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Anyone can use a money order to send or receive money. While money orders aren’t the most common tool, they’re usually simple to obtain and cash. To cash a money order at no charge, visit your local post office branch and present your money order at the window.

In this article, we outline where to cash postal money orders and what the process looks like.

What Is a Postal Money Order?

A postal money order is a type of financial certificate issued on paper by the post office. Similar to a paper check, the document is worth the amount of money determined by the person or company that purchased it. While you can obtain a regular money order from almost any bank, only the United States Postal Service (USPS) issues postal money orders.

Unlike a check, a postal money order is prepaid by the party sending it, so it can’t bounce. Money orders also never expire. A receipt is provided to the purchaser in case the money order is lost, stolen, or damaged. As a result, you can use a postal money order to securely send a payment through the mail.

Another advantage of money orders is that they are difficult to counterfeit. You can make a payment of up to $1,000 with a single order.

To send a money order, you must pay for it ahead of time using cash, a debit card, or traveler’s check. Although it is possible to buy a regular money order with a credit card, you cannot put postal money orders on a credit card.

Recommended: What Is a Niche Bank?

How to Cash a Postal Money Order Step by Step

If you receive a postal money order, you can redeem its face value by cashing it. There is no advantage in keeping a postal money order for a long time, since it doesn’t earn interest and cannot be used directly to make a purchase.

Here’s how to cash a money order at the post office for free:

1.   Bring the money order and a photo ID to a post office service counter.

2.   Sign the money order in view of the postal worker. (Do not sign it ahead of time.)

3.   You will immediately receive the cash value of the money order.

Where to Cash a Postal Money Order

You can cash a postal money order in certain places outside the post office. Many banks will cash postal money orders, as long as you have an account there. Some grocery stores and retailers will cash money orders, too.

Because proof of ID is required, you can not deposit money orders via a mobile banking app.

List of Places That Cash Money Orders

Here are some locations that may cash a postal money order:

•  Most banks. Check with your local branch.

•  Check-cashing retailer. Consumers without a bank account or nearby post office may cash money orders here for a fee.

•  International postal office. The post office offers special international money orders that can be cashed at banks and post offices in some other countries.

•  Rural mail carrier. Some mail carriers may cash money orders for rural customers if they have enough cash on hand.

•  Some supermarkets and major retailers. Search online for “places to cash a money order near me.”

Recommended: Alternative to Traditional Banks

How to Identify a Fake Postal Money Order

You’ll want to examine your money order before attempting to deposit it, to ensure it’s authentic. Here are a few ways to spot a fraudulent postal money order:

•  Look closely at the paper. Valid postal money orders have special markings and designs to prevent fraud. Visit USPS.com to view a sample money order.

•  Review sum amount. If the dollar amount is faded, too large, or not printed twice on the paper, it could be fraudulent. All postal money orders must be under $1,000 and have the sum printed twice on the paper. International postal money orders cannot exceed $700, or $500 for El Salvador and Guyana.

If you think your postal money order is fake, contact the U.S. Postal Inspection Service at 1-877-876-2455.

Recommended: Does Net Worth Include Home Equity

The Takeaway

Cashing a USPS money order is a straightforward process. Your local post office can cash a postal money order at no cost to you. You may also be able to cash a postal money order at a bank branch if you have an account there, or at your local supermarket.

A money tracker tool like SoFi’s can help you monitor all of your accounts with one app. You don’t have to pay a dime to use its online budget planner, debt payoff planner, and more.

Track your expenses and take better control of your finances with SoFi.

FAQ

Can you mobile deposit a USPS money order?

Unfortunately, you cannot use mobile deposit for USPS money orders. Instead, you must deposit it in person with a valid ID.

Where can I cash a money order for free?

You can cash a postal money order for free at your local post office. You may also be able to cash it at your local bank branch.

Can you cash a money order online?

Since you need proof of ID to deposit a postal money order, you usually can’t deposit it online.

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Photo credit: iStock/Delpixart

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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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When a refund goes to a canceled credit card, it may seem like that cash is lost for good. In fact, getting your money back just requires a few calls to the credit card company and the merchant, and a little patience.

