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

In contrast, when you pay with a credit card, you may not have to make any payment immediately. Instead, the credit card company will send you a monthly statement with all of the charges you made during the month. You’ll generally need to make a minimum payment, and will owe interest on any remaining balance. As long as you continue to make the minimum payments and are okay paying interest each month, there’s no limit to how long you can take to repay your purchase.

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

Recommended: What is a Charge Card

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

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

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

Recommended: When Are Credit Card Payments Due

Pros and Cons of Buy Now, Pay Later

Now that you’re familiar with the definition of Buy Now, Pay Later, here are some of their pros and cons:

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

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What Is a Credit Card? And How It Works

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

When you apply for a credit card, the issuer will do a hard pull on your credit. If approved, you’ll be given a specific credit limit that is the maximum amount you can borrow. As you borrow against that limit when using a credit card, your available credit is reduced. Similarly, it’s replenished when you make payments.

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

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

Pros and Cons of Credit Cards

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

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

Difference Between Buy Now, Pay Later and Credit Cards

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

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

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What Is a Buy Now, Pay Later Credit Card?

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

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

Choosing a Buy Now, Pay Later Credit Card

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

Benefits of Buy Now, Pay Later Credit Cards

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

•   Earn rewards on your purchases.

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

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

Risks of Buy Now, Pay Later Credit Cards

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

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

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

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

Recommended: How to Avoid Interest On a Credit Card

The Takeaway

Buy Now Pay Later and credit cards are two ways to pay for your purchases over time. With BNPL, you’ll usually pay an initial deposit at the time of purchase, and then you’ll make several fixed payments over the course of a few months. With credit cards, you have a set credit limit that represents the maximum you can spend on any purchases. Each month, you’ll get a statement with your total monthly charges and any outstanding balance. If you don’t pay your statement balance in full, you’ll owe interest on any unpaid amount.

Buy Now, Pay Later and credit cards can both make sense in certain situations if you need to make a purchase and don’t have the money right now. Another option is to get a Buy Now, Pay Later credit card, which combines features from both types of plan.

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

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

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

Will BNPL affect my credit score?

Generally speaking, BNPL plans do not impact your credit score as long as you make your payments on time. However, if you do not fulfill your BNPL contract, your outstanding debt may be reported to the credit bureaus, which could have a negative impact on your credit score. All BNPL plans work differently, so you will want to make sure you understand the terms and conditions of the plan you’re using.

Will BNPL replace the use of credit cards?

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

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Photo credit: iStock/RgStudio

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.

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.

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Many Americans struggle to save money but it’s worth the effort since there are serious downsides to not stashing away cash. These can range from going into debt, facing financial hardship after losing your job, and not being able to achieve your aspirations, like homeownership.

To help you get motivated to put money in the bank, here are twelve dangers of not saving money. They may help you understand why it’s best to put away cash and motivate you to tuck some into a savings account. Not only will you be better prepared for the twists and turns of life, you’ll be better equipped to reach your financial and lifestyle goals.

The Importance of Saving Money

1. Going Into Debt

Without a savings cushion, any expense—from an unexpected car repair to paying for your child’s college education—can put you in debt. In addition, while credit cards and loans are convenient ways to afford more than your bank account, you pay more in the long run because of interest and loan fees.

Since debt often costs more than the actual expense, you can essentially save a considerable amount of money by plumping up your piggy bank.You can try easy ways to save, such as creating a simple budget or automating savings, to put aside a few dollars a month before you can spend it. These moves can ensure that you’ll be using savings instead of debt to pay for your upcoming expenses.

2. Having a Social Life Can Be Nonexistent

Your friends and family are likely on the list of things you enjoy most in life. Being able to afford a dinner out with loved ones can really boost your mood. Heading to a concert with friends can create memories that last a lifetime. But a full social calendar may put you in a sticky financial situation if you haven’t saved anything. From movie dates to happy hours to ball games, these expenses can add up.

No matter your income level, how much money you save each paycheck can make the difference between having a nonexistent social life and a happening one.

3. Life Being More Stressful

According to the Stress in America survey , 65% of respondents say money is a big stressor in their lives, which is the highest percentage since 2015. When you think about it, failing to save can make you feel stuck or overwhelmed. Your personal, financial, and professional life can suffer because a lack of savings has cut off your options.

