SoFi

Credit card points are a common incentive for cardholders to actively make purchases on a rewards credit card. Once earned, cardholders can use credit card points toward a redemption option they find worthwhile. This can include travel or a purchase credit toward a good or service.

Read on to learn more about how credit card points work, including how to get and how to use credit card points.

What Are Credit Card Points?

Credit card points are one of many different credit card rewards that card issuers offer to consumers through a rewards program. For instance, a program might offer you two points for every dollar you spend on the card, which you could then redeem for use once you’ve accumulated a certain amount of points.

Points act as a form of currency within a credit card rewards program, designed to entice cardholders into maintaining spending activity on the card. Some reward programs for credit cards are also co-branded to encourage loyalty to a particular brand.

How Do Credit Card Points Work?

Understanding how credit card points work ultimately comes down to knowing how to earn points on credit cards — and then how to redeem them.

Earning Points on Credit Cards

There are a number of ways to earn points on your rewards credit card account:

•   Everyday purchases: Using a card as your primary payment method for your routine expenses is one way to earn points. Depending on your preferences and the features of other rewards cards in your wallet, you might choose to put purchases, like your morning coffee, groceries, rideshare expenses, and more on the card.

You might also choose to dedicate certain spending categories to a rewards card that offers bonus points toward that purchase. For example, if your rewards card offers 5X points when using your card at the supermarket, you might decide to use the card for grocery costs only.

•   Shopping with credit card partners: Part of finding the right card for you is researching whether the credit card partners with brands and services that you already shop with. For example, some cards partner with ride-sharing services, like Lyft, and offer bonus points for every Lyft purchase put on the card.

Note that some card issuers require you to pre-register for this type of bonus point incentive. You might have to link your rewards card to your Lyft account in order to receive bonus point credit for ride costs, for instance.

•   Sign-up bonuses: If you’re expecting a costly upcoming expense, like a medical bill or home repair, a common strategy to earn credit card points quickly is finding a competitive credit card bonus offer. Sign-up bonuses typically offer a promotional bulk quantity of points after you spend a minimum amount on the card within the first few months of opening the account.

Putting your large purchase on a new card accelerates your point earnings, but make sure you can pay your monthly statements in full to avoid interest charges — one of the important credit card rules to abide by in general. If you allow your balance to roll over into the next month, it can cut into the value of a sign-up points bonus.

•   Referral points: When you refer a friend to your rewards credit card program, some card issuers offer a referral bonus. Typically, you’ll receive a referral bonus reward, and your friend also receives bonus points if they meet certain spending requirements on their new card. Referral points vary by credit card, but it’s another option for cardholders who want to earn points on credit cards while giving friends a bonus perk, too.

Redeeming Points on Credit Cards

You can redeem credit card points in various ways. Common options to redeem credit card rewards points, depending on your card’s redemption choices, include:

•   Flights

•   Hotel stays

•   Car rentals

•   Statement credits

•   Cash back

•   Gift cards

•   Merchandise

•   Online retailers

•   Special experiences

•   Charitable donations

Redemption typically takes place through the card issuer’s app or website, or through the issuer’s dedicated rewards program website.

Types of Credit Card Rewards

Credit cards offer different types of rewards options. The common “currencies” are points, miles, and cash back.

Reward Points

You can earn credit card points by making purchases on your rewards card. Some credit card products offer a flat rate per dollar spent on your card, while others offer bonus points toward a spending category.

For example, a card might offer tiered bonus points at a rate of 5 points per dollar at restaurants, 3 points per dollar toward every gasoline purchase, and 1 point per dollar on everything else.

Miles

Miles are a common reward unit that’s typically used among travel credit cards and airline-branded rewards cards. Depending on the mileage rewards program, you’ll typically earn bonus miles when charging travel-related expenses on your rewards credit card. Some credit cards also let you earn miles on non-travel purchases at a lower mile-per-dollar rate.