However, there are ways to avoid a refund going to a canceled credit card and methods to recover the cash if it’s stuck in limbo between the retailer and the credit card company. Keep reading to learn how to avoid this situation, and what your options are.

Can You Stop a Refund From Going to a Canceled Credit Card?

To avoid a refund going to a canceled credit card, the easiest approach is to reach out to the merchant before starting the refund process.

Ask the business if it’s willing to refund the purchase differently. That’ll likely mean store credit or a gift card. In some instances, it could mean receiving cash back or refunding the purchase to a different credit card.

Going to the business first may involve calling customer service or visiting a bricks-and-mortar location. If the business is willing to refund the purchase differently, you’ll avoid the long process of getting back a refund that went to a canceled credit card.

Recommended: Common Credit Report Errors and How to Dispute Them

Steps for Getting a Refund on a Canceled Credit Card

When a refund is going to a canceled credit card, you have a few options to ensure the credit doesn’t go to waste. It can help to know a little about how credit cards work, but it’s not essential.

1. Check if Your Canceled Card Account Is Still Open

In the event that a credit card was canceled due to theft or loss, don’t worry. If the account is still open under a new card number, the refund from the merchant will be credited back to the new card.

Recommended: How to Report Identity Theft

2. See if the Refund Was Accepted by the Card Issuer

When there’s no longer a credit card associated with the account, things get trickier. What happens next will vary based on how long ago the cardholder closed the account.

If the customer can still log in to their account, they may see the refund reflected online. But if the account is long closed and can’t be accessed online, first the customer should reach out to the merchant and ask for the Acquirer Reference Number. Armed with this info, they can then talk to the credit card company.

3. Request the Refund

If the merchant says the refund was posted to the old account, call the credit card company and request a refund via check. This is when the Acquirer Reference Number can come in handy. In some cases, the credit card company or bank may ask for a written request.

4. Be Patient

A standard refund usually takes a week or so, but getting a refund from a canceled credit card can take longer, depending on merchant policy, credit card company policy, and even the returned item or service.

Generally, expect a refund between seven and 14 business days after your request. If 30 business days elapse with no refund, it’s time to follow up with the merchant.

5. Return Directly to the Merchant for the Refund

If 30 days pass without a refund, it may be time to return to the store to track down the refund.

In some cases, the card issuer may reject a refund to a closed account and send it back to the store. Reach out to the store’s customer service, and ask if it received a bounce back from the credit card issuer. If the store did, customers might be able to request a refund in the form of store credit or cash.

This process can be complicated or tedious, depending on the retailer’s size and bookkeeping system. An independent retailer is unlikely to have a customer service department, so going to the store with receipts and reference numbers could help speed up the process.

How To Avoid a Refund Going to a Canceled Card

Asking for an alternative refund method is one way to avoid a refund going to a canceled card, but here are a few other ways to steer clear of the lengthy process.

•   Conduct an audit of transactions before canceling a credit card. Are there any purchases you plan to return? Keeping the card open until the refund is processed could make sense.

•   Keep an eye on finances. A money tracking app can help you keep tabs on your spending, avoiding the confusion of which refund goes on what card. Some services also offer free credit monitoring and a debt payoff planner.

•   Think long and hard before canceling a credit card. Canceling a credit card can harm your credit score, and canceling one out of the blue may lead to more issues than benefits. Closing a card without thinking it through could lead to refunds on a canceled card.

Recommended: What is The Difference Between Transunion and Equifax

The Takeaway

The simplest way to avoid a refund going to a canceled card is by going straight to the merchant and asking them to refund the amount through an alternative means. That could mean getting store credit, but it’ll sidestep the credit card company and get your money back faster. If a refund does go to a canceled card, it’s not lost for good. It’ll just take a few steps to get the refund.

Tracking refunds and spending can be overwhelming with multiple accounts. That’s where SoFi comes in. SoFi tracks spending all in one place, ensuring you’ll never miss a refund.

Track your money like a champion.

FAQ

Can I get a refund that was sent to a closed credit card?

Yes, but getting the refund will depend on if the account is still open, how long the card has been closed, and the credit card company’s policies.