Achieving your goals, financial and otherwise, may be a struggle without savings to propel you forward. The importance of saving money goes beyond paying an unexpected bill; it can affect your daily quality of life.

4. Not Having the Money for an Emergency

You’ll find many articles, resources, and financial professionals advising you to set aside an emergency fund. Life is expensive and doesn’t always go as planned. So, saving in advance helps you manage life’s unexpected costs.

For example, building an emergency fund might be a better choice than splurging if you get a raise. You’ll thank yourself later when, say, your furnace goes out or you wind up with a major medical bill. Typically, money experts recommend having at least three to six months’ worth of basic expenses salted away in an emergency or rainy day fund.

5. Not Being Able to Celebrate Events

Life is full of amazing milestones like getting married, having a baby, or graduating from college. Unfortunately, celebrating these life events with your family often takes substantial cash. Not being able to recognize these events the way you’d like to is another one of the many dangers of not saving money. The lack of a financial cushion could also lead you to skip, say, a friend’s destination wedding.

Although you could put your celebration on your credit card, you run the risk of going into debt. This will likely cost more over the long run since you have to pay for interest. In other words, you might still be paying it off for years to come.

6. Not Having a Viable Option if You Are Fired

No one plans on getting fired; however, it’s always possible to lose your job unexpectedly. Financial emergencies like this are an important reason to save. Saving can give you security during this kind of a crisis. If you don’t have some cash available, you might have to look into financially downsizing.

This underscores the importance of saving money from your salary when you are employed. You might consider having a small amount automatically transferred from your checking account into savings on payday.

As mentioned above, you should save at least three months of your expenses in an emergency fund. This way, you can have a solid safety net if you get laid off or are temporarily disabled and can’t work for an extended period.

7. Not Having an Inheritance for Your Children

If you’re a parent or plan to be one, you likely want to give your kids a leg up in life. An inheritance can help your children or heirs to build their nest eggs and meet life’s expenses without stress. Having both savings and an estate plan can be a lasting, life-changing gift to those who matter to you most. These assets can serve to eliminate the possibility of financial legal challenges for your family. That said, being unable to leave a legacy is a consequence of not saving money.

8.Not Being Able to Buy a Home

About three-quarters of Americans believe that homeownership is still a core component of the American Dream, according to one recent study . If you don’t save, the dream of homeownership may never become your relativity.

You traditionally need a 20% down payment to qualify for most conventional mortgages. Buying a home also usually involves other expenses, such as closing costs, repairs, moving costs, and more. Not having savings can make it almost impossible to afford the home of your dreams.

9. Not Being Able to Go on Vacation

Without savings, it’s challenging or even sometimes impossible to take time off for some rest. When you don’t set money aside, you can get sucked into the never-ending cycle of living paycheck-to-paycheck. Since you need to work to support yourself, vacations may become less frequent or disappear altogether.

While you may think you can put a vacation on credit, that can perpetuate the “can’t save” situation, because you’ll have debt to wrangle. You could wind up coming home from your getaway to face more bills…ones you may struggle to afford.

10. Not Having Much Financial Freedom

One of the most potent limiting factors in life can be a lack of savings. With a robust bank account to fall back on, you increase your options and flexibility. Moving to a city or state with more opportunity, taking a professional course or college classes, and starting a business can all be possibilities if you’ve saved money.

Of course money can’t solve every problem life throws at you. However, it is a powerful tool that allows you to access opportunities. Remembering this can help you get serious about saving money.

11. Not Being Able to Invest

Investing your money is a superpowered version of saving. For example, if you begin saving $100 at age 25, you will save $12,000 more by age 65 than someone who starts putting $100 away at age 35.

If you save or invest, you can capitalize on compound interest and/or compounding returns. This means your gains are reinvested, so your money can grow faster over time. Consider that an incentive to start saving as early as possible. For example, if you receive a 7% annual rate of return and begin contributing $100 toward saving at age 25, you will amass $120,000 more by age 65 than someone who began contributing at age 35.

If you are Investing your savings vs. keeping them in an insured bank or credit union, you may get higher returns, but this can also mean taking on risk. To balance those forces, educate yourself with an investing guide or seek professional advice.

12. Not Being Able to Help Others

When someone is in financial need, lending money can help them get back on their feet. Whether it’s through providing a micro-loan, donating to a charity, or contributing to a scholarship, you can make a difference in the lives of others no matter how much you give.

But, if you don’t have savings, you may not be able to afford a helping hand.