This type of credit card reward is ideal for regular travelers who often fly to their destination and are interested in using credit card rewards to travel for less. If you prefer flying on a specific airline, a branded rewards credit card can help you earn miles toward a future flight, in addition to other redemption options, like hotel stays or goods. General rewards mileage cards can be redeemed in a similar way, but it’s not restricted to a particular carrier.

Cash Back

Credit cards that offer cash back rewards let you earn a percentage of cash back based on the amount you spend. This can typically be redeemed as statement credit to reduce how much you owe on your monthly credit card bill, which can be part of using credit cards responsibly. Or it can be redeemed as cash sent directly to you. Some cash back credit cards let you redeem cash back rewards as credit toward a purchase through one of the issuer’s partners.

If you’re not an avid traveler, a cash back card can be a straightforward option to earn and redeem rewards. Many card issuers offer a flat-rate rewards model that offers an easy-to-remember cash-back percentage on all card purchases.

How Much Are Credit Card Points Worth?

The value of each credit card point is generally worth 1 cent. However, reward valuations vary between credit card reward programs and can also differ based on how you choose to redeem them.

For example, your credit card points could be worth 1 cent when you redeem them for cash or gift cards, but worth 1.25 cents when you redeem them for travel-related options, such as flights or dining. Keep in mind that these amounts can vary widely, so it’s important to understand the terms and conditions of your credit card.

Recommended: Tips for Using a Credit Card Responsibly

Getting the Most of Your Credit Card Points

Below are a few helpful ways to maximize your credit card points:

•   Stay on top of bonus categories. Some rewards credit cards offer rotating bonus spending categories that temporarily increase the points you can earn per dollar spent on the card. These types of cards often require you to “enroll” in the bonus category, so familiarize yourself with your card’s bonus calendar.

•   Be aware of bonus limits. Read the rules of your rewards program, including thresholds on the maximum dollar amount that’s eligible for bonus rewards.

•   Calculate if the annual fee is worth it. Before signing up for a rewards credit card, review your spending habits over the last year. Note the spending categories and amounts you’ve spent. Based on this information, calculate whether the card’s rewards program and benefits — like TSA PreCheck credit and other perks — exceed the annual fee you’d spend each year.

The Takeaway

Accruing credit card points, miles, or cash back can be worthwhile as long as you use your card responsibly and select a rewards card that fits your lifestyle. Before putting your earned rewards toward a high-dollar purchase, or applying earned cash rewards to your monthly statement, keep your objective in mind.

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

FAQ

Do credit card points expire?

Typically, credit card points don’t expire. However, your points might expire if your credit card account is closed, falls into bad standing, or after a period of inactivity. Different cards have varying rewards program terms and conditions, so check with your card issuer to see if your credit card points have an expiration timeline.

Do credit cards with rewards have higher interest rates?

Rewards credit cards tend to have higher interest rates compared to regular credit cards. Cardholders with a positive credit history and strong credit score generally qualify for lower interest rates compared to those with a low credit score.

What is the use of earning reward points on my credit card?

Earning rewards points on your credit card allows you to get something in exchange for the spending you do with your credit card. For example, depending on your rewards program, you can redeem credit card points as a cash back reward or put them toward future travel or other purchases.

Photo credit: iStock/stefanamer

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.

SOCC-Q224-1910893-V1

Credit cards can come with a four-digit personal identification number (PIN). The PIN acts like a password, helping to prevent unauthorized use of your credit card. However, in the U.S., PINs are more often required when using debit cards than when using credit cards.

Hence, if you live in the United States and don’t often travel abroad, you may not find yourself using a credit card PIN most of the time. Still, it can be helpful to understand their purpose and how to obtain one just in case.

What Is a Credit Card PIN?

A credit card PIN is a four-digit personal identification number used to help verify the integrity of certain transactions that might occur while using a credit card. You might receive a PIN with your new credit card; however, it will probably be mailed separately for security reasons. This way, if someone were to steal your card, they won’t gain access to your PIN along with it.

