the credit card for new purchases, in many cases the card’s purchase APR, not the promotional rate, will apply to those purchases.

At the end of the promotional period, the card’s APR will revert to its regular rate. If a balance remains at that time, it’ll be subject to the new, regular rate. Making late payments or missing payments entirely will typically trigger a penalty rate, which will apply to both the balance transfer amount and regular purchases made with the credit card.

Home Equity Loan

If you own a home and have equity in it, you might consider a home equity loan for consolidating debt. Home equity is the home’s current market value minus the amount remaining on your mortgage. For example, if your home is worth $300,000 and you owe $125,000 on the mortgage, you have $175,000 worth of equity in your home.

Another key term lenders use in home equity loan determinations is loan-to-value (LTV) ratio. Typically expressed as a percentage, the LTV represents the other side of the scale to equity: Instead of how much you own, it’s how much you owe. That percentage is calculated by dividing the home’s appraised value by your remaining mortgage balance.

Lenders typically like to see applicants whose LTV is no higher than 80%. In the above example, the LTV would be 42%.

If you qualify for a home equity loan, you’ll typically be able to tap into up to 85% of your equity. After the home equity loan closes, you’ll receive the loan proceeds in one lump sum, which you can use to pay down your other debts.

A home equity loan is considered a second mortgage, a secured loan using your home as collateral. Since there’s a risk of losing your home if you default on the loan, this option should be considered carefully.

Personal Loan

If you don’t have home equity to tap into, or you prefer not to put your home up as collateral, a personal loan is another option to consider.

There are many types of personal loans, but most are unsecured loans, which means no collateral is required to secure the loan. They can have fixed or variable interest rates, but the vast majority have fixed rates.

Generally, personal loans offer lower interest rates than credit cards, so consolidating credit card debt into a fixed-rate personal loan may result in savings over the life of the loan. Also, since personal loans are installment loans, there’s a payment end date, unlike the revolving nature of credit cards.

There are many personal loan lenders, and the application process tends to be fairly simple. A loan comparison site can help you see what types of interest rates and loan terms you may be able to qualify for.

When you apply for a personal loan, the lender will do a hard inquiry into your credit report, which may temporarily lower your credit score by a few points. If you’re approved, the lender will send you the loan proceeds in one lump sum, which you can use to pay down your other debts. You’ll then be responsible for paying the monthly personal loan payment.

One drawback to using a personal loan for debt consolidation is that some lenders charge an origination fee, which reduces the amount you receive without affecting the amount you’ll have to repay. There may also be other fees, such as late fees or prepayment penalties. It’s important to make sure you’re aware of any fees and penalties before signing the loan agreement.

💡 Quick Tip: Swap high-interest debt for a lower-interest loan and save money on your monthly payments. Find out why SoFi credit card consolidation loans are so popular.

Is Debt Consolidation Right for You?

Your financial situation is unique to you, but there are several things you’ll want to keep in mind when trying to decide if debt consolidation is right for you.

Debt Consolidation Might Be a Good Idea if…

•   You want to have only one monthly debt payment. It can be a challenge to manage multiple lenders, interest rates, and due dates.

•   You want to have a payment end date. A home equity loan or a personal loan could be useful for this reason because both are forms of installment debt.

•   You can qualify for a low- or zero-interest credit card. This could allow you to consolidate multiple debts on one new credit card and save on interest by paying down the balance before the promotional rate ends.

Debt Consolidation Might Not Be for You if…

•   You think you’ll be tempted to continue using the credit cards you paid down in the debt consolidation process. This can leave you further in debt.

•   You’ll incur fees (e.g., balance transfer fees or origination fees). If those fees are high, it might not make sense financially to consolidate the debts.

•   Consolidating your debts may actually cost you more in the long run. If your goal is to have smaller monthly payments, that generally means you’ll be making payments for a longer period and incurring more interest over the life of the loan.

Recommended: Getting Out of Debt With No Money Saved

Credit Card Debt Relief: How to Get It

Some people seek assistance with getting relief from debt burdens. Reputable credit counselors do exist, but there are also many programs that scam people who may already be overwhelmed and vulnerable.

Disreputable debt settlement companies may charge substantial fees upfront and often make bogus claims, such as guaranteeing that they’ll be able to make your debt go away or saying that there’s a government program to bail out those in credit card debt.

Even if a debt settlement company can eventually settle your debt, there may be negative consequences for your credit. A debt settlement program may require that you stop making payments to your creditors. But your debts may continue to accrue interest and fees, putting you further in debt. The lack of payments may also take a negative toll on your payment history, which is an important factor in the calculation of your credit score.