Why Saving Money Is Very Important

Since money touches almost every area of your life, saving it for what matters most can be essential. Reining in your spending habits can be hard, no doubt, but the payoff quite literally is being able to afford your needs and your goals.

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Affording an enjoyable, stress-free life doesn’t just happen; it requires saving. While this can be difficult in the moment (saying no to splurges, for instance), it can set you up for years of financial wellness. Whether you want to be able to celebrate big moments with friends, start your own business, own a home, or take a major vacation, saving money can help put you on the right path.

Here’s one way to save smarter: with a SoFi bank account. When you use our mobile banking app with direct deposit, you’ll earn a stellar APY and pay zero account fees. Those two moves can help your money grow faster.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

Can I get by without saving money?

While it’s possible to get by without savings, there may come a day when you run into an unexpected expense that causes financial hardship. If you live paycheck to paycheck without an emergency fund, an unforeseen cost could set you back and make it challenging to recover.

Is debt inevitable if you do not save?

Without savings to fall back on, it’s quite possible to go into debt when unforeseen expenses arise. Contributing to a savings account, even a small amount monthly, can make unexpected costs more manageable so you can sidestep debt.

When is the best time to start saving?

It’s best to start saving now to give yourself time to build a cushion. Remember, everyone has to start somewhere. Even if you can only save $20 per month, your future self will likely thank you.

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Photo credit: iStock/nicoletaionescu

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

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

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

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

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

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

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

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.

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

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Shared branch credit unions allow members to access banking products and services at other credit union branches that belong to a wider network. Joining a shared branch credit union can make managing your financial accounts more convenient if you live, work, or study in an area where your home credit union doesn’t have branches.

The types of transactions that can be carried out via shared branching are typically the same as those allowed by the home branch. There are, however, a few things you may not be able to do, so here’s a closer look.

Read on to learn:

•   What is shared branch credit union and how does it work?

•   What can members do at a shared branch?

•   What can’t members do a shared branch?

•   Pros and cons of shared branching.

What Is Shared Branching?

Shared branching is the practice of allowing members of one credit union to carry out financial activities at branches of other credit unions that are all located within the same branch network.

Here’s one example: The Co-Op Shared Branch managed by Co-Op Solutions, for example, offers access to more than 5,600 shared branches in the U.S. and over 30,000 surcharge-free ATMs. This shared branching network includes credit unions in all 50 states. This can be very convenient in terms of being able to bank at a variety of locations.

As long as your home credit union, meaning the credit union where you maintain your accounts, is part of a shared branching network, then you can access your accounts at other credit unions within the network. You don’t need to be a member of multiple credit unions to benefit from this sharing system.

Shared branching is a significant departure from traditional banking. If you have checking and savings accounts at Chase Bank, for example, you likely wouldn’t be able to walk into a Bank of America and conduct business.

How Can I Use a Shared Branch?

To use a shared branch credit union, you first have to determine whether your home credit union belongs to a sharing network. Co-Op Solutions, for instance, simplifies this process. It offers a shared branch and ATM locator tool that you can use to find shared credit union branches near you.

Once you find a shared branch, you can visit in-person to manage your accounts. You’ll need to bring a form of photo identification to verify your identity. You may also need to provide your phone number and the last four digits of your Social Security number. And of course, you’ll need the name and account number for your home credit union.

Generally, you can use a shared branch credit union much the same as your home credit union. That means you can use the ATM to make withdrawals or check account balances. If you need to make a deposit or complete other transactions, you can do those through a teller either inside the branch or at the drive-thru.

What Can Members Do at a Shared Branch?

For the most part, shared branch credit unions allow you to carry out the same range of transactions as you would at your home branch. If you’re not sure what a particular shared branch credit union allows, you may be able to find a list of services on the credit union’s website.

Here are some of the most important transactions you can complete via shared branching.

Deposits and Withdrawals

Credit union members can deposit funds to their accounts and make withdrawals through a shared branch credit union. That’s convenient if you need to deposit cash or withdraw money from your accounts. You may also choose to make deposits in-person if you’re concerned about mobile deposit processing times. (And if you’re wondering, “Is mobile deposit safe?”, the answer is yes.)

Transfer Money Between Accounts

Shared branching also allows members to move money between accounts. For example, you may want to shift some of your savings to checking or to a money market account at your credit union.