Credit card PINs offer an added layer of security alongside other measures, such as your signature, the credit card’s EMV (that stands for Europay, Mastercard, Visa) chip, or the credit card CVV number. In the United States, chip and signature are the preferred security measures for most types of transactions, but there could still be times when you need a PIN.

How Do Chip and PIN Cards Work?

Chip and PIN generally refers to credit cards that have a microchip that can be inserted into a card reader. As their name suggests, these cards may also require the cardholder to authorize the transaction by entering their PIN.

The use of a microchip and a PIN allows for increased security when compared to credit cards of the past, which only used a magnetic stripe to complete transactions. Also called stripe and signature cards, these older credit cards are considered less secure than chip and PIN credit cards. This is because the magnetic stripe has your card information coded directly into it.

An increase in credit card data breaches called for a more secure solution. That led to the adoption of EMV cards, named for the three organizations that developed the technology, as noted above — Europay, Mastercard, and Visa. EMV cards would become the chip and PIN cards we know today, later joined by contactless payments.

The main benefit of EMV, or chip and PIN, cards is that they generate a one-time code when inserted into the card reader. Instead of sharing your card number with the merchant, the code is used to process the payment. This process is more secure than using a magnetic stripe because it makes it much more difficult for thieves to attempt to steal your credit card information.

Recommended: What Is a Contactless Credit Card

Credit Card vs Debit Card PIN

There’s little difference between a credit card PIN and a debit card PIN. Both are four-number codes that you use to verify transactions in some situations.

At least in the U.S., the most notable difference between credit vs. debit card PINs is that debit card transactions require a PIN more often than credit card transactions do. In other countries, the use of PINs for credit card transactions could be more common.

Recommended: When Are Credit Card Payments Due

Why You Might Need a Credit Card PIN

The two scenarios in which you’re most likely to need a credit card PIN are when requesting a cash advance and when traveling outside the U.S.

Cash Advances

A cash advance works like a loan from your credit card issuer. There are a few ways to request a cash advance, but one way to do so is by using your credit card at an ATM. You may be required to enter your PIN when requesting a cash advance, and credit cards sometimes have daily cash advance limits. Also, cash advances can be an expensive option; make sure you understand the interest that will be charged.

Credit Card Purchases Abroad

European credit cards have long used chip and PIN technology, which can help keep your money safe when traveling abroad. That means you could be required to enter your PIN, even for purchases. For instance, automated kiosks in Europe may only work with foreign credit cards if you provide a PIN.

Guide to Requesting a Credit Card PIN

Whether or not you think you’ll need a credit card PIN, you can request one from your card issuer just in case you do end up needing it in the future. Keep in mind that your card issuer may have sent you a PIN when they shipped your new card. However, as mentioned earlier, the PIN likely was not sent in the same envelope as your credit card for the sake of security.

If you aren’t able to locate a PIN that was sent with your card, you can request a new one in the following ways:

•   On your bank’s website. Some banks allow you to request a new PIN while logged in to your account. To do so, you can search your bank’s website for information on requesting a PIN for a credit card.

•   By phone. Some banks require you to call to request a PIN on a credit card. If that’s the case, or if you simply prefer to call, your card issuer should provide a support number. They likely won’t issue you a new PIN over the phone but will instead mail it to the address on file.

•   At a bank branch. If your bank has branches nearby, then you should be able to request a PIN by visiting a branch and asking them to reset it for you.

•   At an ATM. If you know your existing PIN and simply want to change it, you might be able to change your credit card PIN by visiting an ATM.

If you request a new PIN either online or by phone, it should be mailed to your address on file. Thus, you should make sure your address is up to date before requesting a PIN.

Another important credit card rule to keep in mind is not to use personally identifiable information in your PIN, such as your birthday or your address. While those might be easier to remember, they can also be easier for a thief to guess.

Do All Credit Card Issuers Offer Cards With PINs?