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Photo credit: iStock/MBezvodinskikh

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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It is (sometimes) possible to buy stocks with a credit card, but it’s rarely a good idea for most people. Most brokerages do not allow you to directly fund your account with a credit card, and even if you find a brokerage that does, the fees associated with buying stocks with a credit card can outweigh any advantages.

Before you buy stocks with a credit card, make sure you understand the risks as well as the benefits. Investing in the stock market always comes with a degree of risk. If your investments lose money, you may not be able to pay off your credit card statement, which will mean that you’ll have to pay additional interest.

Using Your Credit Card to Buy Stocks

Most brokerages do not allow you to use your credit card to buy stocks. For example, SoFi’s online trading platform does not permit you to fund your account with a credit card. Brokerages generally don’t allow you to buy stocks with a credit card to help comply with the federal regulations governing financial products, such as stocks.

However, while you can’t purchase stocks directly with a credit card, there are still ways you can use your credit card to fund your purchase of stocks. This includes using cash back rewards to fund investments as well as taking out cash advances. Another option is to use a credit card that allows you to transfer funds to a checking account, which you can then move over to your brokerage account.

Recommended: Tips for Using a Credit Card Responsibly

Benefits of Buying Stocks With a Credit Card

You generally aren’t able to buy shares of stock with a credit card, and even if you find a workaround to do so, the risks mostly outweigh the potential benefits.

Perhaps the main benefit if you’re investing with credit card rewards is that it can offer a way to put the rewards you get from your everyday purchases toward your financial future. While there’s no guarantee of success in investing, it’s possible the rewards points or cash you invest could grow in the stock market.

Risks of Buying Stocks With a Credit Card

Just like buying crypto with a credit card, buying stocks with a credit card comes with considerable risk. If you attempt to do so, take note of the following potential downsides:

•   Investments in the stock market may lose value. If this happens, you may have a hard time paying off your monthly credit card statement in full.

•   There are fees associated with buying stocks with a credit card. If you can find a brokerage that allows the purchase of stocks with a credit card, you’ll generally pay a fee to do so. Additionally, if you opt for a cash advance to use to buy stocks, you’ll also run into fees, not to mention a higher interest rate. There’s always a chance your investment returns won’t offset these costs.

•   High credit utilization could affect your credit score. Making stock purchases with your credit card, taking out sizable cash advances, or racking up spending in order to earn rewards could all drive up your credit utilization, a major factor in determining your credit score. Having a high credit utilization — meaning the percentage of your total credit you’re using — could cause your credit score drop.

•   You could get scammed. If you’re getting offers to buy certain shares with your credit card, there’s a chance it’s a scam. Do your own research before making any moves, and be wary before providing any personal information.

Recommended: Can You Buy Crypto With a Credit Card

Factors to Consider Before Buying Stocks With a Credit Card

There are a variety of different factors that you should keep in mind before buying stocks with a credit card.

Investment Fees

If you do find a brokerage that allows you to buy stocks with a credit card, they will likely charge a credit card convenience fee. This fee, which helps the brokerage to offset their costs for credit card processing, usually runs around 3% of the total price of your investment. Starting 3% in the hole makes it very difficult to make profitable investments.

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Cash Advance Fees

If your brokerage does not support buying stocks with a credit card, you might consider taking out a cash advance from your credit card. Then, you could use the cash to fund your brokerage account.

However, this transfer will often involve a cash advance fee, which typically will run anywhere from 3% to 5% of the amount transferred. Additionally, interest on cash advances starts to accrue immediately, which is different than how credit cards work usually, and often at a higher rate than the standard purchase APR.

Transfer Fees

Another way to use your credit card to purchase stocks is by making a balance transfer. You can transfer funds from your credit card to your checking account, and then move that money again to your brokerage account. In addition to the hassle of moving money around, you’ll likely pay a balance transfer fee, which is often 3% or 5%. Plus, interest will start accruing on balance transfers right away unless you have a 0% APR introductory offer.