Recommended: Debt Settlement vs Credit Counseling: What’s the Difference?

Debt Relief: Is It a Good Idea?

What’s a good idea for some people may be a bad idea for others. Whether debt relief is a good idea for you and your financial situation will depend on factors that are unique to you. Working with a reputable credit counselor may be a good way to get assistance that will help you pay down your debt and create a solid financial plan for the future.

The Takeaway

Debt consolidation allows borrowers to combine a variety of debts, such as credit card debt, into a new loan. Ideally, this new loan will have a lower interest rate or more favorable terms to help streamline the repayment process.

Whether or not you agree that credit card interest rates should be capped, one thing is undeniable: Credit cards are keeping people in debt because the math is stacked against you. If you’re carrying a balance of $5,000 or more on a high-interest credit card, consider a SoFi Personal Loan instead. SoFi offers lower fixed rates and same-day funding for qualified applicants. See your rate in minutes.

FAQ

What is debt consolidation?

Debt consolidation is the process of combining multiple debts into a single loan or line of credit. This may help you simplify your financial situation. Ideally, the new loan or line of credit should have a lower interest rate than those you’re paying on your existing debts, so you also save money on interest.

What options exist for consolidating debt?

Common options for debt consolidation include balance transfers to a credit card with a low or zero interest rate (sometimes offered specifically for balance transfers), home equity loans, and personal loans. The most practical choice will depend on your financial situation, including what kinds of debts you have and how much equity you hold in your home.

What are the pros and cons of debt consolidation?

Consolidating multiple debts into one line of credit or loan may help you keep your finances organized and could save you money through a lower interest rate, as well as offering an end date for your debt payoff. However, fees may cancel out the potential savings, and spreading payments over a longer period could lead to your paying more interest overall.

Who qualifies for debt consolidation?

Whether you qualify for debt consolidation depends on how you plan to consolidate your debts. To secure a home equity loan, for example, you’ll probably need to have at least 20% equity in your home. To apply for a personal loan, you won’t need that collateral, but the lender will check your credit score.

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

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Spending is on the rise — and so is consumer debt. Americans carry, on average, four active credit cards and have $6,523 in credit card debt, In Q2 2025 alone, U.S. credit card debt rose by $24 billion over the previous quarter, according to the Federal Reserve Bank of New York.

Credit card debt can be a challenge to pay off along with regular monthly household expenses. Some people may choose to refinance their high-interest credit card debt in order to secure a lower interest rate or a lower monthly payment. Refinancing credit card debt can be one way to make progress toward paying it off.

What Is Credit Card Debt?

If you’re putting more purchases on credit cards than you can pay off in a monthly billing cycle, you have credit card debt.

Interest accrues on the balance that carries over to the next billing cycle. If you don’t pay at least the minimum amount due, you’ll likely also be charged a late fee. Since credit cards use compound interest, you’ll be charged interest on accrued interest and fees. That can add up quickly and make it more difficult to get out of debt.

Carrying a balance on more than one credit card can make the debt even more challenging to manage. If your goal is to pay off credit card debt sooner, refinancing can be one way to achieve that.

Recommended: What Is the Difference Between Personal Loan vs Credit Card Debt?

What Are Some Benefits of Refinancing Credit Card Debt?

Credit card debt is revolving and typically has a variable APR.

Refinancing credit card debt with an installment loan that has a fixed interest rate, such as a personal loan, means you’ll have a fixed end date to your debt and the same APR for the entire term of the loan.

If you’re refinancing multiple credit card balances into one new loan or line of credit, you’ll have fewer bills to pay each month. That could potentially make monthly budgeting a simpler task.

Recommended: What Is a Good APR for a Credit Card?

How Might Debt Refinancing Affect Your Credit Score?

Something to keep in mind when your goal is to pay off debt is that it’s a long game.

That being said, in the short term, your credit score can decrease slightly when you apply for new credit and the lender looks at your credit report. During the formal application process, the lender will perform a hard inquiry into your credit report, which may result in a slight temporary drop in your credit score.

If you’re comparing multiple lenders, and they offer prequalification, they’ll do a soft inquiry into your credit report, which won’t affect your credit score.

Building your credit — or rebuilding it — through refinancing credit card debt is possible if you make on-time, regular payments on the new loan. Reducing your credit utilization can be another positive result of refinancing credit card debt. Both of these approaches can potentially increase your credit score.

It’s important not to overuse the credit cards you’ve refinanced into a new loan, however, or you might accumulate even more debt than you started with.

Will Canceling My Unused Credit Cards Affect My Credit Score?