The answer to this question may depend upon your location. In the U.S., for example, most credit cards have at least chip and signature verification, though an increasing number have chip and PIN. While chip and PIN adoption has increased in the U.S., the technology is already fully implemented in much of the rest of the world.

Most major banks in the U.S. offer PINs with their credit cards, even if PIN verifications aren’t always required.

Finding Your Credit Card PIN Number

When you were approved for your new credit card, you might have received a separate mailer with your credit card PIN along with relevant information about using it. If you never received your PIN or you lost it, you probably won’t be able to find your credit card PIN by logging into your account. Usually, you’ll either need someone to reset it for you at a bank branch or ask to have a new PIN mailed to your address on file.

Are Credit Card PINs Safe?

Chip and PIN credit cards tend to be much safer than their magnetic stripe counterparts of the past. This is because chip and PIN credit cards do not share your credit card number; instead, they generate a unique, one-time code to verify the transaction. Hence, schemes that worked in the past, such as credit card sniffing, are much less likely to succeed with chip and PIN credit cards. This helps you keep your data safe, along with your money.

The Takeaway

With the adoption of EMV, credit cards may have a PIN, but purchases don’t often require them in the United States. However, your card issuer may have sent you a PIN when you were approved for a new card. Chip and PIN technology makes credit cards more secure so you can feel more confident about your purchases.

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

FAQ

What if my credit card company does not allow chip-and-PIN purchases?

Most credit card companies should allow chip and PIN purchases, or at the very least, chip and signature. All U.S. merchants were asked to begin accepting EMV chips by October 2015. While there’s no federal law requiring EMV compliance at the moment, it is considered industry-standard. As a result, most credit card issuers have already adopted EMV standards.

Can I use the same PIN for all credit card transactions?

Some card issuers might allow this, but others may not — it depends on the banking institution. For example, your card may not allow you to use the same PIN for cash advances that you use for purchases. If that is the case, you will need to remember two different PINs.

How do you get a PIN for your credit card?

Card issuers will often send you a PIN when you apply for a new credit card. However, if you lost your PIN or don’t recall receiving one, you can try requesting one from your bank. You may be able to request a PIN via online banking; if that isn’t possible, other options include asking for one on the phone or visiting a bank branch.

Can you use a credit card without a PIN?

Whether you can use a credit card without a PIN depends on the kind of transaction you’re making. For example, if you are in the U.S. and requesting a cash advance with your credit card at an ATM, it is unlikely that you will be able to do that without a PIN. Purchases, on the other hand, often don’t require a PIN in the United States.

Photo credit: iStock/Ludmila_m

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.

SOCC-Q224-1909410-V1

A secured credit card can help you establish credit for the first time or build your credit if you’ve damaged yours with missed payments, defaults, or bankruptcy. While secured credit cards offer many of the same advantages as traditional credit cards, they do have some limitations.

Eventually, those who start out with a secured card may want to switch to a traditional credit card. Here’s a closer look at how to transition from a secured credit card to an unsecured card.

What Is A Secured Credit Card?

A secured credit card requires that you put down a cash deposit, which serves as collateral for the charges you make with the card. Usually, the amount of the deposit is the same as your credit limit. So if you deposit $1,000, you’ll be able to borrow up to that amount.

If you miss payments, the bank can cover their losses by drawing on money from the deposit. That said, making on-time payments is just as important with secured credit cards as it is with traditional cards, especially if you are using the secured card to build credit.

As with traditional credit cards, secured cards require that you make a minimum monthly payment. Beyond that, you can carry a balance from month to month, but you will be charged interest on that balance. Pay your balance off in full each month to avoid interest payments.

Recommended: Differences Between a Secured and Unsecured Credit Card

Benefits of Secured Credit Cards

Secured credit cards offer users and banks a number of advantages.

Easier to Qualify

Because secured cards require users to put down a deposit, banks are taking on relatively little risk. As a result, it can be much easier to qualify for a secured card than it would be a traditional credit card.