Interest

If you’re not able to pay your credit card statement in full (because your investments have decreased in value), your credit card company will charge you interest. With many credit card interest rates often approaching or even exceeding 20% APR, this will very likely swallow up any profits from your short-term investments.

You’ll also want to look out for interest getting charged at a higher rate and starting to accrue immediately if you opt for a cash advance or a balance transfer.

Recommended: How to Avoid Interest On a Credit Card

Avoiding Scams When Buying Stocks With a Credit Card

Because most reputable brokerages don’t allow you to buy stocks with a credit card, there are occasionally scams that you need to be on the lookout for.

Watch out for individuals or lesser-known companies that say you can buy stocks with a credit card through them. Do your own research to make sure it is a legitimate brokerage and offer before using these other companies.

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

Does Buying Stock With Your Credit Card Affect Your Credit Score?

The act of just buying stock with your credit card won’t affect your credit score any more than any other purchase on a credit card. However, your credit score might be affected if you aren’t able to pay your monthly balance off in full. One of the best ways to improve your credit score is to always make sure that you have the financial ability and discipline to pay off your credit card statement in full, each and every month.

Additionally, your credit score could take a hit if you use too much of your available balance or even max out your credit card with your stock purchases, as this would increase your credit utilization. Also, you might see an impact on your credit if you open a new account to fund your stock purchases. This is because credit card applications trigger a hard inquiry, which will temporarily cause a dip in your score.

Alternatives to Buying Stocks With a Credit Card

As you can see, buying stocks with a credit card generally isn’t a great option — or even possible with most brokerages. If you want to start investing in stocks, you might consider these other ways to do so:

•   Cash back rewards: Then, you can take your cash back rewards that you earn and use them to invest in stocks or other investments.

•   Employer-sponsored 401(k): A great way to invest is through an employer-sponsored retirement plan like a 401(k). By using a 401(k), you’ll get to invest with pre-tax dollars and defer paying taxes until you make withdrawals in retirement.

•   Brokerage margin loans: If you’re looking to borrow money to invest, one option could be a brokerage margin loan. These allow you to borrow money directly from the brokerage, often at a lower rate than what’s offered by most credit cards. Be aware of the risk involved here though — even if your investments don’t pan out, you’ll still have to repay your loan.

The Takeaway

Very few (if any) brokerages allow you to directly buy stocks with a credit card. If you do find a brokerage that allows you to buy stocks with a credit card, note the fees involved, not to mention the risk of loss in investing and the possibility of damaging your credit score. This is why even if you do find a way to do it, it’s rarely a good idea to buy stocks with a credit card for most people.

One alternative is to get a cash back rewards credit card and then use rewards you earn to fund your stock investments.

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.¹

Take advantage of this offer by applying for a SoFi credit card today.

FAQ

What is credit card arbitrage?

Credit card arbitrage is usually defined as borrowing money at a low interest rate using a credit card and then investing that money, hoping to earn a higher return on investment. This is often done with cards that offer 0% introductory APRs.

What are the risks of credit card arbitrage?

The biggest risk of credit card arbitrage is that your investments will lose money, or they won’t make enough money to repay your credit card balance. This can cost you a significant amount of interest and/or credit card fees. You should also be aware that having a large balance on your credit card (even if it’s at 0% interest) can have a negative effect on your credit score.

Does buying stock with a credit card affect my tax?

Buying and selling stocks does often come with tax consequences, and you should be aware of how your investments affect your tax liability. How you buy stocks (with cash, credit card ,or in other ways) doesn’t affect the amount of taxes you might owe on your stock purchase.

Should I buy stocks with my credit card?

The way that credit cards work is that you borrow money and, if you don’t pay the full amount each month, you’re charged interest. Some brokerages may also charge credit card processing or convenience fees if they allow you to purchase stocks with a credit card. Because of the interest and fees potentially involved, it’s very difficult to come out ahead buying stocks with a credit card. Plus, there’s no guarantee of success when investing.

Is it safe to buy stocks with a credit card?

Because most reputable stockbrokers do not accept credit card payments to fund your account or buy stocks, you’ll want to be careful with any site that says that it will let you buy stocks with a credit card. Follow best practices for internet safety when trying to buy stocks with a credit card, just like you would before making any purchase online.