After you’ve refinanced your existing credit card debt into a new loan, you might be tempted to cancel those credit cards. But that strategy could negatively affect your credit score.

Whether it’s a good idea to cancel a credit card really depends on the card. If you’ve had a credit card for a long time, closing it would shorten your credit history, which could result in a credit score drop. But if it’s a card you genuinely don’t have a reason to keep, such as a retail card for a store you no longer shop at or a card that has a high annual fee that can’t be justified with your current spending habits, closing the account might be the right step for you.

If you plan to keep a credit card open, it may be a good idea to use it for a small, recurring charge so the card issuer doesn’t close it for inactivity. Setting up autopay can be a convenient way to ensure the card stays open but is paid in full each month.

What Are Some Options for Refinancing Credit Card Debt?

Your overall creditworthiness is a determining factor when finding available refinancing options. Lenders will look at your credit report and credit score, paying attention to how you’ve handled credit in the past and how much total debt you have in relation to your income.

Balance Transfer Credit Card

If you qualify for a low- or no-interest credit card, you could use it to transfer a balance from another credit card. You’ll typically be charged a balance transfer fee equal to a percentage of the balance you’re transferring. The promotional rate on these types of cards is temporary, ranging from as short as six months to 21 months.

If you pay the transferred balance in full within the promotional period, you may not have to pay any interest, or you may only have to pay a minimal amount. However, if you still have an outstanding balance on the card when the promotional period is over, the APR will revert to the card’s standard rate for balance transfers.

Home Equity Loan

A potential source of refinancing funds might be your home if you have equity in it. Funds from a home equity loan can be used for just about anything, even things unrelated to your home. You can calculate how much equity you have in your home by subtracting the amount you owe on your mortgage from the current market value of your home.

In addition to the amount of equity you have in your home, lenders will often look at your income and credit history to determine how much you might qualify for. It’s common for lenders to limit a home equity loan to no more than 85% of the equity you have in your home. There are typically closing costs with a home equity loan, including appraisal, title search, origination, and other fees, which can cost between 2% and 5% of the loan amount.

A home equity loan is a second mortgage secured by your home. If you fail to repay the loan, the lender can foreclose your home.

Debt Consolidation Loan

Some lenders offer loans specifically for debt consolidation. These are actually personal loans, the funds from which can be used to pay off your existing credit card debt. Then, you’ll be responsible for repaying the debt consolidation loan. There may be fees charged on this type of loan, so be sure to look over the loan agreement carefully before signing it.

For a credit card consolidation loan to be as effective as possible at reducing your debt, it will ideally have a lower APR than you’re paying on your credit cards. In this way, you would be paying less in interest over the life of the loan. If a lower monthly payment is your goal, you may opt for a longer-term loan but may have to pay a higher interest rate.

Recommended: How to Get a Debt Consolidation Loan With Bad Credit

The Takeaway

If your credit card debt is piling up and you’re finding it challenging to pay down, you may be considering refinancing. Some credit card refinancing options include balance transfer credit cards with a promotional APR, home equity loan, or debt consolidation loan.

Credit cards have an average APR of 20%–25%, and your balance can sit for years with almost no principal reduction. Personal loan interest rates average 12%, with a guaranteed payoff date in 2 to 7 years. If you’re carrying a balance of $5,000 or more on a high-interest credit card, consider a SoFi Personal Loan instead. See your rate in minutes.

FAQ

What is credit card refinancing?

Credit card refinancing is a strategy in which you work toward paying off your existing credit card balance or debt with a loan or a new line of credit that has a lower rate. Refinancing options include a personal loan, balance transfer credit card, home equity loan, and debt consolidation loan.

Does credit card refinancing hurt your credit score?

Your credit score may go down at first, as the lender will perform a hard inquiry into your credit report, but the decrease is generally temporary. While refinancing, you can rebuild your credit score by paying off your new loan or credit card on time and by lowering your credit utilization.

What are the pros and cons of refinancing credit card debt?

Refinancing can help you pay off your credit card debt sooner, consolidate your credit card debt, reduce your credit utilization, or pay less in monthly interest. However, it may lower your credit score in the short term, and depending on your credit history, some refinancing options may not be available to you or may involve additional fees. For example, using a home equity loan to refinance typically includes closing costs, such as appraisal, title search, and origination fees.

What is the difference between credit card refinancing and debt consolidation?

Credit card refinancing and debt consolidation are both strategies that can help you manage your credit card debt. Credit card refinancing focuses on negotiating for better terms and interest and rebuilding a positive credit history. Debt consolidation is a type of personal loan whose funds can be used to pay off debt, including credit card debt.

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

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