Can Help Build Credit

If you have no credit or poor credit, it can be difficult to get approved for credit cards or loans. Making small purchases regularly with a secured card and paying off your bill in full and on time can help you establish credit or rebuild your credit.

If you’re looking to build credit, you may also consider becoming an authorized user on a credit card.

Convenience

You can use secured credit cards anywhere traditional cards are accepted. Secured credit cards allow you to shop in person or online without carrying cash around with you. It’s also difficult to accrue too much debt because you’re limited by the amount of your deposit.

Drawbacks of Secured Credit Cards

Alongside the benefits offered by secured cards, there are limitations to be aware of.

Coming Up With the Deposit

In order to get a secured card, you will have to come up with the cash that will serve as your deposit. That may require you to save for a period of time before you apply.

Once you deposit that cash, you can’t access it while your secured card is in use. That said, your deposit is refundable when you close the account or convert your secured credit card to an unsecured card.

Higher APR

The annual percentage rate (APR) is the interest rate you’re charged when you carry a balance on your card. Secured credit cards may offer higher interest rates than traditional cards, which can end up costing you more money if you carry a balance.

Spending Is Limited

Most credit cards, whether they’re secured or unsecured, have spending limits. For a secured credit card, your limit will depend on the size of the deposit you make, which will typically range from $200 to $2,000. If you’ve only deposited $1,000 and need to replace your transmission for $1,800, you won’t be able to put the repair on your card.

In comparison, the average credit limit across all cards is upwards of $30,000, according to a recent report from the credit reporting bureau Experian®.

What Is an Unsecured Credit Card?

An unsecured credit card is a traditional credit card that does not require a deposit as collateral. Instead, your credit limit is determined based on your creditworthiness. If you fail to pay off your credit card, your card company can send your bill to a collections agency, and your credit score will take a hit.

There are a variety of types of credit cards to choose from when it comes to unsecured cards, including rewards cards and balance transfer cards.

When You Might Keep Your Secured Credit Card Open

The biggest reasons to keep your secured credit card open have to do with the potential implications closing the account can have for your credit score.

For one, closing an account may result in a dip in your credit score. Additionally, closing the account may decrease the age of your credit history, another factor that goes into determining your credit score.

When You Might Upgrade to an Unsecured Credit Card

You may consider upgrading to a traditional, unsecured card if you’re able to manage a secured card responsibly and are looking for a lower APR or a higher credit limit. Ultimately, making the move requires that your credit is in decent shape.

To do so, it’s important that you stick to credit card rules. That includes being sure that you’re not in the habit of overspending, you’re able to pay your bills on time and in full, and you can keep your total purchases lower than your available credit. Experts suggest keeping your total balance at 30% or less of your available credit.

However, whether you can change a secured credit card to unsecured will also depend on your credit card issuer. Not all card companies offer unsecured options that you can upgrade to. In those cases, you’ll need to apply for a new card.

Guide to Upgrading from a Secured Card to Unsecured Credit Card

If you’re looking to upgrade to an unsecured card, make sure you’re following these steps.

Monitor Your Credit Score

Many credit cards require that you have at least a good credit score to qualify. That means, you’ll need a FICO® score of 670 or higher. Not only are you more likely to qualify for a card with a higher score, you’ll also be more likely to secure more favorable terms and lower interest rates.

If you’re considering trying to convert a secured credit card to an unsecured card, monitor your credit score regularly. You might check with your card issuer to see if they offer you free access to your credit score.

Making the Minimum Monthly Payment

Getting approved for a change from a secured credit card to an unsecured credit card requires displaying responsible credit card behavior. Ideally, you’d avoid interest payments by paying off your credit card in full every month. But if that’s not possible, be sure you are making at least your minimum monthly payment, as payment history is one of the biggest determinants of your credit score. On-time payments are a big part of using a credit card responsibly.