Do stockbrokers accept credit card payments?

Most stockbrokers do not accept credit card payments to fund your account or to buy stocks. If you want to buy stocks with a credit card, you will need to find a workaround such as taking a cash advance from your credit card and using that to fund your brokerage account. Just be sure that you understand any cash advance fees and the interest rate that come with that type of financial transaction.

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Photo credit: iStock/katleho Seisa

¹Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

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

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

Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details, please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

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

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

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If you find yourself in a situation where you’re not able to make even the minimum payment on your credit card, your account may get sent to credit card collections. Credit card debt collection is the process where credit card companies try to collect on the debt that they are owed.

The credit card companies may try to collect the debt themselves, or they may hire a third-party credit card debt collection firm to collect. In some cases, the debt owed may be sold to another company, who might then try to collect. Here’s a look at what happens when credit card debt goes to collections.

What Are Credit Card Collections?

Credit card collections is a term referring to the process that lenders go through to try to get paid for outstanding debts they’re owed.

If you know what a credit card is, you’ll know that credit card issuers allow you to make purchases with the promise of eventual repayment. But if you don’t make even the credit card minimum payment, the credit card company eventually may send your debt to collections in an effort to recoup the money owed.

How Do Credit Card Collections Work?

Credit card credit card debt collection is the end result of repeatedly not paying your credit card bills. The best way to use credit cards is to always pay the full amount each month on the credit card payment due date. Even if you’re not able to, you’ll want to at least make the credit card minimum payment.

If you don’t make any payments toward your credit card balance, the credit card company may start the credit card collections process. At this point, a third-party debt collector will assume responsibility for trying to get you to repay the money owed, relying on the contact information the credit card company has on file to get in touch.

Recommended: When Are Credit Card Payments Due

Credit Card Debt Collections Process

Most credit card companies will begin the credit card debt collections process by attempting to contact you directly to pay off the debt. If you haven’t made any credit card payments recently, the bank will likely try to email or send you certified letters. Then, if you still don’t make any payments and don’t arrange for a payment plan with your lender within 30 to 90 days, they’ll likely turn it over to a third-party debt collector.

Most credit card companies do not have the staff or business model to engage in a long-term credit card collection process. That’s why they will usually hire a third-party company or companies to do the actual debt collection. If these companies do not successfully collect the debt, it’s also possible your debt will be sold to another company, which will then try to collect on it.

At any point, one of these companies may formally sue you in an attempt to collect the money from you, one of the many consequences of credit card late payment.

Features of Credit Card Debt Collections

The credit card collections process is not a pleasant experience. Persistent letters, emails, and phone calls are all features of the debt collections process.

At the beginning, when the credit card company itself is handling the collection process, it may be a bit better. However, once your debt has been sold and/or turned over to a debt collections agency, things often become more intense.

What Is a Collection Lawsuit?

If debt collectors are not successful in using phone calls, letters, or emails, the next step is often a lawsuit. A collection lawsuit is when either the debt owner or collector files in court asking you to pay the debt. If they win, the judge will issue a judgment, which could allow the debt collector to garnish your wages or put a levy on your bank account.

It’s important to note that different states have different rules for how long a debt collector has to file a lawsuit. In most states, if you incurred the debt, the debt collector can legally collect it, and if they have the correct amount, they can keep asking you to pay the debt. However, there may be a statute of limitations on how long they can initiate a collection lawsuit. Check with a lawyer if you’re not sure about the law where you live.

Responding to a Collection Lawsuit: What to Know

If you receive a collection lawsuit, you may be wondering if you should respond. In most cases, it’s a good idea to respond to the collection lawsuit, since that requires the owner of the debt to prove their case.

If they can’t show they own your debt and that you’re obligated to pay it, you may have the debt vacated. Further, you may also have your debt discharged if it’s past your state’s statute of limitations.

Consult with a debt relief lawyer if you’re not sure what to do in your particular circumstances.

What Happens If You Don’t Respond to a Collection Lawsuit?