Can you move money from one bank to another via shared branching? Yes, if you have accounts at more than one credit union. If you need to transfer money from your credit union to a financial institution that’s not part of a shared branch network, then you’ll need to link the external account to schedule an ACH transfer or wire transfer.

If you need to send funds overseas, keep in mind that not all credit unions participate in the SWIFT banking system, which is used to facilitate international wire transfers.

Make Loan Payments

Credit union members can make payments to auto loans, personal loans, mortgages, and other loans through shared branches. You’ll need the loan number to make your payment. Being able to pay through a shared branch credit union could help you to avoid missed due dates.

What Can Members Not Do at a Shared Branch?

While shared branch credit unions allow for flexibility, there are some things members cannot do. If you belong to a shared branch credit union network, here are some of the things that are typically prohibited.

Open a Bank Account

If you’re visiting a co-op shared branch credit union, you can’t open a new account with your home credit union. Instead, you’d need to go to one of your home credit union’s branches or visit the credit union’s website to open the accounts. Of course, you could ask how to open a business bank account or personal bank account options at the shared branch if you’re interested in being a member of that credit union.

Access Deposited Funds Immediately

Just like banks, credit unions process transactions according to a set schedule. When you deposit money at a shared branch credit union, you can’t expect to be able to withdraw it right away. The deposit hold time or processing time can vary by the credit union. You may be able to expedite processing if the credit union allows it, but you may pay a fee for that.

Withdraw an Unlimited Amount of Money

Shared branch credit unions can impose limits on the amount of money members can withdraw each day. For example, members of the Co-Op Solutions Shared Branch Network limit members to $500 per day in withdrawals when accessing funds at shared branches. That limit may be higher or lower than the limit imposed by your home credit union.

Open an Individual Retirement Account

Individual Retirement Accounts (IRAs) offer a tax-advantaged way to save money for retirement. Credit unions can offer IRAs to savers, though you typically cannot open one through a shared branch. Instead, you’ll need to go to your home credit union to open an IRA either in-person or online.

Benefits of Shared Branching

If you prefer credit unions to traditional banks, then belonging to a shared branch credit union can offer some advantages. Remember, you don’t have to do anything special to enjoy the benefits of shared branching, other than belonging to a credit union that’s part of a sharing network. You don’t have to open multiple bank accounts to have privileges at more locations.

Convenience

Shared branch credit unions make it convenient to access your money wherever you are, as long as there’s a shared branch location nearby. So whether you’re traveling for business, taking a family vacation, or planning a move, you don’t have to worry about leaving your credit union accounts behind.

Flexibility

Doing business at a shared branch credit union allows for flexibility since you can do most of the things you’d be able to do at your home branch. Again, the main things you wouldn’t be able to do include opening new checking or savings accounts, opening an IRA, or applying for a loan. You’d only be able to do those things if you also choose to become a member of the shared branch credit union.

Avoid Fees

How do banks make revenue? By charging fees for the services they provide. Being part of a shared credit union may help you avoid some fees. If you use a shared-branch credit-union ATM network while you’re traveling, you may be able to avoid out-of-network ATM surcharges. While shared branch credit unions may charge fees for certain services, others may be provided free of charge.

Drawbacks of Shared Branching

While shared branching does have some advantages, there are some potential downsides to consider. Here are some of the main cons of using shared branch credit unions.

Availability

Credit unions are not obligated to join a shared branch network. If your home credit union isn’t part of a sharing network, then you’ll be limited to using only that credit union’s branches. That could make managing your accounts more challenging if you regularly travel for business, school, or pleasure.

(However, many people today are used to banking without bricks-and-mortar locations, which is a key difference between online banking versus traditional banking. This availability issue may not be a big concern to some who do their money management online or via an app.)

Withdrawal Limits

As mentioned, credit unions that are part of the Co-Op Solutions network can limit you to cash withdrawals of $500 per day. If you need to withdraw a larger amount in cash, you’d need to find a branch of your credit union to do so, assuming your credit union has a higher daily cash withdrawal limit.

Use Limitations

Shared branch credit unions can be used to do quite a few things but they’re not all-encompassing. There are some transactions that you’ll only be able to do at your credit union’s branch or via the credit union’s website or mobile app.

The Takeaway

Deciding where to keep your money matters. Shared branch credit unions can make banking easier. With shared branches, you don’t have to be limited to a certain geographic area when managing bank accounts in person or via ATM. You can avoid fees by being part of a large network of connected credit unions. While there are some drawbacks, the benefits of convenience and cheaper banking costs can be very appealing to some consumers.