Managing All Your Accounts Responsibly

Before opening an unsecured credit card, make sure you’re able to make other debt payments on time as well. This includes student loans, car payments, or a mortgage. If you’re not displaying good credit behavior elsewhere, that will show up on your credit report and potentially hurt your chances of qualifying for an unsecured credit card.

Limiting the Number of Credit Accounts You Open

Opening new accounts requires a hard inquiry, which will result in a temporary dip in your credit score. Additionally, if you open too many new accounts in a short period of time, it can lower the average age of your credit accounts, which is another factor that influences your credit score.

Ideally, you’ll avoid activities that will cause your credit score to drop as you’re trying to work toward being able to qualify for a secured credit card. A better score will improve your chances of getting approved.

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

The Takeaway

A secured card is an important tool for building or rebuilding credit. However, once you’ve established healthy credit card habits and good credit score, it may serve you to switch from a secured to unsecured credit card.

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

FAQ

Can I upgrade my secured credit card to unsecured?

Some lenders will allow you to change a secured credit card to an unsecured card. However, others will require that you apply for a new card.

How long does it take to convert a secured credit card to an unsecured one?

To move from a secured credit card to an unsecured one can take anywhere from several months to a couple of years. How long it takes will depend on the credit card issuer’s policies as well as what your credit score was when you opened the account.

Does converting a secured credit card to an unsecured card hurt your credit score?

Closing your secured card to open a traditional credit card may cause your credit score to take a temporary dip. However, you shouldn’t notice a huge impact.

Do all credit card issuers allow the conversion from a secured to unsecured card?

Not all credit card issuers will convert a secured card to an unsecured card. More often than not, you’ll have to close your secured account and open a brand new card.

Photo credit: iStock/Ridofranz

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 .

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.

SOCC-Q224-1910871-V1

Your credit card’s grace period is the length of time that starts at the end of your billing cycle and ends when your payment is due. During this period, you may not have to pay interest on your balance — as long as you pay it off in full by your payment due date.

While a lot of credit cards have a grace period, not all of them do. Here’s a look at how grace periods on credit cards work and how you can take full advantage of them.

What Is the Grace Period on a Credit Card?

Credit cards allow you to borrow money over the course of a one-month billing cycle, during which you may not need to pay interest. The end of your credit card billing cycle is also called your statement date. That’s when your monthly credit card statement is sent to you in the mail or becomes available online. Credit card payments are due on the payment due date, about three weeks later. The time in between these dates is what’s known as the grace period.

During this time, you won’t be charged any interest on the purchases that you made during the billing cycle. However, because of how credit card payments work, you must pay off your credit card balance in full by your payment due date in order to avoid interest payments. At the very least, you must make your minimum payment, and you’ll then owe interest on whatever balance you carry into the next month.

Recommended: What Is a Charge Card?

How Credit Card Billing Cycles and Grace Periods Work

Grace periods on credit cards are different from the grace period for other loan products. For example, the grace period for a mortgage lasts about 15 days. If your payment is due on the first of the month, you’d have until mid-month to make your payment before it’s considered late and you’re charged potential late fees.

This is not how credit card grace periods work. The grace period for revolving credit — which is what a credit card is — comes before the payment due date. As such, credit card grace periods don’t protect you from late fees. Rather, they give you a period of time in which you can avoid interest payments.

If you miss the date when credit card payments are due, your payment is considered late. Late payments may trigger penalties, and they can have a negative effect on your credit score if they’re reported to the credit reporting bureaus.

Limits on Credit Card Grace Periods

Credit card companies are not required to offer their customers a grace period. However, many of them choose to do so.

Federal law requires credit card companies to send you a bill within 21 days of the payment due date, meaning you’ll get at least three weeks’ notice of how much you owe for your previous billing cycle (after the credit card closing date). However, the amount of time you’ll have for your grace period will vary by lender.

Credit card grace periods typically only apply to purchases. That means if you’ve used your credit card for a cash advance, for example, you’ll have to start paying interest on the date of the cash advance transaction.