If you don’t respond to a collection lawsuit, it’s possible that the judge will issue a default judgment against you. A default judgment means that the plaintiff (the debt collector) automatically wins, since the defendant (you) did not respond to the lawsuit. In that case, the debt collector or owner now has the legal right to garnish your wages and/or attempt to go after the money in any of your bank accounts.

How a Debt in Collection Affects Your Credit

Having debts that are in collection will have a negative impact on your credit score. The more recent the date of collection, the more of a negative impact it will have on your credit score.

In most cases, a debt that is in collection will stay on your credit report for seven years (though note this differs from how long credit card debt can be collected).

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

Guide to Dealing With Credit Card Debt in Collection

If you have a debt that’s already in collection, you may want to consult a lawyer that specializes in debt relief. While it may seem daunting to hire and pay for a lawyer, they may be able to help you settle the debt for a fraction of the original amount or even completely discharge the debt.

Taking Charge of Your Finances

If you’re worrying about credit card debt collections, you may feel like your finances have spun out of your control. Here are some tips to take charge once again:

•   Only spend what you can afford to pay off: One of the best tips for using a credit card is to avoid making purchases that you won’t be able to pay off each month. This will stop your spending from spiraling into debt.

•   Always try to pay off your credit card in full: When you pay your full credit card statement amount each month, you stay out of debt and are more likely to have a good or excellent credit score. Although credit card debt can be hard to pay off, doing so can have a positive impact on your credit score.

•   Address any debt head on: If you find yourself in the position of having credit card debt, the best thing to do is to openly acknowledge your situation and make a plan to pay off your credit card bill. Start a budget, cut expenses if needed, and use any monthly surplus amount to pay down your debt. It’s also smart to stop spending on your credit card until you’ve reduced or eliminated any outstanding balance.

The Takeaway

If you don’t pay the balance on your credit card, your credit card issuer may begin the credit card debt collection process. This may mean that they contact you directly, hire a third-party collection company, or even sell your debt to another company. Having a debt in collections will have a negative effect on your credit score and is something to avoid if possible.

When your finances are back in order and you’re ready for a new credit card, consider the SoFi credit card.

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.¹

Take advantage of this offer by applying for a SoFi credit card today.

FAQ

What happens when credit card debt goes to collections?

If you have an outstanding credit card balance that goes to collections, the credit card company likely will ask you to make at least the minimum payment on the debt. This may continue for the first few months, after which point they’ll likely hire a third-party debt collector. The debt collector will then start trying to collect the debt from you, which may include filing a lawsuit against you.

Can a debt collector force me to pay?

A debt collector company cannot directly force you to pay a debt. However, depending on the statute of limitations in the state you live in and how long ago the debt was incurred, they may be able to sue you in court. If they win, the court may issue a judgment, which would allow them to collect by garnishing your wages and/or levying your bank account.

How long can credit card debt be collected?

In most states, as long as it’s a valid debt, there is no statute of limitations for how long a debtor can ask for repayment. However, many states do limit how long legal action can be taken to collect the debt. Additionally, the Fair Debt Collection Practices Act details what a debt collector can and cannot do while attempting to collect a debt.

Do debt collections affect your credit score?

If you have a debt in collection, especially one that has recently gone into collections, it’s likely to have a severe impact on your score. This is because payment history is one of the factors used in the calculation of your credit score, and credit card debt in collections is considered far past due.

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Photo credit: iStock/courtneyk

¹Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

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

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

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

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

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The world of earning and burning credit card miles has an undeniable appeal. However, figuring out how credit card miles work can have you falling into a rabbit hole of bonus offers and travel portals.

Before you go click-happy with applying for travel credit cards, it’s important to know how miles work on credit cards. That way, you can make a solid choice in your travel cards, and make the most of your miles. We’ll share the ins and outs of credit card miles, including how they work, how much they’re worth, how to earn miles with a credit card, and how to use credit card miles.

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

What Are Credit Card Miles?

So, what are miles on a credit card? In short, they’re a way for credit card issuers to reward you for using their card to make purchases.

Typically, the more you spend, the more miles you rack up. Depending on the card, you can rack up a higher number of points when booking travel on certain airlines or in certain categories.

