Credit cards are one of the most accessible credit-building tools in your arsenal, but rewards are also part of the appeal. A statement credit is one way to redeem rewards you’ve earned.
If you look through your statement balance and find that money was put back into your account, that’s a statement credit.
Knowing how you earned that money can help you take advantage of your credit card’s rewards system in the future.
What Is a Statement Credit?
Credit card companies use a statement credit to issue a credit to your accounts, such as cash back or other reward you have earned. Essentially, you receive money from your card issuer for a specific reason.
Finding documentation of your statement credit varies among credit card companies. Generally, though, you will see it on your monthly statement under transactions or account activity.
If you check your statements online, you’ll probably see the credit appear in green text.
Regardless of the format, a statement credit has a minus sign in front of the cash amount, thus decreasing your revolving balance.
How to Receive Statement Credits
There are a few ways a statement credit might apply to your account. A common reason is through a return.
If you have ever returned an item you bought using your credit card, the retailer will probably refund the money borrowed from your card issuer. You’ll receive a statement credit that matches the price of the returned item.
Other than returns, ways you may receive a statement credit include:
• Shopping benefits. Some card providers offer discounts or statement credits for shopping with specific merchants.
• Travel credits. Card providers may offer annual statement credits to pay for eligible travel expenses like a luggage fee or plane tickets.
• Rewards. Card providers that offer cash back, points, or miles may let you redeem them in the form of a statement credit.
Statement Credits vs. Cash Back
Your credit card company gives you options when you sign up for a rewards credit card. One choice may be cash back or statement credits.
Cash back sounds simple enough, but it doesn’t always mean you’ll get direct money. Instead, your issuer may offer a cash reward in the form of a credit put on your account. Occasionally, they may send you a physical check or deposit the money in your checking account.
You earn cash back as a reward for using the credit card. It is a percentage of the money spent on purchases using the card.
In comparison, a statement credit reduces your credit card balance. Carrying a high balance between periods could lead to a high credit utilization ratio, which shows the amount of available credit a person has. That can result in a lower credit score over time.
Cash in on up to $300–and 3% cash back for 365 days.¹
Apply and get approved for the SoFi Credit Card. Then open a bank account with qualifying direct deposits. Some things are just better together.
Are Statement Credits Taxable?
The type of credit or reward you receive determines whether it’s taxable. If the credit card holder spent money to earn the reward, they usually don’t have to pay taxes on it. If they receive the credit without any spending, the reward may be taxable.
For example, an individual receives money back on her account after returning a chair she purchased online. That credited amount would not be taxable.
Cashback earners who engage in programs for points, like travel rewards, also generally avoid taxation.
The primary instance where cardholders face a taxable reward is with sign-up bonuses.
If they did not have to purchase anything to earn the bonus, it’s probably taxable. The taxation may apply regardless of how the credit card company issues the bonus, whether it’s in cash or airline miles.
Using Your Rewards Wisely
Credit cards come with responsibilities, but they have their perks.
Consider using statement credits put on your account to lessen your balance. Or look into the various rewards your card issuer offers.
You may even be among the 31% of Americans who didn’t redeem any of your stockpiled rewards in 2020. So, you might be missing out on rewards that you could use for some of your favorite services.
When shopping for a new card, you may want to look closely at the points, cash back, or miles involved. How are the rewards offered, how are they redeemed, is it better for you to get a card with consistent points across all purchases or increased rewards in certain areas?
Think through which rewards best fit your lifestyle and interests. If you want to see the world, you may want to get a card that optimizes travel benefits. If you’re an investor or someone interested in student loan refinancing, at least one card is geared toward those preferences.
The Takeaway
What is a statement credit? It’s a reduction in a credit card balance. Many credit cards offer statement credits as one way to redeem travel, cashback, or other rewards.
Wouldn’t it be convenient to have all of your finances under one umbrella—your credit card, money management, investing, and borrowing? You can, with SoFi.
SoFi offers a credit card that lets you earn cashback reward points for eligible purchases and then redeem your points into certain SoFi accounts or for a statement credit.
For a limited time, new credit card holders† who also sign up for a SoFi Checking and Savings with direct deposit can start earning 3% cash back rewards on all eligible credit card purchases for 365 days*. Offer ends 12/31/23.
†SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS PROSPECTIVELY BASED ON MARKET CONDITIONS AND BORROWER ELIGIBILITY. Your eligibility for a SoFi Credit Card Account or a subsequently offered product or service is subject to the final determination by The Bank of Missouri (“TBOM”) (“Issuer”), as issuer, 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. Please allow up to 30 days from the date of submission to process your application. The card offer referenced in this communication is only available to individuals who are at least 18 years of age (or of legal age in your state of residence), and who reside in the United States.
*You will need to maintain a qualifying Direct Deposit every month with SoFi Checking and Savings in order to continue to receive this promotional cash back rate. Qualifying Direct Deposits are defined as deposits from enrolled member’s employer, payroll, or benefits provider via ACH deposit. Deposits that are not from an employer (such as check deposits; P2P transfers such as from PayPal or Venmo, etc.; merchant transactions such as from PayPal, Stripe, Square, etc.; and bank ACH transfers not from employers) do not qualify for this promotion. A maximum of 36,000 rewards points can be earned from this limited-time offer. After the promotional period ends or once you have earned the maximum points offered by this promotion, your cash back earning rate will revert back to 2%. 36,000 rewards points are worth $360 when redeemed into SoFi Checking and Savings, SoFi Money, SoFi Invest, Crypto, SoFi Personal Loan, SoFi Private Student Loan or Student Loan Refinance and are worth $180 when redeemed as a SoFi Credit Card statement credit.
Promotion Period: The Program will be available from 10/1/22 12:01 AM ET to 12/31/23 11:59PM ET
Eligible Participants: All new members who apply and get approved for the SoFi Credit Card, open a SoFi Checking and Savings account, and set up Direct Deposit transactions (“Direct Deposit”) into their SoFi Checking and Savings account during the promotion period are eligible. All existing SoFi Credit Card members who set up Direct Deposit into a SoFi Checking & Savings account during the promotion period are eligible. All existing SoFi members who have already enrolled in Direct Deposit into a SoFi Checking & Savings account prior to the promotion period, and who apply and get approved for a SoFi Credit Card during the promotion period are eligible. Existing SoFi members who already have the SoFi Credit Card and previously set up Direct Deposit through SoFi Money or SoFi Checking & Savings are not eligible for this promotion.
1See Rewards Details at SoFi.com/card/rewards.
SoFi cardholders earn 2% unlimited cash back rewards when redeemed to save, invest, or pay down eligible SoFi debt. Cardholders earn 1% cash back rewards when redeemed for a statement credit.1
The SoFi Credit Card is issued by The Bank of Missouri (TBOM) (“Issuer”) 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.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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