Of course, there’s a lot to be said for online banking and its associated benefits. You can also save money on fees, earn higher interest rates on deposit accounts, and be able to complete many transactions via an app.

SoFi, for example, offers online banking with competitive rates and no fees when you sign up with direct deposit. You can access your money fee-free at more than 55,000 Allpoint network ATMs too.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

Should I join a credit union or a bank branch?

It depends on your needs. Joining a credit union could make sense if you’re looking for lower interest rates on loans and fewer fees, provided you meet the credit union’s requirements to join. If you do choose to join a credit union for those benefits, you can still open an account at a traditional or online bank and enjoy the benefits those offer.

Is it good to be part of a credit union?

Credit union membership can offer certain perks that you may not always get at a bank. For example, credit unions may charge lower interest rates for loans while offering higher interest rates on deposit accounts. You may also be able to get access to discount programs and other special incentives for being a member.

Can I withdraw money from any bank branch?

You can withdraw money from any branch of your bank, either by seeing a teller or using the ATM to access your accounts. However, you wouldn’t be able to walk into a branch of Bank A to withdraw cash from accounts held at Bank B.

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Photo credit: iStock/Marco VDM

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

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

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

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

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

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

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

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

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.

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

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A personal line of credit is a type of revolving credit line that can be used to pay for a variety of personal expenses. This is different from a personal loan, which is an installment loan — awarded in a lump sum to the borrower that must be repaid at specified intervals.

While both options allow you to borrow money there are benefits and drawbacks of each. Continue reading for more information on personal lines of credit and when this type of financing may make the most financial sense.

What Is a Personal Line of Credit?

A personal line of credit is what’s known as a revolving credit vehicle. It’s similar to a credit card in that:

•  It has a maximum credit limit.

•  A minimum payment is required every month.

•  When the debt on the credit line is repaid, money can be withdrawn again.

Although a personal line of credit doesn’t include a physical card, it’s still possible to write checks, withdraw cash at an ATM, and transfer money into another account. Generally speaking, the interest rates on a personal line of credit are lower than those on a credit card.

Personal lines of credit may be secured — requiring collateral — or unsecured — not requiring collateral. For example, a home equity line of credit is secured. This is a very popular option, so much so, that it’s often referred to by people in the know by its acronym alone — HELOC.

💡 Recommended: What Is a HELOC and How Does It Work?

Whether secured or unsecured, some lines of credit require minimum payments of interest and principal, while others only require interest payments for a period of time. This is known as the draw period.

That means that for a certain period of time you can draw money from your line of credit and most borrowers are usually required to make interest payments.

After the draw period is over, the line of credit is no longer revolving (meaning, you can’t borrow against it anymore), and you’re required to make interest and principal payments.

Where to Get a Personal Line of Credit

Not every bank or lender will offer personal lines of credits though they can be found at some banks, banks, credit unions, and other financial institutions.

How to Get a Personal Line of Credit

The process for applying for a personal line of credit is usually similar to applying for other loans or credit cards. Lenders may accept applications online, in-person, or over the phone, and specific application requirements may vary by lender.

Before formally applying, review your credit score and shop around at different lenders to compare the rates and terms you may qualify for. Many lenders will allow you to see if you prequalify, which may require a soft credit check, which won’t impact your credit score. Also be sure to evaluate any fees associated with the line of credit and review the draw period and repayment periods.

Once you’ve determined which loan you’d like to apply for, gather the required documentation (such as statements for proof of income). Your chosen lender will generally have a list of required documents. From there, you’ll fill out the application and wait for approval. At this stage, the lender will usually complete a hard credit inquiry which may impact your credit score.

When to Use a Personal Line of Credit

Personal lines of credit typically offer greater flexibility when it comes to accessing the loan and repaying it than other types of financing like a personal loan or credit card.

If you’re planning to do a home renovation, for example, you may not need a big chunk of money all at once. A line of credit allows you to access money over time (versus all at once) to pay for things in dribs and drabs as you pick out the tile for your kitchen and your contractor finally gets around to installing it. This flexibility can reduce your interest charges because you are only borrowing money you plan to use immediately.

Another benefit of a line of credit is that you can pay it off and then typically borrow from it again. This makes it a great backup to have in case you suddenly experience an expensive emergency that you don’t want to put on your credit cards.