Aside from redeeming miles to cover the cost of flights, you might be able to use credit card miles for hotel reservations, ride shares, or car rentals. Many credit cards also allow you to redeem your miles for cash back, gift cards, or online purchases with partnering retailers. If it’s an airline-branded credit card, you might also be able to use your miles for upgrades, free checked bags, and in-flight purchases.

Credit Card Miles vs Frequent Flyer Miles

Credit card miles and frequent flyer miles are customer loyalty incentives that both offer ways to earn miles to redeem for free flights.

Most major airlines have a frequent flyer program. Signing up for a frequent flyer account is usually free, and it allows you to earn miles when you book with that particular airline. Depending on the program, you can also use those miles for travel perks, such as seat upgrades, priority boarding, and free in-flight purchases.

With credit card miles, on the other hand, you earn miles when you make purchases on your credit card. Unlike with frequent flyer miles, you don’t have to make these purchases with a particular airline in order to earn credit card miles. However, you will have to apply for a credit card and get approved to get those miles.

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How Do Miles Work on Credit Cards?

A credit card will reward you with miles when you spend a certain amount on the credit card. Often, cards will offer one mile per dollar spent, though this can vary depending on how a credit card works. In turn, you can redeem these miles for a free flight or other perks.

Some credit cards offer bonus miles for spending in different categories, allowing you to earn more than the standard mile per dollar. For instance, if you use your credit card at restaurants during certain months of the year, you could receive three miles per dollar spent, instead of the usual one mile per dollar.

As for the redemption value (or how much a point is worth in booking flights), that’s worked out between the airline and the credit card issuer. If the redemption value is 1 cent per mile, for instance, you’d need 40,000 miles to cover a $400 flight.

How Much Are Credit Card Miles Worth?

How much credit card miles are worth depends on several factors, including the redemption value, whether you’re booking through a travel portal, and the particular credit card. But typically, each mile is worth 1 cent apiece.

The number of points that you’ll need to book a free flight varies. It largely boils down to the redemption value, or how much a point is worth in dollars. As mentioned before, this value is determined between the airline and the card card company. Additionally, the cost of the flight itself will influence how many points are needed.

Some of the major credit card issuers, airlines, and hotels have travel portals where you can redeem your credit card miles for flights, hotel stays, and car rentals. An incentive might be offered to use these travel portals. For instance, your miles might stretch further if you redeem them through the portal. Or, there might be a featured, limited time offer where your miles are worth more if you travel to certain cities or regions.

How to Earn Airline Miles With a Credit Card

Now, we’ll dig into the fun part: how to earn credit card miles. There are a bunch of ways to rack up airline miles. Let’s take a look at the most common avenues.

Spend on the Card

The more you spend on your credit card card, the more miles you’ll earn. Plus, a credit card might offer the opportunity to earn more miles in certain categories (i.e., 5 times more on flights booked through a portal) or in rotating bonus categories.

While it might be tempting to keep spending in order to earn more miles, remain mindful of your credit card limit and avoid racking up too much debt (not to scare you, but here’s a look at what happens to credit card debt when you die).

Sign Up for a New Card

A credit card might feature a generous sign-up offer. If you hit the minimum on the sign-up offer, you could rack up a slew of credit card miles (just make sure you can afford to still pay off at least your credit card minimum payment).

Typically, you’ll need to spend a certain amount within a particular period after opening your account. For instance, if you spend $4,000 on transactions within the first three months of being a new cardholder, you could net 75,000 credit card miles.

Sign-up bonus offers are constantly changing, so it’s a good idea to check what a card’s intro bonus is currently before you apply. Also make sure to weigh factors aside from just a welcome bonus, like whether there’s a good APR for a credit card.

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Refer Friends

As a cardholder, you also can earn credit card miles when you refer friends. Often, there’s an affiliate link that you can send to your friends and family members. If they decide to apply and get approved for the card, you’ll earn a referral bonus.

Credit card referral bonuses often have limits though. For instance, a credit card might offer a 20,000 bonus miles per referral, but with a 100,000 limit per year. That breaks down to a maximum of five referrals per year.