Recommended: Tips for Using a Credit Card Responsibly

How Long Is the Typical Grace Period for a Credit Card?

Typically, grace periods last at least 21 days and up to 25 days.

You can find out how long your grace period is by checking your cardholder agreement. The length of your grace period should be listed alongside fees and your annual percentage rate (APR). You can also call your credit card company and ask them directly.

You may also have a longer grace period for special promotions. Those can be as long as 55 days.

What Types of Transactions Are Eligible for Credit Card Grace Periods?

As mentioned above, generally only purchase transactions are eligible for the credit card grace period. Cash advances — which allow you to borrow a certain amount of money against your line of credit — typically are not eligible. They will start accruing interest the day you make the transaction.

Similarly, if you transfer a balance from one credit card to another, you’ll start to accrue interest on that balance immediately. The only exception is if you have a balance transfer credit card with a 0% introductory rate for a period of time. If you pay off the balance during that period, you won’t owe interest. However, interest will accrue on whatever remains of your balance at the end of that period.

Taking Maximum Advantage of Your Credit Card’s Grace Period

If you pay off your credit card bill in full each month, you’ll avoid accruing credit card interest. Even carrying a small balance will disrupt your grace periods. If you do, you’ll owe interest on the remaining amount, and all of the new purchases that you make in the next billing cycle will accrue interest immediately as well.

To take full advantage of your credit card’s grace period, plan your purchases accordingly to ensure you’re able to pay your bills in full and on time. For example, if you’re going to make a large purchase, you may want to do so close to the first day of your billing cycle. That way, you’ll have the full cycle (about four weeks), plus your grace period (about three weeks), to pay off your purchase without owing any interest.

Can You Lose Your Credit Card’s Grace Period?

It is possible to lose your credit card grace period if you don’t make on-time payments in full each month by the payment due date. If you lose your grace period, you’ll be charged interest on the remaining portion of your balance. In the new billing cycle, you’ll also owe interest on any new purchases on the day the transaction takes place. This can lead to you falling into a debt cycle, which isn’t easy to get out of. (It’s wise to educate yourself on what happens to credit card debt when you die, too.)

Luckily, issuers usually restore grace periods once you’ve paid your outstanding balance and are back to making full on-time payments for a month or two.

The Takeaway

Your credit card grace period is an important tool that can save you money on interest if you pay off your balance in full each month. If you don’t pay your balance in full each month, you could lose this privilege temporarily. As such, you’d end up owing interest on your previous remaining balance and any new purchases.

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

FAQ

What is the grace period for credit card payments after the due date?

Credit card grace periods occur before the payment due date. Payments made after that date are considered late. After the due date, cardholders will owe interest on their balance. Further, they may lose their grace period until they can pay their balance off in full for one or two months.

What happens if you are one day late on a credit card payment?

Being one day late on a credit card payment can still trigger late fees, interest, and potentially the loss of your grace period. Late payments may also be reported to the credit reporting bureaus, which can have a negative impact on your credit score.

What is the typical grace period for a credit card?

Federal law requires that credit card companies provide your bill at least 21 days before your next payment due date. The length of the grace period can vary depending on the credit card issuer, though they typically last 21 to 25 days.

Photo credit: iStock/Moyo Studio

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 .

SOCC-Q224-1909322-V1

The annual percentage rate (APR) of a credit card represents how much someone pays in interest on an annual basis if they carry a balance on their credit card. The lower someone’s APR is, the less they would pay in interest. Because of this, it makes sense to try to secure the lowest APR possible.

Keep reading to learn how to lower the APR on a credit card.

What Is Credit Card APR?

A credit card’s APR represents the total cost of borrowing money using a credit card. The APR on a credit card is the interest rate charged to carry a balance, plus any fees. A credit card can have a fixed or variable interest rate, meaning the rate can either stay the same or change over time based on index rates.