You can also choose a line of credit with a draw period (similar to a HELOC) that allows you to only pay interest on the money borrowed for a period of time.

Drawbacks to a Personal Line of Credit

One drawback is that it can be difficult to get an unsecured line of credit with a good interest rate because they can be more difficult to qualify for than some other types of loans, such as a HELOC. This is because personal lines of credit are unsecured loans, and therefore, more risky for the lender. Without collateral, the lender needs to be sure that the borrower has the ability to pay back their loan. That’s why for some, it may be easier to qualify for a HELOC — but it means that you’re jeopardizing your home if you fail to repay it.

Also, the flexibility that comes with a line of credit may be a double-edged sword. The ability to keep borrowing for an extended period of time could lead to feeling tempted to take on more debt or take longer to pay off debt… all of which could mean more interest charges over time.

Using a Personal Loan as a Personal Line of Credit Alternative

When comparing a personal line of credit vs a personal loan, the major difference is that a personal loan is, as mentioned, an installment loan. Like a personal line of credit, personal loans can be used to pay for nearly any personal expense. Borrowers receive a lump sum payment and pay back the loan in installments. Personal loans may have fixed or variable interest rates.

A personal loan may make more sense for borrowers who have a firm idea of their budget or a fixed expense, such as for medical bills, buying an engagement ring, or consolidating debt. Additionally, depending on creditworthiness, the average interest rate on a personal loan may be lower than that of a personal line of credit. Though interest rates will vary by lender so evaluate the options available to you.

Also compare any fees or penalties associated with the personal loan. If a personal loan has a prepayment penalty, you may not be able to pay off the personal loan early.

Other Personal Line of Credit Alternatives

HELOC. As mentioned, this is a home equity line of credit. Borrowers tap into the equity in their home to borrow a line of credit. This is a secured loan where the house functions as the collateral. This can help borrowers qualify for a more competitive interest rate than with an unsecured personal line of credit, but it also means that if the borrower has issues repaying the HELOC, their home is at risk.

Credit Cards. In certain situations, a credit card may be used to help pay for emergency expenses. Be aware that credit cards generally have high interest rates — the average credit card interest rate was 14.56% in February 2022, according to recent data available from the Federal Reserve .

Secured Loans for a Specific Purpose. For example, if you are buying a car consider a car loan over a personal line of credit or personal loan.

The Takeaway

Personal lines of credit offer flexibility for borrowers because they are a revolving line of credit that functions similarly to a credit card. Borrowers can continue drawing on the line of credit for a set period of time to cover the cost of necessary expenses.

Personal loans are an alternative to consider for borrowers who are paying a fixed cost.

If you’re in the market for a personal loan — consider SoFi, which offers low fixed interest rates and have no fees required.

If you think a personal loan might be right for you, check out SoFi personal loans to see if you may qualify.

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

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

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

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

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

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Using a credit card can be easy — almost too easy. And should a financial emergency pop up, or you reach for your credit card to make a cascade of purchases, before you know it, you’re faced with a maxed out credit card.

When you’ve maxed out on your card — or reached your credit card spending limit — it can have a negative impact on your finances. Let’s take a look at what happens if you max out on a credit card and how it can affect your credit score, as well as how to prevent maxing out in the first place and tips to bounce back if you already have.

When Is a Credit Card Maxed Out?

So, what is a maxed out credit card? Maxing out on a credit card simply means that you’ve reached the credit limit on your credit card. For instance, if you have a $20,000 credit limit on a card, and your balance hits that $20,000 mark, it’s maxed out. As such, you may not be able to put any more purchases on that card.

Recommended: What is a Charge Card

What Happens If You Max Out Your Credit Card?

There are a number of financial impacts of a maxed-out credit card. For starters, your card will likely get declined if you try to make a purchase. This is because rather than overdrafting a credit card, your credit card is typically just turned down (though in some cases, you could instead face fees for exceeding the limit, and the charge will go through).

Additionally, you could end up paying quite a bit in interest if you can’t pay off your entire statement balance in full. Plus, it could take you a long time to pay off your balance, further increasing the interest you pay over time. Your minimum payment due may also increase, depending on how it’s calculated by your issuer.

A maxed-out credit card also means that your credit score will take a hit. That’s because your credit utilization — how much of your available your credit you’re using — makes up 30% of your credit score. If you’re maxing out a credit card, it looks as if you’re overextended financially, which signals to lenders that you’re a risk.