How to Redeem Credit Card Miles

Once you’ve racked up credit card miles, you’ll need to redeem them. Let’s take a look at how to do so.

•   Credit card’s travel portal: Travel portals usually give you the option to redeem your credit card miles in a number of different ways, such as flights, car rentals, or hotel stays. You might even get a better deal than you would purchasing tickets outside of the portal. Typically you won’t need to provide information, such as your CVV number on a credit card, to redeem your miles.

•   Travel-related platform: Besides redeeming credit card miles through a credit card network’s travel portal, some hotel chains offer their own online platforms. You can choose to redeem credit card miles there as well.

•   Bundling with a partner loyalty program or frequent flyer program: Some credit cards give you the option to transfer your credit card miles to a hotel, airline, or car rental transfer partner.

Recommended: Tips for Using a Credit Card Responsibly

How to Use Credit Card Miles

Perhaps the most obvious way to use your credit card miles is for free flights. However, you may also be able to redeem them for the following benefits as well:

•   Seat upgrades

•   Priority boarding

•   In-flight purchases

•   In-airport purchases

•   Purchases with specific retailers

•   Gift cards

•   Events

Do your homework and look for ways to get the most out of your miles. For instance, some travel portals give you a higher redemption value. In other words, your credit miles will be worth more and go further, and you’ll get more bang for your buck.

How to Check Your Credit Card Miles Balance

Wondering how many credit card miles you’ve racked up? Here are a couple easy ways to check your balance:

•   On your credit card app: You can easily check your credit card miles through the credit card app. Usually, it will also direct you to ways that you can spend your miles.

•   On your online credit card account: Once you log onto your cardholder account, you’ll typically find the number of credit card miles you’ve racked up on the dashboard. You can also see a breakdown of how many miles each transaction yielded. This is important to check regularly anyways, in case you need to dispute a credit card charge or request a credit card chargeback.

•   By contacting your credit card issuer: You can also reach out to your card issuer over the phone to learn your credit card miles balance. Simply call the number listed on the back of your credit card to speak to a representative.

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Other Types of Credit Card Rewards

Credit card miles aren’t the only reward you can earn from using your credit card. Here are other types of credit card rewards you can swoop in on:

Cash Back

With cash back, you earn back a percentage of eligible purchases made with your card in cash. For example, you might earn 3% cash back, which means you’d get 3 cents back for every dollar you spend.

You can redeem the cash-back rewards you earn in a number of ways, such as a statement credit or as straight cash. However, you might not snag great travel deals like you would with more travel-oriented credit card rewards.

Points

Credit card points offer you a certain number of points for your spending on the credit card. You could get two points for every dollar you spend, for instance. You’ll then be able to redeem those points for a wide range of purposes, though the value of the points can vary depending on the card and how you opt to use your points.

The Takeaway

Credit card miles allow you to get rewarded for your spending with your card. You’ll earn miles whenever you make a purchase on your card, and you can then use those miles to cover the cost of flights and enjoy other travel-related perks.

Beyond looking at a credit card’s miles-earning potential, you’ll also want to look at the APR on a credit card, as well as its fees, terms and conditions, and other featured perks. With the SoFi Credit Card, for instance, you can earn cash-back rewards. Plus, travelers will be happy to hear that the card charges no foreign transaction fees.

FAQ

Is earning credit card miles worth it?

As long as you’re using your credit card responsibly, earning credit card miles to use toward free flights, car rentals, travel perks, and other rewards can potentially help you save.

Which types of credit cards offer airline miles?

Many different credit cards offer airline miles. Usually, travel credit cards or credit cards co-branded with an airline offer additional perks or a greater number of miles earned per dollar.

What are the different types of credit card rewards?

The main types of credit card rewards are miles points, and cash back. Each type of reward has its pros and cons, but they all allow you to earn rewards for your spending on your credit card.

What is the difference between credit card miles and points?

Typically, miles can be used for travel, and they may be tied to a specific airline’s frequent flyer program. Points, however, can be used toward a slew of non-travel related rewards.

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Photo credit: iStock/Prostock-Studio

Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details, please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

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

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

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

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