Understanding what APR is can help credit card users know how much they’d need to pay in interest if they don’t pay off their credit card balance in full each month. If they don’t carry a balance, they can avoid paying credit card interest.

Recommended: What Is a Charge Card?

Ways a Lower Interest Rate Can Help

Having a good APR for credit cards is important for a number of reasons. A lower interest rate can save you money. In turn, this can make it easier and faster to pay off debt. Doing so is one way you can help build your credit score.

The higher your interest rate is, the harder it can be to chip away at your credit card balance, as the bulk of credit card payments will go toward interest. This is why achieving a lower credit card APR can make escaping high-interest credit card debt easier.

Recommended: How to Avoid Interest On a Credit Card

How to Lower APR on a Credit Card

If you are interested in lowering your credit card APR, there are steps you can take to try to do so.

Apply for a Balance Transfer Card

If your card has a high APR, one option for how to get a better rate can be a balance transfer card with a lower interest rate. You can then transfer your balance from the high-interest credit card to the balance transfer card.

Usually, this new balance transfer credit card can’t be issued by the same company or any affiliates of the original card. Balance transfer cards may offer a 0% APR promotional period. During that period, you won’t pay any interest, which means all of your payments will go toward paying down the principal.

However, once the promotional period ends, a higher APR will kick in (this is one example of what can increase your credit card’s APR). Additionally, a balance transfer fee may apply to move over the existing credit card balance to the new card. It might make sense to calculate your credit card interest rate on your old card to ensure you’ll save money.

Negotiate With Your Credit Card Issuer

When it comes to figuring out how to get lower APR on a credit card, it’s possible to simply ask for an APR reduction with a credit card issuer. This strategy may be particularly effective if the cardholder has used their credit card responsibly and consistently paid their credit card bill on time — one of the cardinal credit card rules.

You can also provide a reason why you’re requesting a reduction. You may have experienced a job loss or have unexpected medical bills to pay. Maybe you got a raise and are really motivated to pay off your debt, and having a lower interest rate would help you do that. It’s also possible to leverage new credit card offers with lower interest rates to try to negotiate a current APR down.

Consumers can also ask for a temporary reprieve if the credit card issuer won’t offer a lower rate indefinitely. For example, it may be possible to request a one-year rate reduction of one to three percentage points.

Low-Interest Credit Cards

If you can’t quite figure out how to get a lower interest rate on a credit card with your current issuer, you could also step away from using that specific credit card. Instead, you might apply for a low-interest credit card to use in lieu of the card with the higher APR.

Cardholders who have consistently made on-time payments and taken other steps to build their credit score may be able to secure a new card with a lower interest rate. As an added bonus, doing so can make it easier to negotiate a lower APR with a current credit card.

Some different types of credit cards even reward cardholders for their good behavior by lowering their APR.

The Takeaway

If you pay off your credit card balance in full each month, you won’t have to worry about your APR too much. That being said, it’s always smart to try to secure the lowest APR possible in case it’s necessary to carry a balance from time to time.

Having a lower APR on a credit card means the cost of borrowing money is lower. More of your monthly payments can go toward paying down the principal balance instead of interest. In turn, this can help you pay off your debt faster, save money, and even build your credit score.

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

FAQ

How can I reduce my credit card interest rate?

You have a few options for lowering the interest rate on a credit card. You can try to negotiate a lower interest rate on any current credit cards by calling your issuer and trying to come to an agreement. If that doesn’t work, you can apply for a new credit card or a balance transfer card. If you can secure a lower interest rate on a new credit card, you can choose to use that credit card or take that offer back to your current lender to try to negotiate a lower APR.

Why do credit card issuers charge varying APRs?

Credit card issuers use a consumer’s credit score to help determine what the APR on a credit card should be for a specific consumer. The reason that APRs vary is because credit card issuers give a custom APR to each applicant based on their financial history. Generally, the lower someone’s credit score is, the higher their APR will be.

Photo credit: iStock/Charday Penn

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 .

SOCC-Q224-1910584-V1