Recommended: When Are Credit Card Payments Due

Guide to Prevent Maxing Out Your Credit Card

To avoid maxing out on your credit card, here are some steps to take:

•  Establish an emergency fund: Without an emergency fund, you’ll likely resort to using your credit card in a pinch, which could lead you to max out your credit card. To avoid ending up in this situation, aim to stash away at least three to six months of living expenses. If that seems like a tall order, start with one month of living expenses, and go from there.

•  Keep tabs on your spending: A golden rule of using a credit card responsibly is to check your credit card statements to monitor usage. Aim to check your balance at least once a week, if not more frequently.

•  Know how much of your credit you’re utilizing: Another of the golden credit card rules is to know what a reasonable balance to keep is and how much of your credit card is being utilized at any given time. For instance, if 30% is the maximum amount you’d like to maintain on your card, and your credit limit is $5,000, then $1,500 is the highest balance you should aim to carry.

•  Request an increase to your credit limit: If you increase your credit limit, it would lower your credit use. However, keep in mind that you also run the risk of racking up a higher credit bill. When considering requesting a credit limit increase, you’ll want to make sure you won’t end up simply spending more.

How Maxed-Out Credit Cards Can Affect Your Credit Score

If you’re wondering if it is bad to max out on your credit card, know that it absolutely can have a negative impact on your credit score due to how credit cards work.

When you carry a high balance on a card, it drives up your credit utilization ratio, which can drag down your score. It’s generally recommended to keep the amount of your total credit you’re using at around 30%; if your cards are all maxed out, your ratio is closer to 100%.

However, you can save your score from the negative effects of a maxed-out credit card if you can pay off the balance in full before the statement period closes. If you do this, the maxed-out balance would not get reported to the credit bureaus.

Recommended: How to Avoid Interest On a Credit Card

Tips on Bouncing Back from a Maxed-Out Credit Card

If you’ve hit your credit card spending limit, it is possible to recover. Here are some tips for how to bounce back from what happens when you max out your credit card.

Consider a Balance Transfer Card

Transferring your existing balance to a balance transfer card with a 0% APR interest rate could help you save money on interest. However, you’ll need to have a plan in place to pay off the balance in full before the interest rate kicks in and you’re back in the same place once again. Also note that balance transfer fees may apply, which are generally 3% to 5% of the amount you’re transferring.

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

Request Help

If you’re really struggling to keep your credit card spending down or are having trouble making payments, consider working with a professional. A credit counselor or non-profit credit counseling organization can sit down with you to learn about your debt situation and the state of your finances. From there, they can suggest a game plan to help you manage your debt.

Consider Personal Loans

Another way to bounce back from maxing out on a credit card is to take out a personal loan to pay off your credit card debt. This might make sense financially if you qualify for a lower interest rate with the loan than you have on your credit cards. It could also simplify the payment process by rolling all your debts into a single loan.

Recommended: Can You Buy Crypto With a Credit Card

The Takeaway

If you’ve hit your spending limit on your credit cards, it can negatively impact your credit score and translate to paying more in interest over time. While it’s best to avoid, should you max out on your cards, there are ways to recover and rebuild your credit.

FAQ

What happens if I max out my credit card but pay in full?

If you max out your credit card but pay off your balance in full before the statement period ends, your credit utilization ratio won’t be impacted. In turn, it won’t have a negative impact on your score.

Can I still use my card after reaching the credit limit?

After you’ve reached the credit limit on your card, you generally won’t be able to make purchases on it. Your card won’t go through, and transactions will be declined. In some cases, however, your transaction may go through and you’ll instead owe a fee.

Is it bad to max out your credit card?

Hitting the spending limit on your credit card can have a negative financial impact. First, it can bump up your credit utilization ratio, which can bring down your credit score. It also could equate to a higher monthly minimum payment, and more interest paid over time. Plus, you likely won’t be able to put any more purchases on that card.

How can maxing out your credit card affect your credit score?

When you hit the spending limit on a card and don’t pay it off before the statement period ends, it impacts your credit utilization ratio, which makes up 30% of your credit score. In turn, your credit score will take a hit. On the flip side, decreasing the balances on your card can help boost your score by lowering your credit utilization.

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Photo credit: iStock/nensuria

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.

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

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.

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